Financial service provider giving you problems? The NFO can help

Problems with financial service providers can drive you crazy, but there is someone who can help: the NFO or National Financial Ombud Scheme.

As an independent organisation, the NFO is committed to resolving disputes impartially, speedily and confidentially, in an open, informal and approachable way, at no charge to the consumer.

South African consumers across the board find themselves increasingly under pressure due to the high cost of living and other factors outside their control, such as the increasing food and petrol prices, with most of their budget going towards essentials.

“What is concerning, is their shrinking budgets for essential items, such as education, healthcare and savings,” says Howard Gabriels, credit division lead ombud at the NFO. 

“Where consumers do have a say in how they spend their money, for example on the purchase of new vehicles and property or credit cards, we urge them to think long and hard, considering the consequences should they not be able to service their repayments and look at ways to reassess their budgets, with better financial planning practices rather than facing a possible repossession scenario.”

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If you are unhappy with the outcome of a complaint about a bank or credit provider

Nerosha Maseti, the newly appointed banking division lead ombud, says the NFO’s credit and banking divisions will investigate matters where consumers may not be happy with the outcome of their query lodged at a credit provider or a bank.

“Where a consumer approaches our office to seek assistance regarding a vehicle that has been repossessed by either Wesbank or MFC, the banking division at the NFO will investigate.”  

Maseti points out that repossession is not only limited to vehicles. In some instances, a credit provider may repossess other goods, such as furniture, should consumers fail to stick to their monthly payment obligation.

“Where a consumer’s vehicle is financed by a non-bank vehicle financier, such as Toyota vehicle finance, customers are not left out in the cold. The NFO will also investigate matters from our non-bank vehicle finance participants.”

A recent NFO case dealt with the issue of repossession, as well as the prescription of debt. A consumer and the bank concluded an instalment sale agreement on 11 January 2019, wherein the consumer financed the purchase price of his motor vehicle.

“In terms of the credit agreement, the first instalment was due on 1 March 2019. From April 2019, the complainant started to default on his monthly instalment and the account began to accrue arrears.”

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When a repossession falls short

According to the consumer he was unhappy with the condition of the vehicle. The consumer complained to MIOSA (Motor Industry Ombudsman South Africa) and the vehicle was duly repaired by the dealership.

The consumer continued to default on the account and on 7 January 2020 the complainant elected to voluntarily terminate the credit agreement, in accordance with section 127 of the National Credit Act and returned the vehicle to the bank.

The bank complied with the process set out in section 127 of the Act and on 19 February 2020 sold the vehicle at auction. The proceeds of the sale were credited to the account on 25 February 2020, but there was a shortfall of R94 027.12 (excluding costs) that remained on the account and the consumer was held liable for it.

The NFO investigated when the consumer complained and during the investigation, the NFO considered whether the debt owed had been prescribed and it noted that there was no evidence that the prescription had been interrupted in three years since the date the proceeds of the sale were credited to the account.

The NFO therefore recommended that the bank write off the shortfall that remained after the sale of the vehicle. The bank accepted the recommendation and the debt was written off.

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NFO recommendations to keep in mind

• When you experience financial difficulty and have an account in default, you have the option to voluntarily surrender the vehicle to the bank. This option avoids the bank proceeding with legal action and obtaining a judgment for the return of the vehicle, thereby reducing the legal costs that would be incurred when legal action is instituted. It is important to note that with voluntary termination or repossession, should the vehicle be sold and a shortfall remains on the account, the consumer is liable for the repayment of the shortfall.
• It is also important that you communicate with the bank when you are unable to afford repayment of your accounts and try to conclude a payment arrangement with the bank. However, it is important to note that legally the bank is under no obligation to accept a payment arrangement and that this decision is based solely on the bank’s commercial discretion. The bank takes many factors into account when considering a payment proposal, such as the total arrears and the impact of the reduced payment on the account over time.
• Prescribed debt is a scenario that is mostly unknown to the common credit user and therefore they are caught off guard. Simply put, prescribed debt is an old obligation that neither party to the contract has acknowledged or paid off within three years. Many people who use credit are unaware that this obligation must be acknowledged by the debtor before it needs to be paid because it is frequently passed on and pursued by debt collectors.

If you have a complaint about a financial service provider in the banking, short-term insurance, long-term insurance and credit sectors, you can contact the NFO for free assistance on 0860 800 900 or visit its website at www.nfosa.co.za.