The impact of COVID-19, and the ensuing financial crisis, will have a lasting impact on society and business as a whole. Those who are unable to work because of the lockdown are facing serious economic challenges. It is a time of great financial stress and a time where the services of bodies such as the Ombudsman for Banking Services (OBS) will be needed more than ever.
Because of job losses and reductions in income, many South Africans are worried that their assets such as their home, car or other financed goods could be repossessed over lack of payment. Knowledge is power especially when it comes to these types of financial matters. The Ombudsman for Banking Services is here to help.
Having assets repossessed can be traumatic, not to mention the added legal costs and theburden of having a judgment against you. Even though you may be struggling financially, you need to avoid having any of your goods repossessed.
Voluntary Surrender and Bank Assisted Sales, as outlined below, allow for cost effective and a less strenuous method of disposing of your assets if needed. The consumer has the choice to decide which route is best for them.
Surrender of Goods
As a consumer, if you are no longer able to pay for an item that you purchased on credit, Section 127 of the National Credit Act (NCA) 34 of 2005, allows you to surrender the goods to the credit provider to resell in order to assist you by relieving the debt. Let us unpack what this means:
- The bank can only repossess your financed goods with a court order or with your written consent, which is referred to as voluntary surrender in terms of Section 127 of the National Credit Act (NCA).
- Section 127 also gives you the right to terminate the agreement and surrender (return) the goods to the credit provider for any reason and at any stage before the credit provider institutes legal action to recover the goods.
- Section 127 provides a ‘self-help’ tool aimed at financially strained consumers and allows them to simply return the goods bought on credit.
- The surrender of goods in accordance with Section 127 is limited to specific agreements, namely instalment sale agreements, or a secured loan or a lease agreement governed by the NCA.
- As a consumer, you can exercise your right of voluntary surrender by notifying the credit provider in writing to terminate the agreement and if the goods are already in the credit provider’s possession, you must instruct the provider to sell the goods.
- If the goods that are the subject of the credit agreement are not in the credit provider’s possession, you must return the goods to the credit provider’s place of business during ordinary office hours within five business days after the date of the notice to terminate. You may also arrange with the credit provider with regards to the period within which and the place where the goods are to be handed over.
- If the credit agreement is in default, the credit provider may send its representatives (debt collectors) to your home/work to determine whether you are willing to voluntarily surrender the goods to the bank.
- The bank representatives may not use violence, misrepresentation, intimidation or threats to force you to surrender the goods and you have the right to refuse them entry to the property.
- If you decide to voluntarily surrender the goods, the bank representatives must provide you with a form or agreement to sign to prove that you have surrendered the goods voluntarily. Remember that as a consumer, it is your responsibility to ensure that you understand the contents of the document before signing it.
- The voluntary surrender form/agreement must contain all the information relevant to the surrender of the goods and the process that will be followed thereafter.
- Once the bank is in possession of the goods, it must value the goods within 10 business days to determine how much it can possibly be sold for. The bank will send you a letter by post, stating the amount.
- As a consumer, you have 10 business days after receiving the letter to settle the arrears owing in full and collect the goods. The banks generally require payment of at least 80% of the arrears before it will consider returning the goods to you. This decision, however, is within the bank’s exclusive
discretion. Should you not settle the arrears, the bank will sell the goods at an auction.
- You will be held liable for any outstanding balance owing on the account after the goods are sold.
- After selling the goods, the bank must provide you with an account showing the amount the goods were sold for and the amounts credited and owing on your account.
- The Section 127 Voluntary Surrender process can also be used by a consumer who is not in default under the instalment agreement but has decided that he/she no longer wishes to continue with the agreement. The consumer simply needs to contact the bank and the bank will send representatives to collect the goods and value them. The same process as described above will then be followed.
- If your payments are up to date when voluntarily surrendering the goods, you may unconditionally withdraw the notice you signed.
- There is no limit as to the number of times the consumer may surrender the goods in terms of Section 127 of the NCA.
- During the period when the goods are surrendered to the credit provider, all contractual obligations between the parties are suspended. This means that the consumer is not obligated to make installment repayments.
Bank Assisted Sales
Particularly where property is concerned, a Bank Assisted Sale is a better option than an auction where a property may be sold for less than its
worth. Furthermore, with this option, a consumer can save themselves from the burden of legal costs, a judgment credit bureau listing and a court judgment in their name.
Benefits of Bank Assisted Sales for consumers include:
- The property is sold with the assistance of the bank.
- Discounted attorney fees may apply provided that the attorneys are appointed by the bank.
- The choice regarding which offer to accept remains with the
- The bank may agree to a discount on the repayment of the shortfall (the amount that remains after the property is sold for less than what was outstanding), and in some instances, the repayment may be made interest free over an agreed period of time.
- If the consumer is behind with rates, taxes and levies, these may be added to the loan balance and will form part of the shortfall.