How did 'R699' buyers get credit?Comment on this story
Durban - The saga now commonly referred to as “the six-nine-nine cars” is far from over, and I’m busy investigating a few humdinger cases involving grossly inaccurate information on credit application forms, and a car sold as new when its registration history says otherwise.
But here’s a story of somebody who thought he had a good credit record but could not get a bank to finance a used car.
The 30-year-old, who asked to be identified only by his first name, Andrew, explained: “I’m trying to get vehicle finance but the only answer I get from financial institutes is that my credit scoring is too low or bad.
“I don’t have any judgments or defaults on my name, and all my current accounts are paid on time and up to date. The only thing that reflects on my credit report is that I have ‘39 enquiries’ but, as stated on my credit summary, ‘the enquiry that is recorded will not adversely affect your credit standing’.
“Please look into this matter, as I’m getting married next year, and this issue has been going on since last year, which has affected my life depressingly and my future progress in purchasing a vehicle and a house.”
“It’s like I’m blacklisted but I can’t see why.”
Since Andrew had attached his TransUnion credit report, I asked that bureau’s Carla Gilmour if she could shed light on why someone with an apparently good record was having such trouble getting credit.
“Based solely on the information contained in the consumer’s credit report, a lender would determine whether or not the consumer is in good standing,” she began.
“But each lender has their own policies and affordability assessments they use to arrive at a decision and it’s the lender’s responsibility to disclose to the consumer the reason for not granting credit.”
Gilmour confirmed that a “high number of enquiries” by various lenders could affect a credit provider’s willingness to approve an application, as the consumer would be considered “credit hungry”.
How ironic – the more someone tries to get credit, the less the likelihood of them getting it, as each enquiry noted on their record makes them appear more desperate.
Andrew responded: “If that’s the case, when I was shopping online for the best rates, in regards to finance, there was no product awareness or information stating that if you apply, it could affect your credit standing.
“According to my Trans-Union report, my scoring is high. Please check with finance houses for a justification and a solution.”
I was happy to oblige.
Trevor Browse, managing executive for Motor Finance Corporation at Nedbank, one of the lenders that turned Andrew down this year, said Andrew’s concern that his application was declined purely because of his bureau score was “unsubstantiated”.
“The behavioural score received from the credit bureau was average with no defaults or judgments reflecting. Factors that may have led to the application being declined include the fact that he applied for a 2006 vehicle, and a principal debt of R74 110, when the retail value of the car is R66 300, and the trade-in value is R56 200.
“As MFC we are unable to comment on the client’s concern regarding the number of enquiries to his bureau profile.”
MFC only made one enquiry when the application was received in May and the same bureau information was used when we received an updated vehicle finance request for the client in June.”
WesBank said Andrew had made four arrears payments on an account “a while back”, but that was not the reason for the decline.
“The equity on the asset – an eight-year-old car – he wants to purchase is very high,” a spokesman said.
“This means that the vehicle he is applying for is being sold for more than what the actual value of that car should be, and as such poses a risk for both the client and WesBank.
“The car is also bordering on the maximum age that we would consider for finance.”
“Therefore, considering all of these factors, not in isolation but a combined view, the application was declined.
“The customer can improve the odds for his application to be approved by choosing a newer car which is priced more appropriately. Also, he should consider paying a deposit, or increasing the deposit.”
Strange, then, that the only answers Andrew says he was given for the declines was related to his credit record, not the overpricing.
The National Credit Act states that on request from a consumer, the credit provider must give, in writing, the “dominant reason” for refusal.
Of course, the “pay a deposit or increase the deposit” advice brings to mind the “R699pm” Satinsky car deal, given that the thousands who were granted those bank loans paid no deposits at all.
Coupled with relatively high interest rates, they now pay hefty monthly instalments on less popular entry-level cars for the rest of a six-year term.
SATINSKY VICTIMS FOBBED OFF BY FINANCE DIVISION
Unlike Absa, which has been willing to discuss the individual “R699 per month” cases which I raised with them, Nedbank has clearly taken a view they will not.
Last week, I raised the case of Bradley Downs, who alleges the expenditure he declared to a Satinsky rep when applying for the deal is not what appears on his Motor Finance Corporation credit application, with the division.
For those new to this story, the deal saw consumers being supplied with entry-level cars by Satinsky, and then made to sign two contracts - one making them responsible to pay the full instalment over six years to a bank, and a second with a promotions company, in terms of which they’d get paid a monthly advertising fee for carrying advertising stickers on their car.
If they chose the cheapest car and drove more than 2000km a month, they could end up paying just R699 a month for that new car, it was claimed, thanks to being paid the ad fee.
The advertising deal has now collapsed, leaving them without the instalment subsidy they’d come to rely on.
Downs says he gave Satinsky a full breakdown of his expenses, but on the credit application, his expenses total a modest R3500.
He has since told an MFC staffer that his expenses figures were altered, but claims this did not go down well.
“I was told that it isn’t their problem as I signed the contract. They also stated that they do not take my expenditure into consideration, and when I asked how they determine affordability, the consultant became rude and aggressive,” he says.
Downs is not alone in alleging that his declared monthly expenses total was reduced in order for these loans to be approved.
So I asked MFC whether the bank had asked for proof of what was submitted by the applicants and whether senior employees had looked at the credit applications and identified red flags in the stated expenses.
I also asked what, if anything, the bank was doing to help people such as Downs.
This was the bank’s response: “Thank you for bringing Mr Downs’s concerns to our attention. We will contact the client directly to address his concerns.
“We understand that the non-payment of the marketing refunds that clients received from the Satinsky Group may place a strain on some clients.
“MFC clients affected by this unfortunate matter can send an e-mail to R699Queries @mfc.co.za and a dedicated team will assess each request and assist the clients where possible.
“MFC is not privy to nor involved with these agreements between the car buyer and the motor dealership as these are entered into only once the bank finance contract has been signed and accepted by the car buyer and the vehicle value paid out to the dealership.
“As such, MFC assesses the client’s application for finance based on the full vehicle value, full instalment amount and affordability within the responsible lending framework of the National Credit Act.
“At no stage is any form of dealership rebate, subsidy or lead fee factored into MFC’s financing decision. We encourage the affected customers to contact Just Group Africa to seek a resolution.”
MAKE THAT CALL
The National Credit Act entitles you to one free credit report a year. If you want another report in the same year, you will be asked to pay an admin fee of about R20.
Here’s some excellent motivation: According to credit bureau TransUnion, of those consumers who challenge their impaired credit status, 70 percent end up with the adverse listing being removed.
But less than one percent of consumers check their credit report annually, despite the free offer and the fact that they are likely to have unjustified blacklistings on their record.
Contact details of three major credit bureaus:
TransUnion: 0861 886 466.
Experian: 0861 105 665.
XDS: 011 645 9100.
If you disagree with a listing, lodge a dispute with the credit bureau. If, after 20 days, the listing remains, contact the ombudsman at 0861 662 837.
DID YOU KNOW?
A credit provider is legally required to ask a consumer for permission to view their credit profile.