Wesbank may have run out of road in its efforts to repossess a vehicle as a result of its failure to do adequate checks before providing finance
Consumers have been protected by the National Credit Act for more than a decade — and for just as long, credit suppliers have known how to stay on the right side of the law. So I was more than a little surprised by a recent judgment that suggests motor finance firm Wesbank is not up to speed on the investigations required before financing a vehicle.
In August 2017, after Laetitia Sonnenberg fell behind in vehicle payments, Wesbank issued a summons against her. Two months later, the bank was granted a default judgment. In February Sonnenberg applied for that judgment to be rescinded, and it is the decision on this application that has just been delivered.
Sonnenberg said she saw the August summons for the first time about two months later, quite by accident, along with other papers tidied away by her domestic helper. She immediately made arrangements to pay off the arrears, she said, and the Wesbank employee who helped her said the bank’s legal action to claim her car back “would be suspended” as a result.
Wesbank, which denies these claims, took judgment by default the day after Sonnenberg allegedly spoke to the employee. The first she knew that judgment had been granted was when the sheriff arrived to attach the vehicle.
Considering whether there was a reasonable explanation for her failure to defend the case initially, the court said Sonnenberg did not “twiddle thumbs” but “actively participated” by engaging the bank. She also brought the rescission application in good time.
As to the initial claim, Sonnenberg’s case was that the agreement between her and the bank was “reckless” because the bank had failed to conduct a proper assessment of what she could afford.
The bank did indeed make some inquiries. It found that after rental, rates, water and electricity were deducted from her salary, Sonnenberg would have R4,676.33 left. Once the vehicle finance repayments were deducted, just R123.69 would remain.
As the judge put it: “The less said about the affordability of this transaction, the better.”
It was “abundantly clear”, the judge said, that the bank did not factor in monthly living expenses, and that these must have been sourced elsewhere. According to Sonnenberg, those expenses were met by her husband, something he confirmed to the bank when she applied for credit.
However, in the bank’s view, it had “no obligation to investigate the [husband’s] financial affairs” given that they were married out of community of property. To this, the judge responded: “I find this submission unconvincing and without merit, to say the least.”
Counsel for the bank conceded that no assessment was made of the husband’s financial means — but, as the judge pointed out, if the bank wanted to rely on the husband’s income as well, his finances should also have been assessed to satisfy the investigations required by the credit act.
To an outsider reading the judgment, it seems incredible that the bank did not cover the basics by assessing the husband’s financials as well as the wife’s. It is a failure that could prove costly to the bank.
The road ahead
Now that the court has set aside the default judgment, the bank may continue its original application against Sonnenberg. However, this time it knows she will defend the claim on the basis that the bank approved an unaffordable loan.
The bank will also know that section 83 of the credit act lies in wait: if the court finds the bank signed a “reckless agreement”, it may impose “stringent [remedial] measures”, including suspension of the agreement with no interest chargeable, while the bank’s normal rights against Sonnenberg could be made unenforceable.
You have to wonder: what part of “investigate” do the banks not understand?
Once the repayments were deducted from her account, just R123.69 would remain