The 'Drive a new car for R699 a month' deal 'had all the elements of a Ponzi scheme'. Picture: Sibusiso Msibi
The 'Drive a new car for R699 a month' deal 'had all the elements of a Ponzi scheme'. Picture: Sibusiso Msibi

A victim of the R699/Satinsky vehicle financing scam, who contends that she was granted credit recklessly by Nedbank's vehicle financing division MFC, appeared in the High Court in Pretoria this week to fight off the lender for the third time in two years.

The consumer, who is a financial adviser for a big life assurer and does not want to be named, lodged a complaint of reckless lending against MFC in 2014, not long after the R699/Satinsky scheme collapsed. However, the National Credit Regulator only accepted her complaint as official in November 2015.

The regulator has told her that it referred a case against MFC relating to the Satinsky scheme loans to the National Consumer Tribunal in September 2015, but her case was not included in the regulator's pleadings.

Since early 2015, MFC has tried twice to take summary judgment against the consumer for the outstanding debt. Both cases were dismissed. Although the court orders do not state why the cases were dismissed, the consumer says it's because of her unresolved complaint of reckless lending.

Subsidised instalments

In the latest case against her, MFC sought to repossess her car because she has stopped paying instalments.

The "Drive a new car for R699 a month" scheme collapsed in July 2014, leaving about 24000 consumers who bought cars from the Satinsky Group unable to pay their instalments. In terms of the deals, financed by Absa, MFC and Standard Bank, consumers earned rebates for driving the cars bearing promotional material.

The rebates were intended to subsidise their vehicle instalments to the extent that borrowers could pay instalments of as little as R699 a month.

Although the banks have denied that they factored the rebates in as income when assessing whether the consumers could afford their repayments, when Satinsky's holding company stopped paying rebates, consumers fell into arrears, which suggests that they could not afford the full instalments.

Reckless lending is prohibited in terms of the National Credit Act. The tribunal, which has the authority of a high court, can declare a credit agreement reckless, and it can then set aside your obligations under the agreement, or suspend the credit agreement, during which time you are not required to make payment and cannot be charged interest, fees or charges.

The tribunal also has the power to fine a credit provider for reckless lending.

'Falsified information'

After the scheme collapsed, the three banks involved owned up to a total loan exposure of over R2.7-billion. MFC had the highest - R1.6-billion - having financed about 14000 deals.

At the time, Chris de Kock, the CEO of WesBank, the only bank that chose not to do business with Satinsky, was outspoken in his criticism of his competitors for failing to do a proper due diligence on the offering, which he said had the traits of a Ponzi scheme.

A number of debtors representing all the lenders involved came forward alleging that Satinsky staff, who were acting as agents of the banks, had submitted false information on their applications for credit. Consumers claimed that either their income had been inflated or their expenses understated. But most applications were made telephonically, leaving the borrowers with no record of the income and expenditure that they provided.

The financial adviser challenging Nedbank's MFC does have proof of her income and expenditure, which she e-mailed to a Satinsky agent. She also has a copy of her credit agreement with MFC, which shows false information on her application.

"They changed my marital status from married to divorced - I even provided a copy of my marriage certificate - and they stated that I'm an administrative worker rather than a commission-paid employee. My expenses had been slashed. Yet the amount left was not enough to cover the instalment of R2700."

Case pending

She alleges that this makes hers a clear case of reckless lending, and that MFC is responsible for the actions of its agents.

MFC has offered to restructure the loan, but the consumer has turned down the offer on the basis that the debt should be written off because it was granted recklessly. It has also offered to take possession of the car and reimburse her all she has paid to date. But she has turned this down, too, resulting in the MFC's case against her for repossession of the vehicle proceeding to court this week.

"If judgment is taken against me I will lose my job. And if my car is repossessed, I will lose my ability to earn an income," the consumer, who is a breadwinner, says.

Since she has a case pending against MFC, MFC should have suspended its actions to recoup the debt, she says. "I asked for the case against me to be postponed until the outcome of the regulator's case against MFC, but the court dismissed my application and proceeded straight to trial. The judge has reserved judgment."

NCR case starts in January

The National Credit Regulator’s case against MFC over loans to vehicle buyers in the Satinsky scheme is due to be heard by the National Consumer Tribunal late in January, according to an e-mail from a NCR legal adviser to a consumer. The e-mail says the regulator will call for an audit of MFC loans to Satinsky customers.

The NCR also referred to the tribunal a case against Absa for transgressions of the National Credit Act over the credit it granted to Satinksy clients. But, early this year, it was revealed in parliament that Absa had reached a settlement with the NCR. In terms of the settlement, which is confidential, the bank would pay a fine of R10 million and would give relief to certain Satinsky customers only.

Dean Macpherson, the DA’s spokesman for trade and industry, says the regulator must account for the deal it made with Absa and “make full disclosure” to parliament’s portfolio committee on trade and industry.