Unfair practice to repossess and sell at low price

Some banks and financial institutions continue to take advantage of customers who are not aware that the new National Credit Act protects them.

Some banks and financial institutions continue to take advantage of customers who are not aware that the new National Credit Act protects them.

Many consumers also do not know that they can save on legal costs if they surrender their cars or other items instead of waiting for credit providers to repossess the goods.

But the rush by financial institutions to repossess vehicles will now prove to be a futile exercise.

The credit act requires credit providers to sell surrendered items such as cars and furniture as soon as possible and at the best possible price in order to minimise the shortfall.

The money from the sale is required to be used to relieve the indebted consumer of a large chunk of the debt. And any money remaining after the credit provider has deducted reasonable costs for selling the item and settling the debt has to be refunded to the consumer.

But it seems that credit providers are more eager to repossess from consumers than to make the arrangements that the act provides for. They prefer to sell the items at low prices and to leave their clients indebted to them.

The act states that clients can make arrangements or surrender the object of sale with a view to settle the debt.

But Wesbank, for example, would rather repossess than recognise sections 128 and 86(7) of the act.

Twice this year, the bank tried to repossess vehicles from a client even though she was willing to pay a lesser amount until she was back on her feet again.

Ellen Miya, 40, a taxi owner in Soweto, bought a Toyota Quantum through Wesbank.

It was involved in an accident early this year. Due to some technicality, her insurance company declined her claim. She had to pay to repair her vehicle and this affected her ability to repay the monthly instalment.

Miya had notified Wesbank about her problem and offered to pay a lesser amount for a while.

Wesbank rejected Miya's request.

After Consumer Line intervened, the bank accepted Miya's deal.

Miya was not over-indebted, but was temporarily experiencing difficulties. This also affected her repayment on her Toyota RunX, also financed by Wesbank.

In July, her Quantum was back in business and she met her obligations to the bank.

Miya who was two months behind with her repayments on her RunX, asked the bank to take two instalments at the end of August and another two at the end of September.

Wesbank omitted to carry out Miya's request.

"I called and urged the bank to take a further instalment, which they did, but they still referred my account to their collection department," said Miya.

Last Wednesday night, Wesbank's collectors came to collect the car.

Miya asked: "Can you imagine how terrifying it is for a single parent to be approached by six men at night to demand your car without any proof that they were sent by the bank to repossess it?"

Miya refused to hand over her car because she had made arrangements for the bank to double her instalments.

Wesbank could not explain why it had referred Miya's account to its repossession department. The bank has now stopped the repossession process.

The National Consumer Tribunal (NCT) ruled yesterday it was an unfair business practice for financial institutions to sell surrendered items for next to nothing. It said Motor Finance Corporation (MFC) had to put in place structures to distinguish between responsible and irresponsible consumers.

The act aims to relieve consumers from over-indebtedness by allowing them to surrender objects of sale or to make alternative arrangements with a view to settle their debts.

The NCT said it is imperative for banks to sell cars at the best deals to minimise debt and, if possible, to sell for an amount that would settle the consumer's debt in full.

Section 129(4) of the act states the service provider may not reinstate a credit agreement after the service provider had attached the object of sale or the consumer had surrendered it because he/she could not keep up with repayments.

Frans Hendrick Dumas lodged a complaint with the NCT against the MFC.

Dumas was not in arrears, but surrendered his car when he realised he would not be able to pay his instalment.

He notified his financial institution that two buyers wanted to buy his car for R100000, which would leave a shortfall of R29000.

Dumas was willing to pay the shortfall, but MFC rejected his offers and sold his car for a paltry R54000.

During the hearing, MFC realised that it should have handled Dumas differently and agreed to pay the shortfall. It also conceded that their hasty action in selling the car was not fruitful because both parties lost out.

Every motor vehicle has an estimated value at the time of sale or trade-in, but MFC did not give Dumas an estimated value of his car within 10 business days after he surrendered it with a termination letter as is required by the Credit Act.

Although Dumas had requested information about the estimated value of his car, MFC had ignored him.

The NCT accepted an offer by MFC to Dumas to pay the shortfall and compensation of R6000 for his expenses.

l Consumers who are not happy about credit providers not having taken reasonable means to sell their surrendered items at the best possible price and who cannot resolve the matter with the financial institution can approach the tribunal to adjudicate on the dispute.

The consumer tribunal was established by the National Credit Act to conduct hearings on disputes relating to credit agreements.