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, Credit Division Lead Ombud at the 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, considering the consequences should they not be able to service their repayments / debt and look at ways to reassess their budgets, with better financial planning practices, rather than facing a possible repossession scenario.”
The primary purpose of the NFO is to resolve consumer complaints against financial service providers. 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 Banking Division Lead Ombud. “Where a consumer approaches our office to seek assistance regarding a vehicle that has been repossessed by either Wesbank or MFC, the Banking Division at the NFO will investigate.”
Repossession 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 matters from our non-bank vehicle finance participants.”
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 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.
During the NFO investigation we considered whether the debt owing in respect of the shortfall had prescribed and 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. 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 voluntary termination or repossession, should the vehicle be sold, and 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. However, it is important to note that legally the bank is under no obligation to accept a payment arrangement 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 common credit user, many of whom are caught off guard as a result, and you should absolutely be aware of it. Simply put, prescribed debt is an old obligation that neither party to the contract has acknowledged or paid off within three years. Many people who utilise credit are unaware that this obligation must be acknowledged by the debtor before it needs to be paid because it is frequently passed onto and pursued by debt collectors.
If you have a complaint about a financial service provider in the Banking, Short-term Insurance, Long-term Insurance and Credit sectors, you are welcome to contact the NFO for free assistance.