Banks in firing line over R699
Hundreds of motorists granted urgent Tuesday court hearing
BANKS are in the firing line as hundreds of people who bought cars under the “discounted” R699 scheme have been granted an “urgent hearing” by the Eastern Cape High Court on Tuesday.
This paves the way for a possible class action against banks for supporting the scheme, launched in 2008 by Albert Venter, the CEO of the Satinsky group, who lives in a R11.5million mansion in Mooikloof, east of Pretoria.
The consumers, led by Port Elizabeth lawyer Duncan Heuer of Pieterse Cary Finlaison, are asking the court to declare all contracts between the banks and motorists null and void. The court papers cite as respondents Satinsky and Standard Bank, Absa, Nedbank’s Motor Finance Corporation and FirstRand’s Wesbank.
Wesbank is, however, likely to appear only as a witness as it rejected an offer to join the scheme in 2011 after its due-diligence investigation left it with “concerns about the sustainability of the business”.
Two weeks ago, Wesbank slammed the R699 scheme as having the same attributes as a “Ponzi scheme”, in which money from new investors is used simply to repay older investors.
The court will decide on Tuesday whether the case against Satinsky can be heard as a class action.
Absa spokesman Dante Mashile said on Friday the bank “opposed the application”. Standard Bank said it was preparing answering papers.
Venter refused to speak to the media. Satinsky has hired prominent Pretoria criminal attorney Llewellyn Curlewis as its legal adviser.
About 17 000 people are affected by the scheme, which offered to cut their repayments on new cars to about R699 if they drove a minimum distance every month with scheme advertisements pasted on the cars.
But the scheme collapsed two weeks ago, and banks are telling the motorists to repay full instalments, which some can’t afford.
A Facebook group called “I have been done in by Drive a New Car from R699 per month” had attracted 2 563 members by Friday morning as website excitement over the possible class action mounted.
By late Friday, about 550 of the R699 scheme investors had joined the action. Heuer said the list was growing by about five people an hour.
The court case is expected to spotlight the extent to which the banks supported Venter and his R699 scheme. “We do not know what exactly the relationship was between the banks and Satinsky,” Heuer said.
The scheme’s collapse has caused jitters at most of the banks, notably Absa, which is owned by the British banking group Barclays.
Absa, which stopped financing the scheme last year, said it had launched a forensic investigation into the R699 scheme. “The investigation is ongoing at this stage, and we cannot give a fixed date,” said Mashile.
Absa insiders said the scheme was raised at board level, and management was holding meetings regularly to discuss the fallout.
The bank’s probe is understood to be focusing on whether internal processes were breached when Absa gave loans to R699 scheme members.
Absa refused to quantify its exposure to the scheme, but said it stopped financing the cars “based on the performance of the portfolio”.
The scheme worked like this: when customers came to Satinsky, they had to sign two agreements, one for bank finance and a second in which they were promised a “rebate” for advertising the scheme on the cars.
The customers would pay the full
All credit providers in the scheme will be investigated — National Credit Regulator
instalments, and then be paid separate “rebates” by Satinsky’s overseas partner, Blue Lakes, effectively lowering their monthly instalments.
But the scheme imploded when Satinsky told motorists the rebates had dried up after Satinsky cut ties with Blue Lakes.
While the banks, like Absa, offered to re-negotiate payment terms, it seems that some of the customer details were not recorded correctly.
The National Credit Regulator (NCR) warned that it planned to refer Satinsky to the National Consumer Tribunal if it had flouted the National Credit Act by not revealing the full cost of credit in advertisements.
“All credit providers in the scheme will be investigated,” said the NCR’s Lesiba Mashapa.
Heuer said he believed the Satinsky business model resembled a Ponzi scheme as it relied on getting money by advertising its services, rather than carrying advertising for other companies.
What has sparked outrage is that Satinsky appears to have opened up a new company using a similar model.
Its other company, Zagato Car Sales, promises a R5 000 once-off payments towards a motorist’s vehicle finance plus R3 000 in cash if the buyer orders a new car simply by sending an SMS.