Banking ombud sounds alarm on higher car repossession complaints

More South African motorists are struggling to keep up with their vehicle finance repayments, and this is evident in the higher influx of complaints lodged with the Ombudsman for Banking Services (OBS) regarding what consumers believe is wrongful repossession of vehicles by banks.

In a statement released on Tuesday, the OBS stood as a referee between consumers and banks, clarifying their respective rights and responsibilities concerning vehicle financing agreements.

Listen/read: Vehicle finance defaults now at R4bn

According to the OBS, consumers seem to have a critical misunderstanding of their liability when it comes to prescribed debt.

Prescribed debt is debt that has ‘expired’, as defined in the Prescription Act.

Ombud Reana Steyn’s office notes that they “received several complaints from bank customers who appeared to believe that since a bank’s right to claim repayment of the debt had prescribed, its right to repossess the asset had also prescribed, and ownership somehow automatically passed to the customer”.

Read:
Banks are still collecting on debts that have expired
Two-thirds of account disputes settled in favour of consumers – Credit Ombud

Steyn clarified that what has prescribed (in some cases) is the customer’s obligation to repay the debt and the bank’s right to sue defaulting customers for repayment.

The office urged consumers to engage with their bank should they have difficulty keeping up with repayments, warning that failure to do so could result in adverse consequences like having one’s car repossessed.

Under pressure

According to Steyn, the office saw the need to address the matter after seeing increased frustration among consumers who seemed confused about what was expected of them in such cases.

“These matters are becoming increasingly emotional and acrimonious, and people are very upset,” she said, describing to Moneyweb just how consumers are feeling.

Read: Alternative vehicle financing products to become more important in SA

The ombud’s intervention comes as local consumers come under great financial pressure. The reality of elevated interest rates and rising food and fuel prices contribute to a cripplingly high cost of living crisis that has left many households negotiating which bills to pay.

The South African Reserve Bank (Sarb) Monetary Policy Committee (MPC) has hiked rates by a cumulative 475 basis points since November 2021 in its pursuit of keeping inflation within the target range of between 4% and 6%. In its last two meetings, the MPC kept rates unchanged, holding interest rates at 8.25%.

Read:
Even small increases in food prices add up
Inflation: The good news and the bad news
One more Sarb hike on the cards – Bank of America

However, experts predict that in light of the inflationary risks posed by elevated food and oil prices, the MPC may close out the year with a 25-basis point hike when it meets in November, putting struggling consumers under further pressure.

Fuel and food prices are also placing consumers under pressure. Statistics South Africa’s latest inflation figures showed that food prices (up 8.1%) in September increased faster than overall inflation, which came in at 5.4%.

Listen/read: Cost of living: Consumers warned of ‘multiplicity of shocks

In October, a weaker local currency and elevated oil prices saw fuel prices rise by between R1.08 and R1.96 for petrol and diesel. Daily data published by the Central Energy Fund indicates that motorists may be in for another hike in November.

According to the data, motorists may find themselves paying between R1.93 and R1.98 for a litre of petrol, while diesel users may see their fuel bill rising by between 89 cents and 93 cents per litre.

Pressure to continue

With no reprieve in sight for consumers, Steyn told Moneyweb that her office expects to see a continued influx of complaints as consumers struggle to juggle debt, especially as we head into the festive season – which sees higher-than-usual household spending on food – and into the new year when most households prepare for the start of the new school year.

“I think with the way the economy has been going, people are really squeezed. Between the food and the fuel prices and any interest rate hikes, they just cannot keep up with their payments. And then it’s probably [going to be] about choosing between evils – do they pay the house or pay the car,” the ombud told Moneyweb.

“You don’t have to be a specialist to see that people are struggling financially and they are struggling more every quarter because nothing has gone down,” she added.

“I don’t think it’s a stretch of the imagination [to say] that consumers are really struggling to make ends meet. With that in mind, I think the number of – whether it’s defaults on bonds, credits or vehicles – will go up.”

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