KNOW YOUR RIGHTS WITH THE NFO – GET BACK TO BASICS

BEWARE OF REPOSESSIONS AND YOUR LEGAL RIGTHS 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 (non-life) Insurance, Long-term (life) Insurance and Credit sectors, you are welcome to contact the NFO for free assistance.                                                 

Ends