Question posted in the National Credit Act Law category relating to Gauteng
A staff member of mine (Anna Tsotetsi) recently purchased a vehicle (2023 Toyota Quantum/Hi Ace) for R615 630.43 which she intended to use as a taxi to transport schoolchildren. The vehicle was purchased from Pat Hinde Toyota Springs who arranged finance for the vehicle with MFC, a division of Nedbank. In terms of the application for the vehicle finance, the finance provider filled in an income and expense schedule for the applicant (without reference to the applicant or any verification theeof) which indicated a monthly disposable income of R72 837.50. Anna is a domestic worker who has limited financial literacy and earns circa R7 500 pm. The monthly installments on the vehicle are circa R17 000pm.
Her proposed business plan to transport schoolchildren has not worked out and she has fallen behind in the monthly installments.
The finance provider has handed this over to a debt collector who wants to reposess the vehicle but also hold her responsible for the outstanding balance as well as any shortfall as a consequence of the forced resale of the vehicle.
I recently became aware of all of this and on reviewing the credit installment agreement, am of the view that this should have never been approved. The NCA also states: "RECKLESS LENDING - Credit providers are in contravention of the NCA and may be judged guilty of reckless lending if the Consumers ability to afford loan repayments is not assessed before granting credit. Credit providers may be subject to severe penalties and may even forfeit their right to recover the debt if they are judged guilty of reckless lending. However, Consumers who failed to fill in the loan application fully and honestly are not protected by the NCA."
I have advised Anna that it would be best to try and have the credit agreement set aside on the basis of reckless lending and to return the vehicle.
I would welcome any opinion on this matter and how best to proceed further.
Kind regards
Gerald Nelson
Message from the Lawyer
Hi there Gerald and thank you for your question,
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You are 100% correct in your opinion and your approach.
I think that the difficulty will come in fighting about the income and expense schedule. On the one hand, the finance provider should NOT be allowed to benefit from filling in 100% false information on the schedule in order to boost her creditworthiness and the credit agreement should be set aside on that basis, but on the other hand I'm not too sure how the NCR will deal with Anna having signed the income and expense schedule knowing that the information was wildly incorrect.
However, I think that Anna has nothing to lose, and I think that she should definitely move forwards in her attempts to set the credit agreement aside on the basis that the finance provider failed in the financial affordability tests and that credit (to that degree) should never have been granted!
Message from the client
Can you recommend the way forward?
i.e Should application be made directly to the NCR to have the agreement set aside or would it be more appropriate to procure the services of an attorney to handle the matter?
Message from the Lawyer
It will require a court to declare the credit agreement to be reckless, so either Anna will need to wait for the debt collector to have a summons issued on behalf of the credit provider and then for Anna to defend the summons on the basis that the credit agreement was recklessly entered into and ask the court to set it aside, Or Anna will need to apply to court now to set it aside.
There are loads of companies who are able to assist with things like this, including https://reckless-lending.co.za/reckless-credit/application/
Anna could also apply to the National Consumer Tribunal to have the agreement set aside on the same basis. https://www.thenct.org.za/what-we-do/
You can also read up here on how it works: https://www.obssa.co.za/wp-content/uploads/2018/02/Bulletin-5-Responsible-Lending-Final-30.01.2018.pdf & https://www.derebus.org.za/reckless-credit-sides-story/