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After an influx of complaints about the repossession of vehicles by banks, the ombud for banking services, Reana Steyn, has clarified the rights of both consumers and banks in such circumstances.
The first legal principle to understand is that, under vehicle financing agreements, the vehicle remains the property of the bank until the loan is fully repaid.
Steyn explains:
This means, for example, that if the debt prescribes – which typically occurs if the debtor withholds repayments and the creditor does not act on reclaiming the debt within three years – the ownership of the vehicle remains with the bank, and the bank is still legally entitled to repossess it. Complainants have believed they own the car if the debt has prescribed, however, what has prescribed is the customer’s obligation to repay the debt together with the bank’s right to sue the customer for repayment.
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Another misconception is that a client can simply “hand the keys back” and will no longer be liable for the car finance. While a client can give the car to the bank as a voluntary surrender, they are still liable for the shortfall, should the auctioned asset not sell for the full outstanding balance, meaning they will have to continue paying for a vehicle finance debt, without even having the vehicle to drive.
Rights under 'voluntary surrender'
Section 127(1) of the National Credit Act gives consumers the right to terminate a vehicle finance agreement by giving the bank written notice.
The vehicle will then be sold on auction to offset the debt owed. This affords over-indebted consumers an opportunity to alleviate their financial pressures by voluntarily surrendering the vehicle to the bank. Voluntary surrender should be a consumer-initiated exercise, free of any undue pressure or threats from the bank or its representatives, Steyn explains.
She said banks may, to save you legal costs, try to obtain your consent to voluntarily surrender the vehicle by sending its representative, who may be a debt collector, to your home.
Further, you have the right to refuse entry to anyone who is not a Sheriff of the Court and who does not have an original court order. Should unlawful techniques be used, consumers are advised to record them and report them to the ombud and South African Police Service.
What the banks can and cannot do
The ombud said she has received complaints from consumers, alleging that banks had tricked, forced or unduly influenced them into signing a document terminating the vehicle finance agreement and giving the bank or its representatives permission to repossess the vehicle.
Before instituting legal action, a bank will normally first exhaust its internal debt collection processes to collect the arrears. A bank representative will try to contact you with the aim of having the arrears settled. It is only if this process is unsuccessful, for example, if the consumer avoids the banks or emails, that the banks will resort to litigation.
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In South Africa, a bank can only physically repossess a financed vehicle with a court order or with the consumer’s consent. A court order will only be issued once the bank has complied with the following:
• Issued a section 129 notice (letter of demand) – this can happen only after the account has been in arrears for 20 days or more.
• A summons has been served by the Sheriff of the Court to the consumer.
• A judgment has been granted against the consumer, declaring the vehicle executable.
• The Sheriff of the Court has delivered the original warrant of execution (original court order) to the consumer, stating that the vehicle can be repossessed.
Steyn said that, in the event of a repossession, if the person intent on taking your vehicle fails to provide you with proof that they are the Sheriff of the Court, as well as the original court order stating that the vehicle can be repossessed, you are not obliged to sign any documents they present to you, nor are you obliged to hand over the vehicle.
However, the bank’s only obligation is to send this letter to your chosen address by registered post; there is no legal requirement on banks to prove that you received it.
Thus, it is vital that your contact details with your creditors are up to date. The ombud cautions against changing addresses or neglecting phone calls or emails from banks to evade paying your debts.
“Such an exercise is futile,” the ombud said.
Consumers are advised to bring to the ombud for banking services disputes related to:
. Outstanding balances on the vehicle finance account;
. Unfair treatment by banks and their debt collectors or tracers;
. Unilateral changes of the contractual terms and conditions; and
. Disputes related to prescription.
A formal, written complaint can be lodged directly with your bank’s dispute resolution department. Ask for a complaint reference number. Complainants also need to allow the bank 20 working days in which to respond to your complaint. Finally, complainants need to obtain a written response from their bank. Alternatively, consumers can contact the office of the ombud for banking services for free assistance if they experience any banking problems or would like assistance in lodging a complaint against their bank.
• Online submissions (https://www.obssa.co.za/resolving-complaints/make-a-complaint/)
• By email: info@obssa.co.za
• By phone: 0860 800 900
• By WhatsApp: 066 473 0157
• By downloading an application form from the website: https://www.obssa.co.za/wp-content/uploads/2018/04/Application-for-Assistance-form-FINAL.pdf
Complainants who have already lodged a complaint may track their complaint online by clicking on the following link: https://www.obssa.co.za/track-a-complaint/
