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

Financial Mail - - IN GOOD FAITH - @carmel­rickard BY CARMEL RICKARD

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

123Rf/michael Brown

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