WesBank activity under scrutiny

• Lender approaches defaulters to surrender cars

The National Credit Regulator is seeking legal clarity in a precedentsetting case against WesBank, a division of FirstRand, which it claims is contravening the National Credit Act by persuading defaulting consumers to surrender cars bought under credit agreements.

The national credit regulator is seeking legal clarity in a case against WesBank, a division of FirstRand, which it claims is contravening the National Credit Act by persuading defaulting consumers to surrender cars bought under credit deals.

“Credit providers should not be using section 127 [of the act] to escape going to court,” said Jacqueline Peters, manager of investigation and enforcement at the regulator. “The application is about legal interpretation. It is not a cut-and-dried case.”

The regulator was confident that it was correct, she said.

LOAN REPAYMENTS

Section 127 allows consumers to voluntarily surrender goods purchased under credit agreements if they are unable to meet loan repayments. The regulator is taking issue with WesBank approaching defaulting consumers to surrender their cars, as opposed to defaulters approaching WesBank.

“We mustn’t change the voluntary surrender process to anything other than a process [begun] by the consumer. WesBank’s debt-collection agents coax defaulting consumers into relinquishing possession of their vehicles,” said Peters.

When consumers fell behind on loan repayments, credit providers were required to send them a section 129 notice under the act, which laid out their rights, including the right to apply for debt review.

“We believe we’ve done nothing wrong,” said WesBank CEO Chris de Kock.

Where customers fell into arrears they were given an opportunity to pay the outstanding amount or voluntarily surrender the vehicle, he said.

If they refused to surrender the vehicle, WesBank had it legally repossessed via a court order. Legal fees involved in this process were for the customer’s account, he said.

In terms of this process, WesBank did not tell customers that debt review was an available option, as it was not legally obliged to do so, he said.

“Debt review is not necessarily a good outcome for us or the customer.”

WesBank SA had about 700,000 vehicle finance customers, De Kock said. He did not disclose the number of vehicles it repossessed, but a minority of customers were unable to repay their loans, he said.

CREDIT LOSSES

WesBank SA’s vehicle and asset-finance book reported credit losses of 1.42% of its overall loan book for the six months to December 2015, indicating a relatively low level of nonperforming loans.

WesBank consistently tried to avoid repossession, engaging with customers to help them catch up on arrears, De Kock said. Vehicles were returned to customers who made good on their arrears, he said.

“We need to make sure that consumers are fully aware of all their rights and obligations under the act,” Peters said.

The regulator had engaged extensively with WesBank on the issue and it was now for the tribunal to decide, she said.