What to do if the bank wants to repossess your car in South Africa

In South Africa, thousands of vehicles are repossessed every month, but financial distress does not mean consumers have no rights when a lender comes to seize a vehicle.

According to the National Credit Regulator (NCR), more than 22,600 vehicles were repossessed in South Africa in the first six months of 2023, at an average of about 3,770 a month.

That said, the National Financial Ombud Scheme (NFO) explained that lenders cannot simply seize a vehicle at will, and repossession must follow prescribed legal procedures.

This includes, where required, backing by the appropriate court process and judgment.

“South African consumers are facing significant financial pressure, and many households are having to make difficult decisions about which expenses to prioritise,” said Nerosha Maseti, Lead Ombud of the Banking and Credit  Division of the NFO.

“Unfortunately, vehicle repayments are often one of the first obligations that become difficult to maintain when household budgets come under strain.”

She added that many consumers do not fully understand their rights, obligations and available options when they can no longer afford their vehicle repayments.

“The NFO regularly receives complaints involving vehicle finance agreements, voluntary surrender, repossession disputes and the sale of vehicles following default,” she said.

“Unfortunately, many consumers only start looking for information once the vehicle has already been uplifted or sold. By then, many important decisions and legal processes have already taken place.”

According to the ombud, recent case studies highlight the importance of banks following the correct procedure when seizing a vehicle and that a consumer’s default does not mean they lose the protection of the law.

Maseti explained that a bank’s entitlement to recover a debt and the manner in which it exercises that right are two separate issues.

“A voluntary surrender cannot be forced on a consumer, and a bank cannot simply treat possession of a vehicle as proof that it was voluntarily surrendered,” she said.

“Likewise, where a bank wishes to repossess a vehicle, it must follow the applicable legal process. The protections contained in the National Credit Act exist for a reason and cannot be ignored.”

The NFO noted that consumers should understand the important distinction between voluntarily surrendering a vehicle and having it repossessed.

Knowing the differences

The NFO explained that under section 127 of the National Credit Act (NCA), a consumer may surrender a vehicle by giving the bank written notice.

The bank must follow the processes prescribed by the NCA, including those relating to the valuation and sale of the vehicle and the required notices.

Repossession, on the other hand, follows a different process, as it is initiated by the credit provider enforcing its rights.

It is also subject to the applicable enforcement procedures and legal requirements and will include the bank obtaining a judgment against the consumer approving the repossession and sale of the vehicle.

“These are the only legal methods by which a bank may take a vehicle from a consumer, either with the customer’s consent in terms of a voluntary surrender or in terms of a court order,” explained the NFO.

It noted that consumers should also understand that handing back a vehicle does not necessarily extinguish the debt.

“There is a risk that if the vehicle has been sold for less than the outstanding balance remaining, the consumer will still be liable to repay the shortfall amount,” it said.

“If the sale generates a surplus, that surplus must be paid to the consumer.”

The NFO recommended that consumers with financed vehicles do the following if they cannot make payment:

• Contact your bank as soon as you realise you may struggle to meet your vehicle repayments. Do not wait until legal enforcement has begun.
• Read correspondence, emails, SMS messages and legal notices from your credit provider and keep your contact details up to date.
• Voluntary surrender and repossession are different legal processes. Understand which applies before handing over your vehicle.
• Read any voluntary surrender, consent or other document carefully and understand its consequences before signing.
• If someone arrives to collect your vehicle, establish who they are, whom they represent and the basis on which they are seeking possession.
• Retain correspondence, notices, settlement figures, payment arrangements and documents relating to the surrender or recovery of your vehicle.
• Returning a vehicle does not necessarily cancel the debt. A shortfall may remain after the vehicle is sold.

“If you believe your bank has repossessed, retained or sold your financed vehicle without following the required process, raise the dispute with the bank and, if it remains unresolved, approach the NFO for assistance,” it advised.