By Angelique Ruzicka, editor, Justmoney
The National Credit Regulator (NCR) has received a number of complaints that lenders have left consumers with massive shortfalls after repossessing their homes and vehicles and selling the assets on auctions at a fraction of their value.
The National Credit Regulator (NCR) has received a number of complaints that lenders have left consumers with massive shortfalls after repossessing their homes and vehicles and selling the assets on auctions at a fraction of their value.
The regulator has announced that it is commissioning an investigation into various credit providers. Lesiba Mashapa, company secretary for the NCR, refused to be drawn into naming and shaming the businesses concerned but said: “It’s an industry wide investigation and we are specifically looking at credit providers that repossess cars and houses. I don’t want to mention names in that regard.”
Gross shortfalls
Mashapa said the regulator had received less than 40 complaints from consumers in this regard but explained that these were very serious allegations and that the shortfalls were quite big. “Let’s say, for example, the outstanding balance is R50, 000, the market value is R70, 000 but the car is sold for R20, 000.
“So the shortfall is quite significant and unfair for the consumer to have to pay back R30, 000. The fact that the consumer is still liable for such a big shortfall for a car that they no longer have and which has been sold for a small price [is unfair]. It’s putting the consumer into unnecessary debt. Shortfalls from the sale of houses can be even bigger than this,” he explained.
Change in the law?
Mashapa said there was no law dictating to lenders how much they must sell repossessed assets for and what size, if anything, the shortfall was allowed to be. “The law says they [the banks] are allowed to sell it [the assets] but it doesn’t define as a percentage how much that shortfall must be. It just says the property must be sold at the best price possible.”
However, he did not feel that the law needed to change. “I don’t think so. I just think that credit providers should do their best in terms of selling the property for the best price to help consumers reduce their indebtedness in the long term. They should try and help the consumer to settle their outstanding balances by selling the properties at the right price,” said Mashapa.
Challenges await
It’s unclear whether lenders will be penalised in any way if the NCR finds in the consumers’ favour, but Mashaba explained that lenders could be challenged following the investigation. “The NCA allows the National Consumer Tribunal to review the sales to determine whether the cars have been sold as soon as reasonably practicable or for the best price reasonably obtainable.
“From the NCR’s perspective, if we see that the shortfall is very high we will then have to ask whether the property or car was sold for the best price reasonably obtainable and challenge the shortfall on this basis. The NCA does not define the percentage of the shortfall.”
Mashapa said that the complaints were not linked to the R699 vehicle saga where thousands of vehicle owners were left to struggle with higher car premiums after a scheme provided by the Satinsky Group and Blue Lakes Trading and Promotions, which helped to provide an income stream to pay some of the premiums, collapsed.
Many R699 vehicle scheme owners are now facing threatening letters from banks and may in some cases face having their cars repossessed as they are behind with their payments. Mashapa said that the NCR had only received a few complaints from R699 vehicle scheme members. “The last time we checked we had 29 complaints and the investigation is drawing a conclusion. I can’t say yet when it will conclude however,” he added.