Picture: ISTOCK
Picture: ISTOCK

In a first ruling of its kind, the National Consumer Tribunal has instructed Volkswagen Financial Services to refund, with interest, customers it charged for on-the-road, administration and handling service fees since 2007.

The ruling, which was handed down last Thursday by the tribunal, puts the spotlight on the legality of the installment agreements that consumers sign prior to taking delivery of vehicles bought from dealers.

The tribunal ruled that Volkswagen Financial Services should stop charging consumers the prohibited fees by Wednesday and should submit a written confirmation that it had done so by April 25. 

Volkswagen Financial Services had taken the matter to the tribunal after the National Credit Regulator (NCR) alleged in October 2017 that the fees were in contravention of the National Consumer Act.

In a 2017 compliance notice, the NCR instructed Volkswagen Financial Services to desist from charging the fees by October 24, 2017 “and to provide a written confirmation to [NCR] that it had done so by November 2, 2017”.

It also instructed Volkswagen Financial Services to submit a list of all the consumers who were charged the fees and the amount of fees charged to the consumers.

It also wanted Volkswagen Financial Services to submit a report with the number of consumers refunded and the total amount refunded.  

Anne-Carien du Plooy, acting manager for investigations and enforcement at the NCR, said on Monday the body uncovered the alleged contraventions after an industry-wide investigation on fees and charges on credit agreements. 

Du Plooy said the 2017 investigation of the regulator found that Volkswagen Financial Services, which finances motor vehicles, was charging the fees in contravention of various sections of the NCA.  

Volkswagen declined to comment, saying Volkswagen Financial Services was a separate legal entity. In a statement on the ruling, Volkswagen Financial Services said it was reviewing the ruling and soliciting legal advice.  “We shall revert in due course,” it said on Monday. 

Du Plooy said the company could take the matter to the high court.

In its submission to the tribunal, Volkswagen Financial Services disputed the allegation. The firm alleged that the fees were part of a separate cash purchase and sale agreement between a dealer and a customer “to which [Volkswagen Financial Services] is not a party”.

The NCR stated in its submission that invoices from dealers, which Volkswagen Financial Services used to structure credit agreements with customers, included the prohibited fees.

In the judgment, the tribunal said credit providers could not add items to the consumer’s principal debt if doing so contravened the National Credit Act.

“Allowing credit providers carte blanche to include any items in the credit agreement on the basis that they had been invoiced for those items by the dealer, and then passing it on to the consumer in the credit agreement, manifestly runs counter to the purpose of the NCA …” the tribunal said.

The Act encourages responsible borrowing and discourages reckless credit granting by credit providers.