The complainant purchased a motor vehicle financed through an instalment sale agreement with the bank for an amount of R511 660.00. Shortly after delivery, she experienced persistent mechanical problems, despite attempted repairs by the dealership; these problems were not resolved.
The complainant and the dealership agreed to cancel the sale, and she returned the vehicle. However, the dealership failed to refund the purchase price and the customer remained liable for the outstanding balance owed to the bank.
After lodging a dispute with the Motor Industry Ombudsman (MIOSA), MIOSA confirmed the cancellation of the sale agreement and ordered that the dealership refund the purchase price, less usage costs in terms of section 20 of the Consumer Protection Act (CPA).
Following this, the dealership requested a settlement amount from the bank. The bank provided the settlement amount to the dealership who paid R470 070.04 into the complainant’s vehicle finance account, which the bank treated as a settlement and closed the account. Prior to the payment being made, the complainant disputed the issuing of the settlement amount arguing that she had not requested settlement and provided the bank with the MIOSA ruling. She believed the bank should have engaged with her before closing the account and facilitated resolution with the dealership.
Instead, the bank advised her that her dispute was with the dealership and not with them.
The complainant approached the NFO seeking a refund of all instalments paid to the bank, or alternatively that the bank cover her legal costs in recovering funds from the dealership.
From a legal perspective, the NFO noted that under common law and case law, a debt may be validly settled by a third party if payment is made in the debtor’s name and for their benefit, even without the debtor’s consent. This meant that the dealership’s payment was legally effective in extinguishing the debt owed to the bank, and the account closure was technically correct. Furthermore, the instalments the complainant had paid were part of her contractual obligation under the instalment sale agreement with the bank, which included not only the purchase price but also interest, fees, and insurance premiums. These payments were therefore due under the contract and not refundable by the bank.
However, the NFO also considered the broader principles of fairness and equity. The Code of Banking Practice requires banks to prioritise the fair treatment of customers, ensuring that customers can be confident their interests are central to the bank’s culture. In this case, the complainant had alerted the bank to the MIOSA ruling before the account was closed, yet the bank proceeded to accept the dealership’s payment and close the account without engaging with her or facilitating resolution.
Other banks consulted by the NFO indicated that they would not have closed the account under such circumstances. Instead, they would have engaged the dealership in respect of the ruling by MIOSA, and required the dealer to repay the full purchase price less usage costs. This approach would have aligned with fair treatment and ensured the complainant received accurate figures and clarity on her liability.
The NFO found that the bank’s conduct prioritised its relationship with the dealership over its duty of care to the complainant. By closing the account despite being aware of the MIOSA ruling, the bank acted inconsistently with fair banking practice and failed to protect its customer’s interests. While the complainant’s legal claim in terms of the MIOSA ruling for the difference between the settlement amount and the purchase price less fair usage lay against the dealership, the NFO emphasised that the bank had a responsibility to foster trust and act equitably in its dealings with customers.
The NFO initially issued a provisional ruling in which it awarded the complainant R10 000.00 for distress and inconvenience, noting that she had endured unnecessary hardship as a result of the bank’s conduct in closing her account despite being alerted to the MIOSA ruling. The bank subsequently made further submissions, expressing its disagreement with the NFO’s position that it had prioritised its relationship with the dealership over its duty of care to the complainant. In its response, the bank also advised the NFO that the dispute between the complainant and the dealership had since been resolved through the National Consumer Commission.
While maintaining its objection to the reasoning, the bank indicated that it would nonetheless accept the provisional ruling should the NFO decide to uphold its original position in light of the new information in order to resolve the dispute.
The complainant confirmed that her dispute with the dealership had been resolved to her satisfaction.
Final ruling
Given that the complainant had already resolved her dispute with the dealership through the National Consumer Commission, the Ombud concluded that no monetary refund could be awarded against the bank. However, recognising the distress and inconvenience caused by the bank’s handling of the matter, the NFO ultimately ordered the bank to pay the complainant an reduced amount of R5 000.00 as compensation.
The bank and the complainant accepted the ruling and the dispute was finalised on this basis.
Contact details for the NFO:
Telephone: 0860-800-900
WhatsApp: +27 (0) 76 574 8055
Email: [email protected]
