The South African Banking Services Ombudsman, Reana Steyn, said this week that the organisation had noted a rise in complaints about vehicle repossessions by banks from consumers who were falling behind on payments, as the rising interest rates made living a highly expensive affair.
Consumer credit statistics also show a financially stressed market, with over 50% of South Africa’s active credit users falling short of a good standing record, according to the National Credit Regulator.
As financial tension in households across the country thickens in the face of rising fuel and food costs, Steyn said the rights of both consumers and banks should be clarified.
When a person purchased a vehicle through finance, the owner of that vehicle was the institution which loaned you the money and not you, which in most cases was a bank, Steyn explained.
If a person bought a vehicle and then defaulted on payments and did not act on them within a period of three years, the company could legally repossess said vehicle.
Steyn said that complainants who approached her were under the impression that if the debt was written off, then the bank could no longer repossess the vehicle.
“Unfortunately, this is not the case.
“With financed vehicles, the bank, as the titleholder, remains the legal owner of the vehicle, and ownership only passes to the buyer on payment of the last instalment to the bank,” Steyn said.
There are a number of consequences to consider after defaulting on a vehicle repayment, namely: your information will be listed on your credit report, limiting your ability to access further credit in the future.
Legal action may be taken against you, resulting in you being liable for the additional legal costs and a judgment recorded against your name.
The vehicle may be repossessed and sold at auction, and you will be liable for the shortfall should the auctioned asset not sell for the full outstanding balance.
This means you will have to continue paying for a vehicle finance debt without even having the vehicle to drive.
There are around 27 050 000 active credit users in South Africa, according to the National Credit Regulator.
The latest credit market figures, measuring the period from April to June 2023, show that 6.49 million consumers are at least three months and longer in arrears.
Just over 17 million consumers are in good standing.
“The interest rate cycle has been on an upward swing, placing consumers' payment obligations under severe financial pressure as a result of increased debt repayment instalments.
“Secured credit, which is dominated by vehicle finance, decreased by R480.03 billion (1.06%) quarter-on-quarter and by R153.55 million (0.34%) year-on-year.
“The total outstanding consumer credit balances as of June 2023 were R2.31 trillion, representing an increase of 0.74% quarter-on-quarter and by 5.81% year-on-year,” the NCR report said.
Furthermore, the NCR said that secured credit debtors’ books increased by just over R3bn quarter-on-quarter and by R22bn year-on-year. This relates to the amount people owe to their credit provider.
But while the financial strain may leave consumers between a rock and a hard place, they too are protected, Steyn said.
The South African banking system dictated that a bank could only repossess your financed vehicle if they had your consent or a court order.
The court order that gives the bank authority to take back your vehicle is granted under four stipulations:
• If a Section 129 notice is issued (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 a 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.