The ethical face of SAbanking

The ethical face of SAbanking

Cathy's R4,800 loan will cost her R41,780

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Submitted by : Johnie Johnson on 2009-11-23 23:26:44
BTW. Any goverment tender requires some formalization of a trading entity. To "prove" its status. In turn, every formalized trading entity must have a seperate banking account. Every bank in SA charges a considerable amount for banking fees, monthly. Have a seperate entity for each business or venture, and you can end up with a string of banking accounts. This is a monopoly! Can I start my own bank?? All noseweek subscribers to receive a healthy discount!
Submitted by : David Claase of Johannesburg on 2009-11-23 21:23:54
Clearly, without the details it is impossible to comment fairly about the above article. However, it is clear that the bank did allow easier terms ("...was told to keep paying what she could..."). Furthermore, it is implicit that the client was not actually making payments or depositing cheques which bounced (..."shows that a number of payments were reversed...") - this can only occur if no actual funds are received or if cheques do not clear. It is also important to remember that all the time the loan is not being serviced by the client, the bank is carrying the funding cost of that loan.

Archer - in terms of the Usury Act - your point is valid, however, at the time, lenders who were registered with the Micro Finance Regulatory Council (MFRC) - the early version of the NCR - were exempt from the Usury limits provided they fulfilled certain criteria, including:

1) The microlender must be registered with the Micro Finance Regulatory Council (MFRC) and comply with the Exemption Notice to the Usury Act, which governs the affairs of microlenders.
2) The repayment period may not exceed 36 months.
3) The loan agreement must be in writing and contain all the terms and conditions under which the loan is granted.
4) Borrowers must be given a copy of the loan agreement.
Submitted by : Archer Wilson of Howick on 2009-11-13 11:21:30
Surely the Usury Act 73 of 1968 reg 259 forbids interest on loans of under R6000 to exceed a maximum rate of 33%. I cannot believe that any subsequent amendments (if any)could allow the rate to exceed even 40%. How then can a recognised bank, charge rates even in excess of microlenders without being criminally charged because this episode is definitely criminal.

Submitted by : Scott Cundill of Johannesburg on 2009-11-06 12:33:03
I agree with Raymondt. The problem is not with the loan, nor the repayments - both parties go into that with eyes wide open. The problem occurs when the debt can't be repayed back. Suddenly it goes off the rails. From owing 1,300 to owing R42,000 is disgusting and any halfwit, inbred Julius Malema supporting moron with half a brain can see that.

Only the banks can't.
Submitted by : Raymondt Dicks on 2009-11-05 18:49:21
I believe that “Common Sense” in the article formulates to a cooperative understanding between the Client and the Bank. The understanding part refers essentially that both parties enter into an agreement blind-folded; neither one can predict the future. Death, illness, job-loss or even recessions are facts of life and therefore common course. If the latter happens neither party is to blame, as the risk was the risk, and therefore the parties must find a common ground to which a resolve can be found. In this instance common sense would dictate that the bank meets its clients half way and re-negotiate the balance of the loan at a lesser interest rate or extended term. The other way (compounding interest, cost and fees) reflects a measure of undue punishment where there is no blame.
Submitted by : Loyiso Marasela of Johannesburg on 2009-11-04 14:34:47
Reckless lending is not about someone incapacity to make decision. When someone that is already in debt ( and obviously desperate) and the bank grants the person a loan to consolidate all debt with no indication of new or additional income clerarly to me that is reckless lending. Its reckless because how does the bank hopes the person will repay the loan.
Submitted by : David Claase of Johannesburg on 2009-11-02 09:56:05
Editor - I find your response to my comment insulting, in that your immediate response to a comment which critiques your holy written word is the assumption that I must be a banker or a loan shark.

I am neither.

I am, however, fully conversant on the entire NCA - I merely highlighted the specific section which applied to your article above.

Please explain the nature of the common sense you feel the bank should apply? Perhaps, in the interests of balanced reporting, you should ask the banks to provide details of the number of loans which are written off for various reasons without consequence to the borrowers. Of course, if they do provide this detail to you I have no doubt that your story will focus on the terrible business practise of writing off loans which makes banking more expensive for paying customers.

Editor's Note
Stay tuned to Noseweek December Issue to know how Nedbank has applied the Common Sense. Thank you.
Submitted by : David Claase of Johannesburg on 2009-11-01 12:26:04
Loysio - please grow up. Problems start with people living above their means and taking on debt. I'm sorry, but adults have to take responsibility for their own actions. If you are intimating that adults are too unsophisticated to enter into legally binding financial agreements then surely we should reconsider other legal activities which for which they may not be sufficiently competent, like voting, for instance. In the story above there is no mention of a reckless loan - the client was risk evaluated, her lending risk had been priced and she had been paying her debt for 7 months - a clear indication that, while she was working, she could afford the loan. The fact that she lost her job is not the bank's fault. I am ambivalent towards banks, but my logic dictates that if you substitute yourself with the bank, it is likely that you would also do all you could to recover a loan outstanding to you. Why should the logic be any different merely becasue an institution is involved?

Editor - in terms of the comment regarding the judgement that interest and costs cannot exceed the original loan amount: my understanding is that the NCA (Section 103(5)) codified a long-standing common law principle called In Duplum. This only applies once a loan goes into default and only applies to loans granted after 1 June 2007 when this section of the NCA came into force.

Editor's Note
Read the entire Act and not Section 103(5) in isolation. Do you work for a bank or are you a loan shark? If only bankers could sometimes apply common sense, which by the way isn't that common in most people.
Submitted by : Loyiso Marasela of Johannesburg on 2009-10-30 14:45:47
Although very shocking unfortunately this is not a never hear before story, we have read in the past of people losing their houses due to their failure to repay a loans that were recklessly granted to them.

Its so unfortunate that we don't have a dedicated government programme aimed at protecting consumers' rights (the ombudsman are failing under the immerse weight of the proplem). Our country largely depends on private organisations who don't even have enough resources to help everyone


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