Car pawning scams: Man arrested for theft of his own car

Consumer must beware of illegal car pawning scams as not even the police can help if you have pawned your car. You can even get arrested for theft of your own car, as one man found out.

This is especially concerning in tough economic times when consumers have to stretch their rands carefully to get to the end of the month.

Consumer lawyer Trudie Broekmann says a person called her for help when he was charged with theft of his own car. “Our client was the victim of a scam, where consumers who need cash fast pawn their cars.

“However, this kind of car pawning is illegal and the National Consumer Tribunal has ruled at least eight times that these car pawning syndicates are in fact providing disguised loans which are regulated by the National Credit Act, which requires that all credit providers are registered.”

The judgments were against Quattro Pawn, Cash Squeeze, The Loan Company, Global Salvage, CMR Group, We Buy Bakkies, Devco Auto and Allied Capital.

In a letter to the police, Broekmann attached proof printed out from the National Credit Regulator’s website showing that neither Cash Capital, nor Mel Manson Consulting, the company in question, are registered as credit providers. She says they are therefore prohibited by law from conducting this business.

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Previous cases of illegal car pawning scams

The Tribunal declared the car pawning transactions prohibited conduct in each of the eight cases and fined the companies R100 000 or R250 000, while interdicting them from continuing to transact with consumers while they remain unregistered and ordered them to return the vehicles, or if they were sold, to pay the consumers back the replacement cost.

In one of the judgments, against Global Salvage, the Tribunal said if this is a pawn transaction, the company should have been a registered credit provider. Both parties agreed that the company paid R40 000 to the consumer and took possession of the vehicle. They agreed that the consumer would return to buy back the vehicle for a certain amount on a certain date.

The nature of the transaction was however in dispute. Section 1 of the National Credit Act (NCA) defines a pawn transaction as an agreement, irrespective of its form, where one party advances money or grants credit to another and at the time of doing so, takes possession of goods as security for the money advanced or credit granted.

The party that advanced the money or granted the credit is entitled on the expiry of a defined period to sell the goods and retain all the proceeds of the sale in settlement of the consumer’s obligations under the agreement.

The Tribunal found that the agreement reflected the requirements of a pawn transaction, despite the face-value appearance of the purported sale agreement. The consumer used his car as security for a loan which was disguised as a purchase price. The consumer got a loan, disguised as a purchase price.

According to the judgment, the consumer was in financial distress at the time and wanted to sell his vehicle. The parties did not agree on the value of the vehicle, but it was agreed that the company would buy the vehicle for R40 000 on condition that the consumer will have the option to buy it back for R44 000.

They also agreed that the consumer would continue paying insurance on the vehicle although there was an apparent contract of sale. The consumer paid a monthly amount of R4 000 but the parties disputed what the amount was for. The consumer alleged that the R4 000 was the interest owing on the R40 000 he received for the vehicle but the company said it was for storage fees, marketing and taking on the risk.

The Tribunal found that this additional fee would be highly unusual in a true purchase agreement and that it is more akin to a loan or pawn transaction. Therefore, the Tribunal concluded that the agreement was a simulated pawn transaction and prohibited conduct in terms of Section 150(a) of the Act.

Broekmann’s client experienced exactly the same transaction, where he was given a R22 500 advance against his car by Cash Capital, but the transaction was dressed up as a sale of the car to Cash Capital as is evident from the contract.

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No help for consumers in car pawning scams?

After the consumer contacted Broekmann’s firm, they advised him that the entire transaction is illegal and invalid and therefore, the “sale” of his Nissan to Cash Capital is invalid and he remains the legal owner of the car, although Cash Capital have registered the car in its name.

“Further proof that this is a sham transaction, is that according to the documentation provided by Cash Capital, our client ‘sold’ them a vehicle which is worth R156 000 for R22 500, which of course no sane person would agree to if they understood the contract.”

Broekmann says therefore the consumer cannot be guilty of theft of a car of which he has always been the owner since he bought it and there are no grounds for the police to keep the vehicle. Her firm asked the police to release the vehicle to her client and not to Cash Capital or Mel Manson Consulting or any of their staff or representatives.

The consumer also laid a charge of fraud against the company. Capital Cash did not respond to questions about this case by the time of going to press.

Since she sent the letter to the police on 11 July, Broekmann had no reply from the police. The original police station sent the docket to another police station and the commander at this police station also does not respond, save to say that they have no record of the case on their system.

To ensure that her client does not incur any further legal costs as he is already out of pocket, Broekmann has complained to the police’s internal complaints and she will also approach the Public Protector and Ipid. Otherwise, she will have to go to court to claim the consumer’s car back.