A temporary lapse in making payments does not justify repossessing a vehicle
A recent judgment in the Western Cape High Court brings the values of our Constitution to the realm of consumer credit agreements. The law, and constitutional law in particular, can seem lofty and dense at times. The provisions of the Bill of Rights may be well understood, but it can be harder for the ordinary citizen to see how the Constitution can protect their more mundane, day-to-day activities. We take great delight in this judgment, which rebukes a financial services provider for “harsh and disproportionate” behaviour and finds in favour of a consumer who missed a few payments and quickly tried to set matters right.
Credit provider vs. credit consumer
In the case, “Ms A” vs. Mercedes Benz Financial Services, Ms A had purchased a vehicle under a hire purchase agreement. She missed two months’ payments in succession, after a period of making payments timeously. She missed a third payment after paying the monthly amount due following the two missed months. She fully intended to rectify the arrears.
However, Mercedes Benz Financial Services immediately took action through the courts to demand full payment of the balance or repossess the vehicle as per s 129 of the National Credit Act (NCA). Ms A never received this notice because she had moved house, and had not yet notified Mercedes Benz of her new address, as she was waiting on the requisite documents, such as a utility bill, to provide the proof of address required by the credit agreement. As soon as she became aware of the action against her, she offered to make full payment of the arrears, but Mercedes Benz refused. She had also been making her monthly payments on time since the months she had missed. At this point she engaged the services of an attorney to defend her case.
National Credit Act provisions
In a victory for the consumer, the High Court ruled that the order to repossess the vehicle be rescinded. The judgment makes reference to the NCA and cites an earlier case (Absa Bank vs. Peterson): “A credit provider is required to react in a constructive and bona fide manner to any approach made to it by a consumer who has received a notice in terms of s 129. The notice has been described as a pivotal characteristic of the NCA’s ‘cost-avoidant and settlement-friendly processes’. It is directed at alerting debtors to ‘restructure their debts, or find other relief, before the guillotine of cancellation or judicial enforcement falls.’” Mercedes Benz did not do this.
An unequal relationship
The relationship between credit provider and consumer will always be “chronically unequal”, in the words of the judge, and “will always result in the authority of the powerful, irrespective of the quality and state of their case.” This “great divide between credit providers and credit consumers” is one of the divisions of the past which the Constitution seeks to heal. The credit provider also acted disingenuously, accepting Ms A’s monthly payment knowing it had already cancelled the credit agreement and this cancellation was unknown to the consumer. Receipt of Ms A’s payments in this situation, according to the judge, was under false pretences.
Therefore, the judge rescinded the original action by Mercedes Benz, Ms A was granted leave to defend the action, i.e. to pay her arrears, and no cost order was made. The court decided in favour of the private citizen, quashing the might of the corporate lender.
Have you been unfairly treated by a credit provider or other corporate entity?
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