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Credit Regulator Cracks down again

The National Credit Regulator (NCR), in a media release on 24 October 2017, also issued a compliance notice to Volkswagen Financial Services South Africa (Pty) Ltd (VW) for charging consumers an on-the-road fee, admin fee and handling fee under its credit agreements. This followed after BMW Financial Services (BMW) received a similar compliance notice on 5 October 2017. In both notices, the NCR instructed the credit providers to refund the consumers and submit an audit report to the NCR.

BMW has subsequently indicated that they will be objecting to the compliance notice and we expect that VW will follow the same route.

This is very likely to impact on many other motor dealerships, as BMW already indicated in a Times Live article that it will object, as the ‘on-the-road’ fee is agreed to between the dealer and the consumer.

From a high-level analysis of section 100 to 102 of the National Credit Act, Act 34 of 2005 (NCA), the following salient information should be noted by both dealerships and credit providers:

The limitations on the on-the-road and other fees are especially important where the sale of the motor vehicle is to be concluded through a vehicle finance agreement with a credit provider. Should these fees be charged under a cash sale, the NCA will not apply to those transactions;

In terms of section 100, it is an offence for a credit provider to charge a credit fee or charge prohibited by the NCA. It further states that a credit provider must not charge a consumer a higher price for any goods or services than the price charged by that credit provider for the same or materially similar goods or services in the ordinary course of business on the basis of a cash transaction;

Section 102 makes provision for credit providers under a credit agreement, being among others an instalment agreement and lease, to include in the principal debt deferred under the agreement, any of the following additional items (i) the initiation fee, (ii) extended warranty, (iii) delivery, installation and initial fueling charges, (iv) connection fees, levies or charges, (v) taxes, licence and registration fees and (vi) subject to section 106, credit insurance. The NCA does not specify any other fees that may be included in the principal debt;

The credit provider must not require the consumer to appoint the credit provider as the consumer’s agent to arrange for the additional services. Therefore, the consumer should have the option to arrange these services on his or her own;

The fees charged for these additional items should be the actual costs incurred by the credit provider or at the ‘fair market’ value if the credit provider renders these services itself; and

Where the fees for the additional items financed under the credit agreement, exceeded the actual amount paid by the credit provider, the consumer should receive a refund.

We feel that it is necessary to re-iterate that these on-the-road fees may consist of various items, some of which may likely be included in the principal debt. Dealerships and credit providers should, therefore, be diligent to ensure that they specify these costs in accordance with the NCA, where the sale of a vehicle is financed through a credit agreement.

With the NCR taking on a second large South African vehicle financier, the question in our minds is not whether another financier will receive a compliance notice, but rather which one.

Please click here to download a copy of the media release

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