Ombud brings relief to abused debtors

Abuses suffered by consumers of credit are highlighted in case studies reported in the Credit Ombud’s latest annual report, which also shows how consumers benefit from the free services of the ombud’s office. reports

Most complaints to the Credit Ombud’s office last year were about non-bank credit providers, and a large number of these were about the information that credit providers list on consumers’ credit reports, according to the Credit Ombud’s 2016 annual report.

Information that was the subject of complaints pertained to: reckless credit; bank and retail accounts opened by fraudsters; debts that had prescribed; and charges on debts that had been paid up, including debt paid by way of emoluments attachment orders (EAOs).

The Credit Ombud’s office found in favour of consumers in almost 70 percent of cases last year, “paying back” to consumers more than R10.7 million, ombud Nicky Lala Mohan says. In other words, in each case, investigations by the ombud’s office revealed “something that was not correct with regard to the credit agreement or the credit bureau listing”, he says.

The R10.7 million that went back to consumers is the total of amounts overpaid by consumers, or refunded or recalculated as a result of the ombud’s office finding some breach of the law. “Most of the amounts are relatively small, which makes the total amount that much more remarkable,” says the ombud.

The total amount paid back in 2016 was 40 percent higher than the amount the ombud’s office recovered for consumers in the previous year.

FRAUDULENT CREDIT

A consumer who was the victim of fraud would have been held liable for debts of more than R200 000 had it not been for the Credit Ombud’s office.

The consumer complained that no fewer than five fraudulent bank accounts (credit cards and personal accounts) had been opened in his name and he had not been able to clear these accounts from his credit profile, despite his contention that they were fraudulent.

The bank’s initial reply was that it could not assist, as it had never received a complaint from the consumer alleging fraud. But the consumer was able to provide proof to the Credit Ombud’s office that he had lodged a complaint with his bank and that he had been informed that the bank was still investigating.

As a result of the intervention by the ombud’s office, the bank investigated and confirmed that the accounts had indeed been acquired fraudulently. The accounts, totalling R223 741, were written off and the consumer’s credit profile was restored.

In another case, a consumer alleged that the furniture account listed on his credit report had been fraudulently opened using his details. He followed the credit bureau dispute process and turned to the ombud’s office only when that process failed. The ombud’s investigation produced evidence that the account was indeed fraudulent and the credit provider agreed to instruct the credit bureaus to remove the account from the consumer’s credit profile.

But there was a twist in the tale: the account had been handed over to a debt collection agency for collection and as a result, not one, but two payment profiles were reflecting on his credit report – one for the credit provider and another for the debt collector – amounting to a total of R63 386. Both these payment profiles were removed from the consumer’s credit profile and the account was terminated.

RECKLESS CREDIT

A consumer who did not realise that she was the victim of reckless lending complained to the ombud’s office because she could not make sense of the high balances on her personal loans.

She told the ombud she started experiencing financial stress in 2012, when she had to pay for two children at tertiary institutions and another at school. She applied for the first loan in 2012 and two further loans in 2013. She was paying the three loans, but was left with too little to cover her living expenses. She approached her creditor and made a payment arrangement.

She advised the Credit Ombud’s office that without any notice or consultation, and despite the fact that she paid every month as per the arrangement, an EAO was granted through the court in respect of two of the loans.

When she contacted the creditor, the outstanding balances on the three loans were so high that it was as if she had only just incurred the loans and not yet started to repay them, she said.

On investigation, the ombud’s office found that the consumer had obtained three loans for R21 000, R40 000 and R21 000, respectively. She had defaulted on all three and signed a consent to judgment and to an EAO. The outstanding balances on the three loans were R36 318, R81 226 and R48 072, totalling a staggering R165 616.

The ombud’s office raised the argument that the consumer could never have afforded the loans in the first place. As a result, the first loan was regarded as settled in full; on loan two, the outstanding balance was reduced from R81 226 to R14 885, and on loan three, the balance was reduced from R48 072 to R6 841. Her new total outstanding balance was R21 726.

In previous annual reports by the Credit Ombud, reckless lending was a category of complaint, but according to Reana Steyn, the deputy ombud, complaints of reckless lending constitute only one percent of complaints to the ombud’s office.

“We don’t classify more complaints as reckless lending, because in most of the cases, the credit providers do not agree that it was reckless, even if they are prepared to assist the consumer in some way because of our involvement and because of the arguments we raise based on our investigation.

“They do this as a matter of ‘goodwill’ and not because they admit that the lending was reckless. As long as we obtain the necessary relief for the consumer, we will not insist on the credit provider admitting to reckless lending. In a very small percentage of cases we do have an outright admission that the loan was reckless.”