When the Satinsky Group’s “Drive-a-new-car-for-R699-a-month” scheme imploded in July 2014, it emerged that Wesbank was the only big bank that had chosen not to do business with the Satinsky Group. Wesbank’s chief executive Chris de Kock said at the time that the scheme had “the traits of a traditional Ponzi scheme”.

Wesbank decided in 2011 not to “get involved in any way whatsoever” with Just Group, which was a subsidiary of Satinsky Group.

“Our due diligence process indicated that the simple mathematics behind reducing an instalment of R3 000 or more to the advertised R699 did not point to a sustainable vehicle finance model and structure for the consumer.

“It is understood that the vehicles sold through the scheme were financed at their full retail price, without any deposit or manufacturer discounts, as with normal deals. In addition, the reported long finance periods, together with high-mileage conditions on the contracts, make it impossible for any customer to replace such a vehicle over the average replacement period of 36 months without significant shortfalls, resulting in financial difficulties for the affected customers.

“We believe that these facts were overlooked by consumers who were enticed by the promise of a very low instalment. Consumers entered into these deals on the misguided belief that they would only ever pay the advertised instalment, with the self-justification that it would fit within their available disposable income.

However, for most of the affected customers, the full instalment remained unaffordable,” De Kock said. Media reports at the time indicated that consumers’ affordability assessments could have been manipulated to reflect a higher amount of disposable income. If this is true, the credit providers may have been misled into making incorrect lending decision as well, he said.

“It appears that the profits from deals comprised the vehicle retail margin, as well as commissions on finance and insurance products sold by the group. Some of these profits also appear to have been used to fund the company’s ongoing commitments, but we could not see any evidence of financial reserves, proving the company never intended to sustain any long-term commitments as more customers joined the scheme.

“It, therefore, seemed blatantly obvious that the scheme relied on these upfront profits to fund its downstream obligations – typical traits of a traditional Ponzi scheme,” De Kock said.

Consumers “rely heavily on the trust they place in banks” to do a thorough investigation into their intermediaries before making any financial commitments of this nature, he said.