'R699' banks deny reckless lendingComment on this story
Durban - There’s no commonality; not all R699-ers had the same experience.
The claims of manipulating expenses information to influence credit scoring are completely reliant on hearsay and speculation and the application should be dismissed due to lack of jurisdiction.
That, in a nutshell, is the response of all three "699" car deal financing banks - Nedbank's MFC, Absa and Standard - to attorney Duncan Hauer's application to certify the Satinsky car owners as a "class"; to his contention that their financial information was falsified by Satinsky and to his suggestion that the banks were guilty of reckless lending and thus all the affected contracts ought to be set aside.
The matter - regarding the class action, initially - was due to be heard last Tuesday in the Port Elizabeth High Court, but was postponed until next Friday, 8 August.
Satinsky 128 (Pty) Ltd, the company which reportedly sold more than 25 000 "New car from R699pm" cars in the past six years, is among the respondents, along with the three banks which have financed the cars.
Also listed as a respondent is Wesbank, which chose not to finance the cars, regarding the scheme to be too risky.
Those who bought the cars entered into two contracts: one with the bank, for the full instalment, and another with the mysterious promotions company, Blue Lakes.
The latter saw them being paid a fee in return for plastering advertising stickers on their cars.
The scheme worked for many people for several years, but began to wobble in March when the advertising fees were slashed, and then imploded altogether earlier this month when the fees all but dried up.
Now thousands are left unable to pay the full instalments to their banks, which is more than a little awkward for the banks, who have steadfastly maintained they didn't take into account the Blue Lakes income at all when assessing whether applicants could afford their proposed car instalments.
Hauer claims in court papers that "some if not all of the consumers' monthly expenses or commitments were manipulated by Satinsky's representative or agents".
Indeed, many R699-ers are claiming that their monthly expenses, as reflected on their bank credit application forms, are far lower than what they disclosed to Satinsky when applying for the deal.
As is standard practice with car finance deals, the clients gave their financial information and documentation to Satinsky reps - acting as mandated financial agents for the bank - and Satinsky in turn passed that information on to the banks.
The problem is that most clients provided the details of their income and expenses to Satinsky over the phone, and therefore have no record of what they said, so they can't prove that their living expenses were reduced in order to create the false impression that they could afford the car instalment.
Absa's attorney pounced on this in the bank's answering affidavit: "At the heart of the complaint that promoted this application is the allegation that 'Satinsky manipulated or fabricated the consumers' monthly commitments so as to make them qualify for access to credit'.
"If the cause of action is fraud on the part of Satinsky, Bartosch (the 699-er whom Hauer has put up as representing some 14 000 others) has failed to set out the essential elements of fraud."
In other words, he has presented no proof.
And Absa states, in its affidavit: "The over-broad, uncertain and ill-defined nature of the 'class' is self-evident from the applicant's own say-so… via the ambitious and uncertain statement that 'some if not all of the consumers' monthly expenses or commitments were manipulated by Satinsky's representative or agents'."
But Consumer Watch has spoken to two 699-ers who do have such evidence, though neither of them live in the Eastern Cape where the action is being brought.
"Dominique of Midrand" featured in this column last week.
When she applied for her Satinsky car in early 2011, she was required to fill in all her financial details on a form and fax it to Satinsky, and she kept that form.
On it she declared her monthly expenses as totalling R6282, but on the Absa credit application form, that's been halved to R3140.
A few months later Satinsky changed its procedure, requiring applicants to give that information over the phone.
But she's not the only one with proof.
I've since discovered that a wily Pretoria pastor also has a record of what he submitted to Satinsky, thus he can also prove that his living expenses were "fiddled with" - in his case reduced by almost R2300.
But while the banks are arguing that they had no reason to believe Satinsky had supplied them with falsified living expenses information, in many cases the "fake" living expenses amounts were obviously implausible; amounts which couldn't possibly have covered rent/bond instalment, petrol, food, utility bills and the like.
So questions are being asked about the nature of the affordability assessments which the banks conducted in respect of the Satinsky applications, and why the falsified numbers didn't raise red flags.
What Hauer ultimately seeks to achieve is the setting aside of the 699-ers' loan agreements with the three banks, on the basis that the banks were guilty of reckless lending, something a court can pronounce in terms of the National Credit Act.
The act allows for this if the bank is found to have either failed to assess a consumer's financial position, or approved a credit application "despite the fact that the preponderance of information available to the credit provider indicated that the consumer did not generally understand the risks, costs or obligations of the agreement", or despite the fact that entering into it would make the consumer over-indebted.
The banks argue, in their responding affidavits, that Hauer did not attach "particulars of claim" revealing in what way the banks erred in respect of reckless lending.
And all the banks claim the Port Elizabeth High Court does not have the jurisdiction to hear the matter, as none of the respondents are based in the Eastern Cape.
Absa argues that Hauer's application is "fundamentally misconstrued" in that it adopts a "forced-in and opt-out" approach to the members of the class action: the 699-ers.
In other words, they should have been given the opportunity to opt in to the class action, rather than being considered to be bound by it, unless they take steps to indicate that they don't wish to be.
"It is patently unreasonable and prejudicial to such forced members of the class”.
If a loan agreement is found by a court to be a case of reckless lending, it can be declared null and void, the car |handed back and payments refunded.
But many of the 699-ers want to keep their cars, and have made deals with their banks to lower their instalments by extending the term for another year - making it 84 months - or restructuring the agreement to create a "balloon" payment. Selling the cars is not a viable option for many: they owe more on their cars than they can get in a market which is flooded with high-mileage little hatchbacks.
CALLS FOR HELP KEEP COMING
The mostly twenty-somethings who man Nedbank's 150-desk call centre in Sandton know all about the 699-ers, having all spoken to many of them in recent weeks.
All have notices at their desks, reminding them to deal with those clients with empathy. They're trained to forward them to a specialist, experienced team who can discuss ways of allowing them to keep both their cars and their credit records intact.
The bank has also set up a dedicated e-mail address: [email protected]
"If someone has no e-mail address, they can call us and we will call them back," said Trevor Browse, MFC's managing executive.
Browse invited Consumer Watch to Nedbank's head office to discuss the Satinsky debacle, including why the bank had continued to sign Satinsky deals as recently as 7 July.
"From time to time we had seen Hello Peter website complaints that in certain cases Satinsky was making it more onerous for clients to claim their marketing fees, but we had not received any direct escalations or complaints from MFC clients," he said.
So what happened to make the bank finally pull the plug on Satinsky?
"Albert Venter (Satinsky group chief executive) failed to reply to us on the extensive allegations made in the media on July 6 and the week before that, that he was reneging on payments he owed to clients in terms of the 'marketing agreement' between himself and these car buyers."
But an internal team with MFC admitted they realised the Satinsky deals "were going to be problematic" three months ago, because distressed clients were applying for financial relief, given that their advertising fees were drastically diminishing.
But on the other end of the business, Satinsky deals continued to be approved.
Absa began reducing the number of Satinsky deals it approved late last year and stopped altogether around February.
But like MFC, Standard Bank approved finance on a Satinsky car as recently as 7 July - a week after Satinsky had sent notices to existing clients saying the Blue Lakes deal was over.
Consumer Watch's first big splash on the withholding of this deal's advertising fees was on 23 June.
Most of those who signed up from late May never got a cent in advertising fees.
R699-ER HAS WRITTEN PROOF HIS DETAIL WERE CHANGED TO SECURE A LOAN
He wants to be identified only as JB, but he's a special 699-er.
Like Dominique of Midrand, whose experience featured in Consumer Watch last week, he has proof that his expenses information was falsified to |pass the bank's affordability| test.
When he contacted Satinsky to apply for the deal in February 2013 - fancying a new car for just R699 a month, as advertised - he was told to give his income and expenses information over the phone.
But he refused, insisting that a representative visit him with the paperwork at his home.
Not only that, he insisted on keeping a copy of the form he filled in.
On it he put his take-home pay as R8648, and his living expenses as R7007, but the MFC credit application form reflects his expenses as R4719 - R2288 less.
The pastor says he signed all the documents on the day the car was delivered to him, although he admits he was too trusting and didn't check all the information on the bank forms.
Trevor Browse said MFC had asked Satinsky, last Tuesday, to explain why the expenses they captured differed from what JB submitted, "and whether the misrepresentation happened due to negligence or fraud".
If either were proven, MFC would "uplift" the loan, with JB's consent, he said, "and get the dealer to take back the car, pay MFC back the balance outstanding, and we would reimburse JB".
And if Satinsky doesn't accept responsibility?
"We would need to consider criminal and/or civil proceedings against the dealership," Browse said.
And here's the crux of this case - had JB's declared expenses not been altered, MFC's system "would automatically have calculated that a disposable monthly cash surplus of R1641 is not sufficient to service a monthly repayment of R2646", Browse said.
The application would then have been declined.