The tribunal confirmed that the compliance notice issued by the National Credit Regulator (NCR) to VW Financial Services South Africa for charging consumers the OTR, admin and handling fees on credit agreements was valid, declaring the fees to be unlawful and that it needed to refund customers.
In its judgment, the tribunal ordered VW Financial Services to stop charging the OTR and other fees and to provide written confirmation to the NCR to this effect. It also ordered the entity to calculate the total amount of charges, fees or interest levied on the OTR, admin and handling fees; and refund all those consumers charges, fees or interest levied and submit a report by independent auditors to the NCR.
In a statement released on Monday, Nomsa Motshegare, the chief executive officer of the NCR, said: “The NCR welcomes this judgment as it affirms the protection given to consumers by the National Credit Act against illegal charges and fees on credit agreements.”
The regulator said it would “continue to conduct industry-wide investigations on fees and charges on credit agreements to root out illegal charges and fees on credit agreements”.
VW likely to appeal ruling
The ruling has massive implications for the entire industry, but before motorists get excited about an unexpected pay day worth a few thousand rand, it is likely to be appealed by VW.
For now though, VW is studying the ruling. Sandy Naudé, the brand manager for VW front office, said they were currently reviewing the ruling and obtaining legal advice. “We shall revert in due course.”
In October 2017, the NCR ruled that lumping OTR fees on vehicle finance agreements was not permissible under the National Credit Act (NCA). This after the regulator launched an investigation into both VW Financial Services and BMW Finance.
These fees have been illegal since 2007, with the introduction of the NCA, yet vehicle financing entities have continued to add them to the credit agreements – masking ‘gifts’ of flowers, champagne and even personalised key rings, as well as valet, pre-delivery checks and staff costs as “delivery fees” and “service fees” – even though the vehicles were often driven off the showroom floor by the customer.
The NCR has not gone after car dealerships, but rather their vehicle financing arms.
Under the NCA, the only costs that are allowable are initiation fees, actual delivery of a vehicle, extended warranties, a tank of fuel, and licence and registration fees.
Over and above those, the operating costs should be built into the purchase price, not added as an extra, which isn’t itemised or explained.
Stephan van der Merwe from Stellenbosch University Law Clinic has welcomed the ruling.
“If you buy a vehicle under the NCA, section 100 says you aren’t allowed to charge fees that aren’t set out clearly. Section 101 deals with allowable fees. And section 102 sets out the fees or charges that can be part of the transaction. That includes the initiation fee, extended warranty, initial fuelling charges, connection fees, taxes, licence and registration fee.
“If they do add the tank of fuel, they are only allowed to charge for what was actually put into the tank. And they have to provide slips to prove the expenses. For the rest – tying the bow, inspection fee, ‘keyholder with our details’ – that’s nonsense.”
In 2017, the National Consumer Commission issued a compliance notice against VW and BMW Financial Services. BMW then made a consolidation application to the tribunal to consolidate matters between the two finance arms, wanting the notices rescinded.
On June 5, the tribunal decided against consolidation because it would take too long and the matter needed to be expedited.
Nthupang Magolego, a senior legal adviser at the NCR, said the BMW matter would only be heard later this year: “We are still attending to some of the procedural issues that they raised.”
She said they had asked that VW Finance refund from when they started charging the fees in 2013, when they registered as a credit provider.