Those cheap deals come at a hefty price
Consumers are lured by a good deal. A deal where money can be saved or made, often at their cost. As is the case for thousands who signed up for the R699 car deal with the Satinsky Group.
Affordability is the central issue surrounding this scheme. And many, if not most of the consumers who now f ind themselves f inancially distressed as a result of the collapse of the scheme, chose this deal because of the revenue that advertising the scheme on their car would provide to pad their disposable incomes and put them in a position to afford a new, usually entry-level car.
Ironically, these instalments are probably higher than if they had purchased the same vehicle through traditional dealers. And now, with the termination of the Blue Lakes advertising deal they signed through the Satinsky Group, the income generated from this arrangement has effectively been cut off, leaving consumers unable to meet their repayment commitments.
If it looks too good to be true, it generally is. But if you learn that three major banks, Absa, Nedbank’s MFC and Standard Bank are underwriting the deal, then this would surely dispel fears. Yet, as early as 2009 the Satinsky Group was already on the National Credit Regulator’s radar after failing to comply with various provisions of the National Credit Act.
The uncertainty now that the scheme has imploded is whether the Consumer Protection Act (CPA) will cover those affected and whether they are afforded protection under the National Credit Act.
“Our consumer rights are among the best in the world. The CPA is a wellintended piece of legislation designed to protect the consumer and, given our demographics, especially the lower income, perhaps more vulnerable consumers who have been exploited in the past,” explains Jeff Osborne, CEO of Gumtree Automotive. Osborne was head of the Retail Motor Industry Association for 13 years and was instrumental in compiling CPA information for car dealers and consumers.
But the CPA was designed to afford protection to consumers, not business
relationships. This key fact could be the potential deal-breaker for those affected by the Satinsky scheme. Indications are that these consumers forfeited their right under the act when they entered into an arrangement to provide an advertising service, in effect making it a business deal. No longer viewed as consumers, it appears they may not benefit from the act’s protection.
Osborne understands this to mean that these consumers, although they fall outside the ambit afforded by the CPA, do have recourse through the law. But their recourse would mean pursuing the same costly route as any business would be required to do in a civil action. He believes this warrants legal opinion because the intent of the act, he says, has always been very clear. It was designed to protect the individual private consumer. And in his opinion, these consumers haven’t forfeited that status simply because they agreed to advertise the dealer’s business on their car.
Affected consumers may have found an ally in Cosatu, which says that it will enter into negotiations with the banks to extend periods of repayment so that the amounts remain at the affordable levels of R699. “From what I understand, the term is already over six years, and further extending this would mean that the interest implications would be horrific,” says a concerned Osborne.
Hinting at reckless lending by the banks, Cosatu also called on Government to take action against banks violating the National Credit Act and said they will be supporting the class action suit against the finance institutions and car retail companies to ensure that these kinds of practices are not repeated in future.
Osborne says that in the event of default where reckless lending has been established, the National Credit Act prevents f inanciers from repossessing and they are obliged to restructure the deal with the consumer. “I do not believe the banks would want to be in a position where they have to repossess cars on an unprecedented scale. Banks don’t want to repossess cars. I have heard them say that time and time again. And they always advocate that a consumer should approach them if they f ind they can’t meet their payments. Banks will appreciate that,” says Osborne.
“But I would equally like to believe that the banks, given the role they have possibly played in inf luencing the consumers’ decision to go with this scheme, do have some kind of moral obligation. You have a whole bunch of people, lowincome earners who are going to be profoundly affected by this, devastatingly so. Far be it for me to speculate on what the banks should or shouldn’t do, but I believe there is an opportunity to generate some goodwill here,” he adds.
Absa told Finweek that it recognised that some of its clients may face financial difficulties and encouraged affected customers to contact the bank on 0860 789 111 to arrange an appropriate repayment plan. Absa says that its business relationship with Satinsky was reviewed in 2013, which coincided with customer complaints received relating to the Blue Lakes advertising scheme. The bank has since issued notice to Satinsky to terminate the relationship.
Absa also confirmed that it has no other agreement with the Satinsky Group of companies apart from providing finance to customers in line with the bank’s processes and credit criteria. “The advertising service agreements between Satinsky clients and Blue Lakes Trading and Promotions of Hong Kong are separate agreements to which Absa is not a party and does not promote in any manner. In addition, Absa is unaware of which clients did in fact conclude such agreements with Blue Lakes or the number of clients that may be affected,” says Absa’s spokesperson.
The reality is that consumers countrywide are feeling the pinch and are targets for the unscrupulous using the cheap deal as a carrot. But consumers, too, need to not only be mindful of the risks associated with cheap deals, but also of their affordability limitations and ensure that they explore what other options are available to them before signing on the dotted line.