Illegal car repossessions are common in South Africa
- Author: Gershwin Wanneburg
- Published: Thursday, 13 April 2017 12:32
Vehicle financier Wesbank is not the only institution that has been accused of illegally repossessing cars.
Credit providers have been engaging in such practices for years, according to industry experts.
The issue has been around since 2007, said Paul Slot, president of the Debt Counsellors’ Association of South Africa (DCASA).
The National Credit Regulator (NCR) recently said it had reported Wesbank to the National Consumer Tribunal after an investigation found that the bank had contravened the National Credit Act (NCA).
The NCR said the law allowed defaulting consumers to voluntarily hand over goods to credit providers. But it said Wesbank used debt collection agents who “coaxed defaulting consumers into relinquishing possession of their motor vehicles”.
“This procedure undermines the voluntary nature of the surrender process,” said Jacqueline Peters, NCR manager of investigations and enforcement.
Slot said the problem had been around since the implementation of the National Credit Act in2005.
“In terms of this practice, the consumer is visited at home or his or her place of work and in this process the option to surrender the vehicle is ‘explained’ to the consumer.
“DCASA has received feedback from consumers that they did not understand that the handback in terms of Section 127 [of the NCA] is voluntary,” Slot told GetBiz.
He said that was just the tip of the iceberg.
“The NCA also sets out a process [on] how to sell the vehicle and many consumers are shocked to see how much the vehicle is sold for by the credit provider.
“Consumers receive an additional shock when they are informed that they are responsible for the difference between the selling price and the outstanding amount. Consumers in this position often say that they did not know they are responsible for the difference and, if they knew this, they would not have handed back the vehicle on a voluntary basis.
Slot said consumers were also to blame. He said many often ignored a Section 129 notice served on them by credit providers. A Section 129 notice, a feature of the NCA, informs clients of their right to seek debt counselling and reschedule payment of the owed amount.
The banking ombudsman said in 2009 already that credit providers were breaking the rules.
“They bully and threaten unsuspecting clients or they mislead them”
Even then, the banking ombudsman was fielding dozens of complaints that included illegal repossessions. In about 60% of the cases, banks were forced to compensate clients for illegally seizing vehicles.
The compensation included cash, cancelling outstanding debt or replacing cars that had been sold on auction. Banking ombudsman Clive Pillay’s comments eight years ago foreshadowed what the NCR reported recently. He accused banks of unleashing debt collectors who behaved like “bully boys” on consumers.
“They bully and threaten unsuspecting clients or they mislead them,” Pillay told the Cape Argus newspaper in 2009.
“They say, ‘We’re taking your motor car, putting it in storage for a certain number of months. As soon as payment is made, we’ll release the car.’ That never happens. Of course banks will deny it. They will say they followed regulations religiously.”
Back in 2009, Cas Coovadia, managing director of the Banking Association of South Africa, said he was unaware of any illegal repossessions, but he said action must be taken if that was the case.
Asked this week about the recent findings by the NCR, the Banking Association said it could not comment on the business activities and conduct of members. The association referred queries to the bank in question, meaning Wesbank.
In response to the NCR investigation, Wesbank said that it respected the regulator’s decision, even though it disagreed with its conclusions.
“This referral does not constitute non-compliance with the National Credit Act but is instead a result of differing interpretation of the applicable legislation,” Wesbank said in a statement.
“WesBank has a strong commitment towards achieving fair treatment of our customers and will continue to cooperate with the National Credit Regulator and the National Consumer Tribunal.”
The National Consumer Tribunal was also established in terms of the NCA and its decisions are equal to those of a high court. The tribunal’s powers range from declaring certain conduct prohibited to imposing administrative fines that punish wrongdoing.