R699 new car scheme ‘is a con’Comment on this story
‘It had the historical traits of a true Ponzi scheme.” So said Wesbank chief executive Chris de Kock on Friday of the Satinsky Group’s “New Car From R699pm” deal, which imploded this week.
In a statement issued on Friday, De Kock was scathing about not only the scheme but about the banks’ competitors, which have financed the deals.
In 2012, Wesbank declined Satinsky’s invitation to finance the cars in a deal aimed at relatively low income earners, having investigated the company and deemed its business strategy not to be in consumers’ best interests, De Kock said.
Consumers were sold on the idea of “subsidising” their monthly car finance instalments by plastering advertising stickers on their cars in return for a monthly advertising fee.
Absa, Nedbank and Standard Bank’s vehicle finance divisions agreed to finance the deals, over long terms - six years - and at high interest rates; up to Prime plus 4 percent.
Most of the estimated remaining 7 000 branded car owners discovered this week that they had not been paid a cent in advertising fees for June, leaving them legally indebted to pay the full instalment to their banks - typically about R2 600 a month.
De Kock said there was no evidence of the company’s financial reserves. “It seemed blatantly obvious that the scheme relied on upfront profits - from car sales, and commissions on finance and insurance products - to fund its downstream obligations: the historical traits of a true Ponzi scheme.”
On Friday, Absa told Independent Newspapers that it had reviewed its relationship with Satinsky late last year after receiving consumer complaints about the advertising scheme.
The bank recently terminated its relationship with the company altogether. Asked to comment on the Wesbank statement, Satinsky Group chief executive Albert Venter denied that his business model - in place for eight years - was anything like a Ponzi scheme, and said it was not true that the business was “barely solvent and with little capital”, as De Kock alleged. “If that is so, how come we paid a substantial amount in tax last year? And how come Wesbank has accepted my personal surety for the floor plan of another dealership I am involved in?”
As for the affordability issue, Venter said each applicant’s income and expenditure was assessed and verified in the normal way. If approved, they were made to sign the bank documents.
Asked why the advertising fee deal had collapsed, Venter said a lot of bad publicity had been generated by clients who fraudulently took their stickers off their cars and submitted fake photographic proof of their continued advertising of the deal, with the result that “fewer and fewer advertisers came on board”.
He conceded that the company had failed to communicate with its clients as their fees began to diminish in recent months, for no apparent reason.
On Tuesday, Satinsky told its clients that it had dissolved the “management agreement” between itself and Blue Lakes Trading & Promotions of Hong Kong, and appointed Accelerator Rewards (Pty) Ltd as its new partner instead.
No need for stickers on cars, no need to do a specific mileage, Venter says - just download a smartphone app, send out referrals, and if you sell a car you get “up to R3 000 in cash”.
About 4 400 people previously contracted to Blue Lakes had already signed up, Venter said. “We are aiming for 7 000 people, which will make us the biggest dealership in the country, and I can assure you customer satisfaction will be very high.”
- Pretoria News Weekend