BEWARE OF REPOSSESSIONS AND YOUR LEGAL RIGHTS AND OBLIGATIONS
19 June 2024 – South African consumers across the board find themselves increasingly
under pressure due to the high cost of living and other factors outside their control, such
as the increasing food and petrol prices, with most of their budget going towards
essentials.
“What is concerning, is the shrinking budget allocation on essential items, such as
education, healthcare and savings,” says Howard Gabriels, Lead Ombud for the Credit
Division at the newly established National Financial Ombud Scheme (NFO).
“Where consumers do have a say in how they spend their money, for example on the
purchase of new vehicles and property or on credit cards, we urge them to think long and
hard, taking into consideration the long term consequences should they not be able to
service their debt repayments and to look at ways to reassess their budgets, with better
financial planning practices, rather than facing a possible repossession scenario down
the line.”
The primary purpose and mandate of the NFO is to resolve consumer complaints against
financial service providers in the banking, insurance (life and non-life) and credit space.
As an independent organisation, the NFO is committed to resolving disputes impartially,
speedily, confidentially, in an open, informal and approachable way, at no charge to the
complainant.
“Our Credit and Banking Divisions will investigate matters where consumers may not be
happy with the outcome of their query from a credit provider or a bank,” says Nerosha
Maseti, the newly appointed Lead Ombud for the Banking Division. “Where a consumer
approaches our office to seek assistance regarding a vehicle that has been repossessed
by a bank e.g. ABSA, Wesbank or MFC, the Banking Division at the NFO will investigate.”
Repossessions is not only limited to vehicles. In some instances, a credit provider may
repossess other goods such as furniture, should a consumer fail to commit to their
monthly payment obligation. “Where a consumer’s vehicle is financed by a non-bank
vehicle financier, such as Toyota vehicle finance or BMW, Mercedes, etc., those
customers are not left out in the cold,” Gabriels explains. “The NFO will also investigate
complaints against non-bank vehicle finance financiers.”
A recent case, dealt with the issue of repossession, as well as the prescription of debt *
The complainant and the bank concluded an instalment sale agreement on 11
January 2019, wherein the complainant financed the purchase price of his motor
vehicle. In terms of the credit agreement the first instalment was due by the
complainant on 01 March 2019. From April 2019, the complainant started to
default on his monthly instalment and the account began to accrue arrears.
According to the complainant he was unhappy with the condition of the vehicle.
The complainant lodged a complaint with MIOSA (Motor Industry Ombudsman
South Africa), and the vehicle was duly repaired by the dealership. The
complainant continued to default on the account and on 07 January 2020 the
complainant elected to voluntarily terminate the credit agreement, in accordance
with section 127 of the National Credit Act 34 of 2005 and returned the vehicle to
the bank.
The bank complied with the process set out in section 127 of the Act and on 19
February 2020 the vehicle was sold at an auction. The proceeds of the sale were
credited to the account on 25 February 2020, however a shortfall of R94 027.12
(excluding costs) remained on the account for which complainant was being held
liable for.
The consumer brought the complaint to our office and during the NFO
investigation, we considered whether the debt owing in respect of the shortfall
had prescribed. We noted that there was no evidence that prescription had been
interrupted in three years since the date the proceeds of the sale was credited to
the account. It was therefore recommended that the bank write off the shortfall
that remained after the sale of the vehicle due to their claim having prescribed
after 3 years. The bank accepted the recommendation, and the debt was written
off.
NFO RECOMMENDATIONS
When a consumer experiences financial difficulty and an account is in default, the
complainant has the option to voluntarily surrender the vehicle to the bank. This
option avoids the bank proceeding with legal action and obtaining a judgment for the
return of the vehicle, and thereby reduces the legal costs that would be incurred when
legal action is instituted. It is important to note that with both voluntary termination or
repossession, the vehicle will be sold, and if a shortfall remains on the account, the
consumer is liable for the repayment of the shortfall.
It is also important that the complainant communicate with the bank when they are
unable to afford repayment of their accounts and try to conclude a payment arrangement
with the bank as early as possible. However, it is important to note that legally, the bank
is under no obligation to accept a payment arrangement proposal and that this decision
is based solely on the bank’s commercial discretion. The bank takes many factors into
account when considering a payment proposal, such as the total arrears and the impact
of the reduced payment on the account over time.
Prescribed debt is a scenario that is mostly unknown to the consumers of credit, many
of whom are caught off guard as a result, and everyone should absolutely be aware of it.
Simply put, prescribed debt is an old obligation that the consumer has not acknowledged
or paid within three years.
If you have a complaint about a financial service provider in the Banking, Short-term (nonlife) Insurance, Long-term (life) Insurance and Credit sectors, you are welcome to
contact the NFO for free assistance
