Light: The bank Ombudsman sheds light on procedures banks should follow before they repossess a vehicle

By Thuli Zungu

Following the influx of complaints about the repossession of vehicles by financial institutions when consumers fall behind with their vehicle finance repayments, the Ombudsman for Banking Services (OBS) has invited all those affected to bring these disputes to her office.

These issues involved outstanding balances on the vehicle finance account, unfair treatment by banks and their debt collectors or tracers , changes of the contractual terms and conditions and prescription related disputes.  Reana Steyn, the OBS Ombudsman, says it is also necessary to clarify the rights of both consumers and banks in such circumstances. Importantly,  the first legal principle to understand is that under vehicle financing agreements, the vehicle remains the property of the bank until the loan is fully repaid.

“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 says.

This means for example, that if the debt prescribes – which typically occurs if the debtor withholds repayments and the creditor does not act on reclaiming the debt within three years – the ownership of the vehicle remains with the bank and the bank is still legally entitled to repossess it.

Steyn says her office received several complaints from bank customers who appeared to believe that since a bank’s right to claim repayment of the debt had prescribed, its right to repossess the asset had also prescribed, and ownership somehow automatically passed to the customer.

“Unfortunately, this is not the case,” Steyn says.  What prescribes is the customer’s obligation to repay the debt together with the bank’s right to sue the customer for repayment.

Steyn acknowledges that many consumers are  finding it more and more difficult to make ends meet these days with the increase in cost of living, fuel, interest rates to name a few. However, she encourages consumers who find themselves unable to make their repayments in full or on time to either return the vehicle to the bank or to renegotiate their credit agreement with the bank to avoid legal action being taken against them for the recovery of the asset.

She says a default on payments will have the following negative consequences:

• The adverse 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;  and
  
  
• The vehicle may be repossessed and sold on auction. You will remain liable for the shortfall, should the auctioned asset not sell for the full outstanding balance, meaning you will have to continue paying for a vehicle finance debt, without even owning the vehicle.

The OBS says she has received complaints from consumers alleging that banks tricked, forced or unduly influenced them into signing a document terminating the vehicle finance agreement and giving the bank or its representatives permission to repossess the vehicle.

Steyn says it is more important than ever that consumers know their rights. “Banks are not a law unto themselves and cannot repossess a vehicle without following the procedure set out in the National Credit Act 34 of 2005 (NCA).”

She says before instituting legal action, a bank will normally first exhaust its internal debt collection processes to collect the arrears. 

“A bank representative will try to contact you with the aim of settling the arrears. It is only if this process is unsuccessful, for example, if the consumer avoids the banks or emails, that the banks will resort to litigation”.

In South Africa, a bank can only physically repossess a financed vehicle with a court order or with the consumer’s consent.

The court order will only be issued once the bank has complied with the following:

• Issued a section 129 notice (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 to the consumer stating that the vehicle can be repossessed.

If the bank cannot show that it sent you a section 129 notice, a court will not grant judgment against  the consumer. However, the bank’s only obligation is to send this letter to your chosen address by registered post. There is no legal requirement on banks to prove that you received it.

“Thus, it is vital that your contact details with your creditors are up to date.” Steyn cautions against changing addresses or neglecting phone calls or emails from banks to evade paying your debts. “Such an exercise is futile.” 

If the person intent on taking your vehicle fails to provide you with proof that they are the Sheriff of the Court as well as the original court order stating that the vehicle can be repossessed, you are not obliged to sign any documents they present to you, nor are you obliged to hand over the vehicle.

Section 127(1) of the NCA gives consumers the right to terminate a vehicle finance agreement by giving the bank written notice. The vehicle will then be sold on auction to offset the debt owed.

This affords over-indebted consumers an opportunity to alleviate their financial pressures by voluntarily surrendering the vehicle to the bank.

Voluntary surrender should be a consumer -initiated exercise, free of any undue pressure or threats from the bank or its representatives. Banks may, to save you legal costs, try to obtain your consent to voluntarily surrender the vehicle by sending its representative, who may be a debt collector, to your home.

It is important to know that these representatives are not allowed to use intimidation, threats, or violence to force you to surrender the vehicle.  Further, you have the right to refuse entry to anyone who is not a Sheriff of the Court and who does not have an original court order. Should unlawful techniques be used, consumers are advised to record them and report them to the OBS and the SAPS.

“Lastly the OBS office deals with vehicle related complaints daily and that it is more than equipped to assist complainants with any vehicle – finance related disputes they may have with their banks.”

Ground-breaking judgment entitles dads to maternity leave

DECLARATION: Judge rules that both parents qualify for four months’ parental leave if they contribute to UIF benefits…

By Tania Broughton

Sections of the Basic Conditions of Employment Act and the Unemployment Insurance Fund Act have been declared unconstitutional because, when it comes to “maternity leave”, they unfairly discriminate against mothers and fathers, surrogate parents, and those who adopt children.

Johannesburg High Court Judge Roland Sutherland suspended the declaration of invalidity of the two laws for two years to give Parliament time to “cure the defects”.

However, in the meantime, Judge Sutherland has ruled that all parents are entitled to four months “parental leave” and, if they contribute, to UIF benefits.

The ruling has to be confirmed by the Constitutional Court, and the Minister of Labour may note an intention to apply for leave to appeal it.

The matter was brought to court by a Polokwane couple, Werner and Ika van Wyk, Sonke Gender Justice, and the Commission for Gender Equality, with several other organisations acting as amicus curiae.

The sole respondent was the Minister of Labour, the custodian of the BCEA.

The contested sections are in Chapter 3 of the Basic Conditions of Employment Act which regulates the minimum leave that an employer must grant to employees who become parents. It provides for a total of four consecutive months of maternity leave for a birth mother and ten days paternity leave for a father from the date the child is born.

It also provides for “gender neutral” leave for parents who adopt children. One of the parents is entitled to consecutive ten weeks and the other parent to ten days leave, with the election being left up to the individuals.

With regards to children born via surrogacy, the Act guarantees leave for the genetically linked parent, however it says nothing about the surrogate.

The Act does not require an employer to pay any remuneration, but parents can claim from the UIF if they contribute.

Judge Sutherland, in his ruling this week, said it was plain and uncontroversial that there was a differentiation made between mothers and fathers, and between a birth mother and other mothers or parents.

He said the applicants argued that this was unconstitutional in that it was unfair discrimination and violated the dignity of all parents.

The Minister argued that the present suite of benefits compared favourably with other countries with similar socio-economic profiles, that the Act did not violate any constitutional guarantees. The National Employment Association of South Africa (an amicus) also opposed the relief sought as being “bad for business” and best left to Parliament.

“The crux of the case is about unequal treatment of persons,” Judge Sutherland said.

He said, save for breastfeeding, both parents were able to provide comprehensive care to their child and it was not cogent to contend that the BCEA does not discriminate on the grounds of gender.

The judge said from a deconstruction of the policy choices made in the Act, it could be inferred that the framers had a particular perspective of a family and had excluded “other modalities” which were no less legitimate.

While the Act was not an instrument to regulate family life or prescribe norms by which people should organise their lives, it must find application in a way that is in harmony with the Children’s Act and the Constitution.

“Upon the premise that the leave entitlements and duration of leave are provided for the purpose of the nurture of a baby or toddler, not merely to allow a literal physiological recovery from giving birth, it seems plain that the distinctions made in the BCEA are at odds with the objectives of the Constitution and the norms inherent in the Childrens’ Act.”

The first irrationality, the judge said, was the provision of a ten-week period of leave for commissioning and adoptive “mothers”, rather than a 16-week period leave provided for a birth mother.

“Why dock off six weeks because they did not experience physical childbirth? What impelling rationale could inform the need for the distinction to be made … No legitimate governmental objective is discernible. In my view the discrimination is unfair. Mothers in all three categories ought to be entitled to the same period of leave for the purpose of child nurture.”

Judge Sutherland said, to accord a “paltry” ten days leave to a father “speaks to a mindset that regards the fathe’s involvement in early parenting as marginal”.