Pawn and Drive Your Car Scheme Prohibited

NCT Ruling on Pawn & Drive Your Car‘ Scheme from Allied Capital

Last year Allied Capital ran into a snag with a consumer who they repossessed a car from over end balance differences. In that case, the consumer had borrowed R30000 in a pawn your car and still drive it scheme from Allied Capital. When she said the balance was paid up and they disagreed she stopped payments. That led to them sending several men to take the car from a shopping centre (with her bags still in the back). When the matter went to court the judge ruled in favour of the consumer even though Allied Capital argued that she willingly gave them the car that day.

All the way back in 2015, Debt Counselling firm Octogen referred Allied Capital to the National Credit Regulator (NCR) for investigation over what they saw as contraventions of the National Credit Act (NCA). These things tend to take time and eventually, the NCR did get to investigate. Especially after these matters hit the press and got some good public coverage. Consumers wanted to know. This led the NCR to apply to the National Consumer Tribunal for a ruling in regard to this Credit Provider.

At the same time, a number of related matters were taken the Magistrate Court  (by Debt Counsellors) who also agreed that there had been contraventions of the NCA.

NCT Ruling

This year the NCT made a ruling which stated that the whole “pawn and still drive your car” scheme is prohibited because it is actually just an attempt at disguising a normal credit agreement. This is, of course, disastrous for Allied Capital. The NCT further ordered that an independent audit must be done to figure out what the credit provider now needs to refund consumers who have been a part of the scheme since it began.

What About Cars Already Repossessed or Sold?

After the audit is conducted refunds will have to be made to consumers even where they failed to make payments and had cars taken in the past. The NCT have ordered that

1. Allied Capital is to return consumers’ vehicles and, if already sold, to refund those consumers; and
2. Allied Capital‘s registration has been lapsed (stopped) for 18 months.

‘The NCT found that …these agreements were, in fact, normal credit agreements disguised as something else’

The NCT found that though pawn agreements are (somewhat) under elaborated on in the NCA these Allied Capital agreements were, in fact, normal credit agreements disguised as something else. As normal agreements, there are steps a credit provider must normally take (like affordability assessments, quoting and proper documentation) which Allied Capital failed to take.

Pay Back the Money

This just goes to show that there are no short cuts and companies should not feel that simply because a lot of time has gone by they will not face the prospect of paying back funds to consumers. This was recently also evidenced when the NCT ruled that Club Fees were a contravention of the NCA allowed fees for a credit provider and ordered that Edcon pay back a HUGE amount that they had charged consumers since 2007 (last year they charged around R400 million in club fees).

 

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