Johannesburg - The Covid-19 pandemic has created a bloodbath of job cuts, business closures and car and home repossessions, with consumers failing to keep up monthly repayments to financial institutions and facing financial ruin.
Banks maintain that they have offered their clients payment holidays and are willing to negotiate payment structures with those in arrears, but clearly many customers either didn’t get the information, or – they say – banks were not willing to meet them halfway.
Lucky Mazibuko, the owner of The Zone Pub in Soweto, is among those businessmen who have had to bear the brunt of the Covid-19 forced lockdown and business closures, with banks unwilling to come to his rescue.
Mazibuko has run the pub and grill for 22 years, and has seen his business grow and thrive over two decades of operation.
Then, in 2020, when President Cyril Ramaphosa signed the National Disaster Act into law, shutting down schools, businesses and basically the whole economy, Mazibuko’s business – along with thousands of others – was left without income for almost two years.
During the pandemic, Mazibuko applied for a R1.5 million loan at Standard Bank in order to complete a B&B building project, but the bank refused. The bank declined his application, telling him this was because of the uncertainty of Covid-19.
But the banks want him to pay R50 000 by the end of this month as he is in arrears because his business wasn’t generating enough income during the Covid-19 lockdown for him to meet his obligations with the banks.
“They refused to fund our sixteen-room B&B. I know I am not working, but Covid-19 won’t be with us forever. But I was told it’s too risky. However, when you say Covid-19 is the reason why you can’t pay, they don’t meet you halfway. People are willing to pay, but the banks are making it almost impossible,” he said.
Ratselane Modiehi (38) from Midrand had her Volkswagen VW Polo TSI repossessed after she struggled to meet her monthly instalment because her baking business was struggling during the lockdown. She had bought her car in 2018 and her monthly instalment was R3 833. She had managed to meet her repayments for three years before the lockdown struck.
“I started my own baking business and I called the bank when I realised that I would have trouble paying for the car. It was a year and a half ago. They weren't able to reduce the actual amount that I needed to pay. I would get calls from different people and I would try to avoid them,” she said.
Modiehi’s car was eventually repossessed in February this year. She said a representative from Wesbank approached her with the sheriff of the court and she was presented with a warrant of execution authorising the sheriff to repossess it.
“Two days after they repossessed it, I got a call from the bank informing me they were going to auction the car for R26 000. I was owing R46 000. Because they had to add lawyer fees and sheriff fees, it amounted to R62 000, which I was expected to pay in 15 days.
“I had to borrow money from friends and family, and on the 15th day, I managed to gather R40 000. I gave them that amount and I was asked to pay the remaining R22 000 at the end of the month, which I did. I got the car back at the end of March.
“I had to get it back because I was afraid it would look bad on my credit record, making my chances of getting another one (car) bleaker. Another issue was that for the months that I didn't have a car, I struggled to get to suppliers, which put a strain on my business,” she said.
While Modiehi managed to get her vehicle back, she now sits with a R40 000 debt as she still has family members to pay back.
Sizwe Mthomane (36) from Centurion had his Volkswagen VW Polo GTI repossessed at the beginning of the year. He only had the vehicle, which cost R400 000, for two years and couldn’t manage to pay his instalment when he lost his job at the beginning of the Covid-19 pandemic.
“I was working as a sales consultant for a recruitment company and I was let go. I was financed by Wesbank and bought the car in December 2018. I was let go from my job at the end of 2020. I started evading them from 2021 as I couldn’t pay my instalment of R5 000. They eventually managed to repossess the car in November last year. Things have been tough for me. The bank is on my neck as I am currently looking for a job at the moment” said Mthomane.
Atlegang Kgwerano, who was a general worker for a Johannesburg construction company, lost his job when the company implemented retrenchments because of the pandemic.
“My car was financed by Standard Bank and I was paying an instalment of R2 300 for my 2015 Hyundai i20. I bought the car in 2017 and I managed it when I was working, even though there were tough months for me where I would skip an instalment or two.
“I lost my job in April 2020 and I couldn’t pay for the car. I tried to make arrangements with the bank after I had evaded them for months. Two gentlemen came to my place last year with the sheriff of the court and presented me with papers authorising the sheriff to repossess the car. I was told it would be auctioned for R50 000 and that’s the money I need to pay,” he said.
According to Ombudsman for Banking Services Kwanda Vabaza, the law is very clear on how repossessions must be done, especially of immovable property.
“There must be a court order and there must be a warrant of execution authorising the sheriff of the court. What we see happening are people going to people pretending to have a court order, but not having a valid one and convincing customers to sign documents. In signing those documents, people believe they are signing documents from the court, only to find that they are signing a voluntary termination notice. This is how consumers are tricked,” he said.
He added that the sheriff of the court must go to the consumers with the original stamped court order, and produce that order to the consumers, showing them that they are authorised.
“If there is no court order, the consumer must be the one willing to give back the vehicle, but consumers should not be tricked into giving back the vehicle. That is fraudulent misrepresentation and that amounts to fraud,” he said.
Banks say they are willing to give relief and to negotiate
Lebogang Gaoaketse, WesBank’s head of marketing and communication, said the bank pushes to make arrangements with a client before repossessing.
“Repossessions are always the very last resort for WesBank. The bank would rather consult with its customers to make new arrangements for payment than repossess a vehicle,” he said.
“During these challenging times, it remains a priority of ours to assist our customers where possible. As such, a payment relief option has been made available to those negatively affected by the Covid-19 pandemic,” said Gaoaketse.
“To date, we have received over 100 000 applications and have offered relief to over 53% of customers that have applied and have qualified for assistance. These numbers are a clear indication of where our focus is at the moment, considering how customers are vulnerable and need solutions,” said Gaoaketse.
The major banks, including Absa, WesBank, Nedbank and Standard Bank, say they have implemented payment relief on financed vehicles to temporarily take the pressure off clients.
This follows the loss of jobs and income caused by the Covid-19 lockdown, which has left many people facing the prospect of not being able to make vehicle repayments.
Even if you are in default, there is still hope of avoiding having the vehicle repossessed. It is best to contact your bank and find out how you can reinstate the loan. In general, it means making up all the missed payments, or arranging to integrate the outstanding amount into the total settlement value.
Legal action is generally taken once a client misses three payments. If your vehicle does get repossessed it is usually sold through an auction, where vehicles often sell for a fraction of their resale value. If this happens, you will owe the difference.
WesBank devised payment-relief plans from April 1 to June 30 to assist customers affected by Covid-19, with the type of relief depending on the type of product each customer holds. The bank has been inundated with requests for assistance, which has led to delays in getting to each customer.
“It is unfortunate that there have been some delays in responding to all of our customers and for that we would like to apologise. Amendments to the system have been made to ensure a quicker turnaround time for responses”, Gaoaketse said.
Absa spokesperson Khulani Qoma said Absa introduced Siyasizana, an extensive debt management programme that included payment relief, debt restructuring, debt consolidation, assisted sales offerings and a wide range of existing tools to mitigate the impact of the pandemic.
“The essence of Siyasizana was to work together with customers to counter increased financial strain as a result of the lockdown and the pandemic. The payment relief programme gave customers the opportunity to either continue paying if they were in a position to pay reduced instalments by agreement with the bank, or to defer payments for a period of three months.”
He said Absa did not repossess any cars during the Covid lockdown period level 4 and level 5. No homes were repossessed during any of the level 4 and level 5 lockdown, and all legal processes were halted during this time.
Standard Bank spokesperson Ross Linstrom said the bank had offered a broad range of relief measures to clients at the time the initial hard lockdown was introduced.
“These included proactive offers of payment holidays to customers, as well as introducing processes whereby customers that had been impacted by Covid could contact the bank and request assistance based on their unique circumstances.”
According to Ross, the majority of customers who took up a payment holiday only took up a 3-month-payment holiday; however, they supported some customers with payment holiday extensions based on their individual circumstances.
“Interest rates were not affected at all by payment holidays. Repossessions were lower than what they would otherwise have been had the bank not come out in support of its clients.
Repossession of any kind is the absolute last resort. It is not in the interest of the bank or our customer for financial distress to lead to a repossession. As soon as a customer is in financial distress they should contact the bank so that an arrangement can be made to avoid unnecessary and further distress. Repossessions in the last year have been much lower than in corresponding years and form a very small portion of the banks’ lending book,” he said.