Your money: all about voluntary returns
BUYING a car, TV, cellphone or couch on credit might have seemed like a good idea at the time – but what do you do when you realise you can no longer afford the repayments?
As a consumer you have the right to return items to the credit provider so they can be sold to cover the amount you still owe.
This process is unlike seizure or sequestration because you’re returning the items voluntarily.
WHEN CAN YOU DO IT?
Only if you have a payment arrangement plan with the credit provider.
The agreement must state that while you’re paying off the amount owed you have the right to use and keep the item, but you legally become the owner only once the entire amount has been paid back.
This rule usually applies to movable assets such as electrical appliances and cars.
HOW DOES THE PROCESS WORK?
▶ According to the National Credit Act you can give the credit provider – the shop where you bought your TV, for example – written notice that you want to return the item. You then need to return it within five days. ▶ The credit provider has 10 days after receipt of your written notice to let you know what the estimated value of the item is. Remember, it’s secondhand now and not worth the same as when it was new. ▶ If you’re satisfied with the estimated value, you can let the service provider know it can resell the item for the best price it can get. ▶ You have 10 working days to withdraw your written notice, in which case you can collect the item and resume your repayments. ▶ There’s no guarantee the sale of the item will cover what you owe and you’ll be responsible for any shortfall. If the retailer manages to sell the item for more than the amount you owe, it has to pay the difference back to you, says Carla Oberholzer of debt management group Zeeva. ▶ As soon as the item is sold the credit provider must let you know how much it reached and what the net profit was. The net profit is the amount remaining after the credit provider has deducted its fee for selling the item.
Example*
Janice buys a fridge for R5 000 (including interest and fees) and she and the shop agree she’ll pay it back over 10 months (1 January1 October) at R500 a month.
The fridge is delivered on 1 January but on 1 June Janice realises she can no longer afford the repayments.
She takes the fridge back on 2 June and lets the shop know she’s returning it voluntarily.
By 12 June the shop lets her know the fridge can be sold for R3 000, and Janice agrees.
As soon as the shop sells the fridge, they send Janice a notice: 1 Settlement amount (4 months outstanding 1 July-1 October x R500) = R2 000 2 Sale of fridge = R500 3 Reasonable cost of the sale = R500 4 Amount owed to consumer = R500 *Source: Legalwise
WHAT IF YOU’RE IN ARREARS?
In this case you can also voluntarily surrender the item.
But because you’re in arrears with your instalments, you don’t have the option of retracting your voluntary surrender if you don’t agree with the estimated resell value.
You can retract a notice of voluntary surrender only if all your payments are up to date.
WHAT IF YOU’RE UNHAPPY WITH THE ESTIMATED VALUE OF YOUR ITEM?
You can withdraw your written notice and take back possession, Oberholzer says.
Selling the item privately may bring a better price and help you pay back your credit provider.
If you don’t want to return your item you can talk to your credit provider about reducing your monthly payments – but bear in mind your interest will be higher and you’ll end up paying more in the long run.
WHAT ARE THE PITFALLS?
If a debt collector hands you a form or document and it’s not a court order it’s probably a voluntary surrender agreement, Oberholzer warns. Some creditors mislead consumers into thinking it’s a seizure order when it’s actually just a form that debt collectors want you to sign so you’ll voluntarily hand over the item.
Don’t give in to threats – if your payments are up to date when you sign such a form and you’d already handed over the items, you can unconditionally retract your notice of voluntary surrender.