Banks cannot take a financed car at will, the National Financial Ombud Scheme (NFO) said. The ombud said every car repossession must follow the steps set out in law.
According to the NFO, a bank may only take a car in two ways. The owner can agree to hand it back, or the bank can get a court order.
“These are the only legal methods by which a bank may take a vehicle from a consumer, either with the customer’s consent in terms of a voluntary surrender or in terms of a court order,” the NFO said.
According to the National Credit Regulator (NCR), more than 22,600 vehicles were repossessed in South Africa in the first six months of 2023. That is about 3,770 cars a month.
Nerosha Maseti is the Lead Ombud of the Banking and Credit Division of the NFO. She said many households are under heavy money pressure.
“South African consumers are facing significant financial pressure, and many households are having to make difficult decisions about which expenses to prioritise,” she said. “Unfortunately, vehicle repayments are often one of the first obligations that become difficult to maintain when household budgets come under strain.”
Maseti said many people do not fully understand their rights and choices when they can no longer pay for their car. She said the NFO often gets complaints about car finance deals, handing back cars, repossession fights and car sales after missed payments.
“Unfortunately, many consumers only start looking for information once the vehicle has already been uplifted or sold. By then, many important decisions and legal processes have already taken place,” she said.
Maseti said a bank’s right to recover a debt and the way it uses that right are two separate issues. The ombud said a person who falls behind on payments still has the protection of the law.
“A voluntary surrender cannot be forced on a consumer, and a bank cannot simply treat possession of a vehicle as proof that it was voluntarily surrendered,” Maseti said.
“Likewise, where a bank wishes to repossess a vehicle, it must follow the applicable legal process. The protections contained in the National Credit Act exist for a reason and cannot be ignored,” she said.
The NFO said section 127 of the National Credit Act (NCA) lets an owner hand back a car by giving the bank written notice. The bank must then follow the NCA rules on valuing and selling the car. It must also send the required notices.
Repossession is a different process, the ombud said. It is started by the lender and includes the bank getting a court judgment that approves the repossession and sale of the car.
The NFO said handing back a car does not always clear the debt. “There is a risk that if the vehicle has been sold for less than the outstanding balance remaining, the consumer will still be liable to repay the shortfall amount,” it said.
If the sale brings in more money than is owed, the NFO said the extra amount must be paid to the owner.
The ombud said people who believe their bank took, kept or sold their car without the right process should first raise the dispute with the bank. If the matter is not solved, they can approach the NFO for help.
Source: this article is based on reporting by TopAuto.co.za. Image: TopAuto.co.za. Written with the help of AI and published by the Tzaneen Voice Business desk. See our Editorial Standards.
Anelisa Nkuna covers business and money news for Tzaneen Voice. Anelisa reports on the rand, fuel prices, interest rates, jobs, Eskom, Transnet, farming and company results. The aim is simple: explain what the numbers mean for household budgets, small businesses and workers in South Africa.