Grieving mother charged exorbitant interest on funeral loan
When Doris Msibi borrowed R4000 to pay for her daughter's funeral, she didn't realise she would end up paying nearly 89percent interest.
This deal whereby the 55-year-old cleaner agreed to repay R4000 at R320,17 a month for three years, which adds up to R11509,55, didn't come from a loan shark, but from Nedbank.
"I only qualified for R1000 from work and my burial society had buried two of my relatives and were unwilling to pay for my daughter's funeral," Msibi said.
The grieving mother was approached at work by a broker only known to her as Sello offering loan arrangements via Nedbank.
Though she specifically asked for her loan to be paid back over 24 months, she later discovered her loan agreement was for three years. Furthermore, the R4000 she borrowed was upped to R5000 on her bank statement by "administration fees".
With only a grade 5 education, Msibi struggled to understand the loan agreement and turned to her colleague Elaine Kgosana for help.
Kgosana approached a Nedbank Southdale branch.
"I was told that she was a high-risk client and that it was not unusual for people with her type of income to be charged such an astronomical interest rate and that in fact some people paid close to 90percent interest," she said.
Nedbank Personal Loans strategic business communications manager Roshelle Pillay said: "We would like to confirm that ND Msibi took out a R4000 loan in September 2006, to be repaid over 36 months at an interest rate of 65,5percent.
"Under the Usury Act Exemption Notice and regulated by the Micro Finance Regulatory Council no maximum rates were set. The risk profile of the client influenced the rate at which the client repays the loan."
But run a R4000 three-year loan at 65,5 percent interest through a loan calculator, the monthly repayments come to R256,14. The R320,17 Msibi is being charged equates to a R5000 three-year loan at 65,5 percent. As Msibi only received R4000, she is being charged nearly 89percent interest.