Pensioner wins case after bank flouts SA Credit Act

Wednesday, 05 May 2010 11:08

2010/04/30
Hendrick Mphande
The Herald

Taken from the Herald:

A PORT Elizabeth pensioner has won a landmark court case against Absa bank after it granted him a bond for R350000, despite knowing the instalments were more than his entire monthly income.

When the man inevitably defaulted on his repayments, the bank threatened to repossess his Lorraine home. However, debt counsellors took up his case and it went to the Port Elizabeth Magistrate’s Court.

The court ruled this week that Absa was guilty of reckless lending and that the loan be scrapped.

The ruling, believed to be the first of its kind in the country, has prompted banking services ombudsman Clive Pillay to warn banks that they are not above the law and must comply with the National Credit Act.

The Act was specifically drawn up to protect consumers from becoming over indebted and had been in effect for four months when the loan agreement was signed in September 2007.

In terms of the access bond agreement, the 81-year-old, who asked not to be named, was expected to pay off the bond over 20 years. This meant he would have been 98 by the time he had paid off the debt.

At the time of the loan agreement, the man and his wife received a monthly income of R3700, and had household expenditure of R2472. Despite this, they were granted a bond of R350000, with a monthly instalment of R4200.

A family member said he had been shocked to discover that Absa had granted the loan after both FNB and Standard Bank had turned the man down.
“If the other two banks declined the application, surely you would expect Absa to do likewise. Instead, when he was five months behind in his payment they sent a threatening letter saying the family must see a debt counsellor.”

The pensioner sought debt counselling late last year with Debt Smart, which immediately suspected a case of reckless lending and called in lawyers to assist.
Gaynor de Kock, of Debt Smart Newton Park , said yesterday the firm had decided to bring an application on behalf of the pensioner.

“In terms of the National Credit Act, it is stipulated that you have to do credit assessment on the client. Yet despite proof that our client could not afford the bond repayment, the bank granted him the bond any way,” De Kock said.

In terms of the order the court declared that the pensioner and his wife were over-indebted in terms of the National Credit Act.

Absa was not represented in court when the verdict was handed down.

Responding to the ruling, Pillay said: “Banks are not a law unto themselves and must comply with the provisions of sections 81 and 82 of the Credit Act.
“My advice to consumers is to ensure that they are not over-indebted and to answer all the questions fully and truthfully.”

Barry Pinnock, of Debt Smart, said the court decision was a massive victory for his organisation and urged clients to explore every avenue. “Many people do not know what to do in such a situation.

“There are different aspects of debt counselling and it’s not always about the guy who is in financial trouble. We pride ourselves with our work,” he said.
Approached for comment, an Absa spokesman said the company would issue a statement later.

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