By: Natasha Archary
A number of South Africans are finding it harder to make ends meet, and car repossessions are on the rise in a difficult economy.
Kwanda Vabaza, Communications Manager at Ombudsman for Banking Services joins Gugulethu Mfuphi on Kaya Biz to clarify the rights of both consumers and banks in such circumstances.
While Vabaza encourages consumers who find themselves unable to make their vehicle repayments in full or on time to return the vehicle to the bank or renegotiate their credit agreement with the bank, he sheds light on the Debt Prescription Act.
“Customers who know they are defaulting on their debt, and have raised the issue of prescription.
The Prescription Act basically means that any contractual and delictual debts extinguish after 3-years from the date when it became payable or due.
This is when the bank has not collected has not collected an installment for 3 or more years, then the bank is legally not entitled to pursue that debt, and the consumer is not obligated to make payment to the bank.
The benefit of this is that the customer’s Trade Bureau must be updated to never reflect the debt on the customer’s profile.”
Kwanda Vabaza – Communications Manager at Ombudsman for Banking Services
However, there are conditions to this because customers shouldn’t be misled into believing that they can just stop making vehicle repayments without repercussions.
For example, if the customer has received calls, letters, or emails from the bank and does not acknowledge the debt or that they received the communication, then the bank cannot hold the customer liable for payment after 3 years.
But, if the customer takes a call from the bank, identifies themselves, and acknowledges the debt then the bank has the right to pursue that debt.
Vabaza stressed an important point that even if the debt is prescribed, the vehicle does not automatically pass to the customer after the debt has been prescribed.
Listen to the full conversation on Kaya Biz:
Consumers are advised to bring to the Ombudsman for Banking Services disputes relating to:
- Outstanding balances on the vehicle finance account
- Unfair treatment by banks and their debt collectors or tracers
- Unilateral changes in the contractual terms and conditions
- Prescription related disputes
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