Dear Reader: FNB's racist bond rates

Are principles really necessary if one wishes to lead a good and stress-free life? Jo Maxwell, a long-time reader posed the question in nose148. She went on to relate how one of her early principles had come about through the shenanigans of the lotto board, which held on to the money as if it were glued to their fingers – and managed to distribute millions to a wellknown sports club, while those feeding the hungry were left to find other means of keeping people from starving.

“I swore I’d never buy another lotto ticket.  And I have stuck to that principle,” she said.

At one stage she thought to change her bank, but then found – through Noseweek – that every bank, perhaps not Capitec, is ripping us off, so decided one devil is as bad as the next. “Hard to make an on-principle choice when there are no choices,” she quite rightly observed.

More recently, having just read in nose147 how Coca-Cola screwed a much smaller guy and left him penniless, she decided not to allow another sip of Coke past her lips. (Although she did admit this was not too difficult as she hardly drinks Coke, Appletiser or Valpré.)

Oh, and she doesn’t fill her car with fracking Shell.

She concluded with a plea: “Please, Noseweek, keep me on my toes. I’d hate to miss out on making more on-principle choices.”

Jo Maxwell has put her finger on something – something peculiar about Noseweek and most of its readers: we hang on, for dear life, to our freedom - our right to choose. And we believe the good life, the life well led is, ultimately, a life of principle.

We choose not to eat dogs. On principle: dogs are man’s best friend.

We won’t eat meat culled from cruelly confined and abused chickens and pigs. Goodbye KFC. (I have received more emails from readers alerting me to that grotesque video on YouTube about the cruel culling of egg-laying hens than on any subject under the sun, ever.)

We choose not to buy or use products that have been tested on rabbits and dogs in cruel and bizarre pseudo-scientific “trials” devised by sadists.

We won’t buy ginger beer and “traditional” drinks from Woolworths because they stole the idea from the legitimate originator, a small guy like most of us. (To their credit, Woolies got the message and have stopped production.)

We don’t tolerate liars and cheats. Or pompous old farts. On principle. We have at least one good laugh a day – on principle.

Which brings us back to the subject of which bank to choose; we have recently found serious reason to reconsider our position on that one. Until now we've rated one pretty much as bad as the other – you may have noticed, they all choose not to advertise in Noseweek – making our reasons for choosing or staying with one rather than another all fairly arbitrary. Mostly its “now we’re there, we may as well stay.”

In our case it’s been FNB since the day we started up in 1993. In all that time we have had no serious reason to complain. On the news front we have had huge fights culminating in a showdown in the high court. But then we have had equally damning things to report about the business ethics of Investec, Nedbank, Standard Wank and Absa. Until now, not much for choice. They all steal, lie, cook the books and abuse their financial power and controlling grip on the legal profession. But there is one sin that you dare not commit in South Africa: you dare not be racist. The wounds are too raw, too deep; the issue too dangerous.

FNB, as hard as it is to believe, has remained racist on at least one front. It has actually set up it’s systems to steal – consistently – more from its black bond clients than it dares steal from its white bond clients.

FNB lied from day one about the position of the 80 000 bond clients it took over from Saambou. That, Noseweek readers have known almost from day one. We told you all about it in August 2002.  Saambou had for years been charging their bond clients an illegally inflated interest rate, and been calculating the interest in an illegal manner, resulting in all these accounts reflecting hugely inflated outstanding balances.

FNB has for the past 10 years failed to rectify the position, regularly proceeding to seize clients’ homes and sell them in execution, based on false outstanding balances – which they know to be false – when, as often, the client has in fact long paid off his or her loan and it is the bank that owes the client tens, if not hundreds, of thousands of rands. That part of the scandal we knew. (Everyone knows it. The government knows it. Even the courts know it: on 28 January in the High Court in Pretoria yet another FNB sale in execution was stopped on the basis of the bank’s fraudulent interest calculation. This was the 179th such case. On each occasion FNB was forced to withdraw. But still it carries on, presumably because enough clients are too uninformed to know that they have been robbed by a bank and don’t resist when the sheriff arrives. And for all those years that he was the responsible minister Trevor Manuel never cared - presumably because most Saambou clients were white Afrikaners, or so we thought.

What we did not know is that the victims are almost exclusively black – as in black-black. And that they have been deliberately targeted with illegally inflated interest rates that are substantially higher than the rates the bank charged its white bond clients. Which puts a whole new colour on Trevor Manuel's neglect.

Look at the two graphs above: the one on the right, a white client, is charged an interest rate very close to the prime bank rate, which is regularly adjusted up or down in tandem with the Reserve Bank’s repo rate. The one on the left, a black client, signs up at a rate much the same as his white compatriot, but very soon the bank secretly starts upping the rate above the rate it charges white clients. When the repo rate drops, it reduces the rate it charges black clients later and by less, exploiting the opportunity to open the gap even more.

In this particular case, the black client ended up paying R150 000 more than he should have paid. Proof that the racial discrimination is deliberate is found when the Saambou/FNB bond accounts are examined by suburb. An analysis of the bond accounts of over 2 000 white clients in four Pretoria suburbs with a similar number in four of the city’s black townships in 2002, shows that black clients were charged on average 2.5 percentage points more than white clients. In Monument Park, Pretoria, an overwhelmingly white suburb, most clients were charged between 13.5% and 15%. But the two obviously black clients living there, a Mr Phoshoko and a Mr Sibeko were charged 16.5%.

The decision to target black clients with an illegally inflated interest rate was taken in December 1993. Even when Saambou was under curatorship instituted by the Reserve Bank, the practice persisted: white clients paid 5% above prime, black clients were charged 6.5% above prime in March 1992. The gap was further widened in August 2004. By these devious means, the bank managed to up the bond clients’ debt by as much as 32%. The suffering they have inflicted on innumerable households is immeasurable.

FNB has to date refused to rectify the matter. The total amount it owes the 80 000 bond clients it acquired from Saambou could total billions. Most of it is owed to its black clients.

We are putting FNB on notice: unless it comes clean and declares its willingness to voluntarily rectify this outrageous wrong before our next issue goes to press, we will be closing all our FNB accounts, and inviting our readers to do the same. We have a choice and we intend exercising it.

On principle.

The Editor

  • In December it was reported that the Bank of America was fined $335 million for minority discrimination for charging higher interest rates on loans to African-American and Hispanic American borrowers.


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Submitted by : Emerald Van Zyl of Tygervalley on 2012-03-07 16:01:49
From June 1990, banks in South Africa were not permitted to discriminate against Black home loan clients by charging them a higher interest rate than White home loan clients as FNB did.

At that time, most banks became involved in low cost (Black) housing. Because of the higher administration costs on Black housing, the banks informed the Government at that time that they were going to charge Black homeowners a higher interest rate than those of the White market to recover their loses of the higher administration costs on these bonds. This was not acceptable for the Government, and it was decided between the banks and Government that the Usury Act would be amended to allow banks to charge a monthly administration fee of R 5 (VAT excluded) on each home loan client in South Africa. The purpose of this fee was to recover any loses due to the additional administration costs on Black mortgages.

The Usury Act was amended to allow banks to charge this R5 fee and in return not to discriminate with higher interest rate.
Reference: Hansard, 6 June 1990 page 10937–10994

In December it was reported that the Bank of America was fined $ 335 million for minority discrimination for charging higher interest rates on loans to African-American and Hipanic American borrowers.

I have referred the interest discrimination by FNB to the Commercial Crime Unit.

Emerald van Zyl
Submitted by : David Claase of Johannesburg on 2012-02-29 20:27:59
Dear Editor - on principle, I feel I need to respectfully point out that your presentation of comparitive rates above is misleading. Comparisons of that nature are meaningless unless you can also show that both white and black customers had exactly the same credit risk, and that all suburbs used in the comparison showed the same property risk fundamentals. I do not wish to defend a terrible practise, if that indeed is what emerges, but if you take a position based on principle, then you are obligated to present the detailed, complete facts, and a publication of your stature should not be content to present a superficial analysis to support your position.
Submitted by : Don Pearce of Noordhoek on 2012-02-29 17:29:21
Dam, the pejorative one, another divorce decision required. Like Jo Maxwell I too do not buy Shell, nor BP, nor ANY product I've discovered is involved in cruelty etc in its production or operation. Now despite having been reasonably satisfied with my relatively low ceiling of 'Rip Off' i am faced with a truly despicable treatment of some of my fellow SAfricans by FNB. So were to now? But I ask, with 1000's of employees operating at the 'Coal Face' of public interaction, how many are aware that their employer is a "THIEF" but they need to have a job? SAD SAD SAD.
Submitted by : Jennifer Spencer of DUNVEGAN on 2012-02-29 11:27:56
I already have a big gripe with FNB due to there unjustified bank charges - so this is just the push I need
Submitted by : Mujidat Mustapha on 2012-02-28 15:12:16
Another shocking revelation! Thanks for doing what you do.You are in my opinion the ONLY credible media institution in the whole country and I really wish more people would become readers of your wonderful newsmagazine.
Submitted by : Mujidat Mustapha on 2012-02-28 15:12:15
Another shocking revelation! Thanks for doing what you do.You are in my opinion the ONLY credible media institution in the whole country and I really wish more people would become readers of your wonderful newsmagazine.


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