An increasing number of consumer complaints about vehicle repossessions have prompted the Ombudsman for Banking Services (OBS), Reana Steyn, to clarify the rights of both consumers and banks in such situations.
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Firstly, it’s essential to understand that, under vehicle financing agreements, the vehicle remains the bank’s property until the loan is entirely repaid. If the debt becomes prescribed – typically happening when the debtor withholds repayments, and the creditor doesn’t take action to reclaim the debt within three years – the ownership of the vehicle remains with the bank, which retains the legal right to repossess it.
Defaulting on vehicle repayments has several consequences:
- Adverse information will be listed on your credit report, limiting your future credit access.
- Legal action may be taken against you, resulting in additional legal costs and a judgment recorded against your name.
- The vehicle may be repossessed and sold at an auction, with you remaining liable for any shortfall if it doesn’t sell for the outstanding balance.
To avoid these consequences, consumers who can’t make their repayments in full or on time are encouraged to either return the vehicle to the bank or renegotiate their credit agreement with the bank.
Banks must follow the procedure outlined in the National Credit Act before repossessing a vehicle. They must send a Section 129 notice (letter of demand) after the account is in arrears for 20 days or more. A Sheriff of the Court then serves a summons to the consumer. A judgment must be granted against the consumer, declaring the vehicle executable, followed by the delivery of the original warrant of execution by the Sheriff of the Court, stating that the vehicle can be repossessed.
In South Africa, a bank can only physically repossess a financed vehicle with a court order or the consumer’s consent.
Consumers can terminate a vehicle finance agreement by providing written notice to the bank. The vehicle will then be sold at auction to offset the debt owed. This “voluntary surrender” should be consumer-initiated, free of undue pressure or threats from the bank or its representatives. These representatives cannot use intimidation, threats, or violence to force consumers to surrender their vehicles.
Consumers are advised to report any unlawful techniques bank representatives use and bring vehicle finance-related disputes to the Ombudsman for Banking Services. Common dispute areas include outstanding balances, unfair treatment, unilateral changes to terms and conditions, and prescription-related issues.
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