1. We refer to the National Credit Bill B18 – 2005 tabled in parliament on 8 June 2005 ("the Bill").
2. The Imperial group of companies is involved in motor vehicle retail through its Motor Division and also the financing of motor vehicles sold to the public through the Motor Finance Corporation division of Imperial Bank. The Motor Retail Division is also a member of the National Automobile Dealers Association ("NADA").
3. We wish to make the submissions in respect of the bill detailed further below
4. Our concerns regard the practicality of sections 121 to 127 of the Bill regarding the right of Consumers to rescind credit agreements and in particular, the effects of the difference in value between a new and a second hand vehicle.

Sections in question

5. Section 121 of the Bill provides that:

1. 121 (2) - "A Consumer may terminate a credit agreement within five business days after the date on which the agreement was signed by the consumer, …"
2. 121 (4) – "A credit provider to whom property has been returned in terms of this section, and who has unsuccessfully attempted to resolve any dispute over depreciation of that property directly with the consumer, and through alternative dispute resolution …., may apply to the National Consumer Tribunal….;"

 

 

 

 

 

 

 

 

3. 121 (5) – "If, on an application in terms of sub section (4), the Tribunal concludes that the actual fair market value of the goods depreciated during the time that they were in the consumer’s possession, the Tribunal may order the consumer to pay to the credit provider a further amount…..’
4. 121 (1) b – The section does not apply to non-returnable goods.

Industry considerations

6. Our experience is that:

1. the realisable value of a new motor vehicle immediately falls by at least 10% when delivered to a customer. Such a vehicle, whether delivered yet or not, is then classified as previously owned and a previous owner is indicated on the National Automobile Registration System, regardless of mileage or condition. Even if the vehicle in question is for all practical purposes new, part of its value is permanently lost and cannot be returned.
2. customers in the motor industry regularly attempt to return vehicles just acquired for a variety of reasons including "buyers remorse’, simply not liking the vehicle or practical considerations, notwithstanding the fact that they have had amply opportunity to consider the purchase and test drive the vehicle.
3. A significant percentage of customers do not have the financial resources to be able to settle the difference between the new value of a vehicle and the realisable used value of that vehicle when returning the vehicle as amount is substantial.

Submission

7. It is submitted that the application of the sections in their current form would lead to:

1. considerable additional administration pressure on dealers and credit providers;
2. prejudice and undue hardship on the side of Consumers attempting to rescind credit agreements in respect of motor vehicles, due to the high rand amount of immediate depreciation between a new and returned used vehicle;
3. prejudice to credit providers who would be obliged to accept returned vehicles that have depreciated substantially in value and who would in all likelihood have to spend considerable time energy and cost to recover the depreciation from a Consumer who might not be able to pay the amount;
4. a deluge of cases being referred to the Tribunal for consideration.

8. In the premise, we are of the opinion that motor vehicles should either be classified as non-returnable or excluded from the ambit of the provisions in total.

 

 

 

 

 

 

 

 

 

 

9. We further note that the wording of section 121 (5) of the Bill only applies to depreciation of the goods "during the time that they were in the consumer’s possession". It should be noted that the decrease in value occurs upon registration of the vehicle and that circumstances might arise where a customer signs a credit agreement, the vehicle is registered in the name of the customer, and the customer then rescinds the agreement before taking possession of the vehicle. In such a case, the credit provider would not be able to recover the depreciation from the consumer as the Bill no stands.
10. Should you require clarification in respect of any aspect of our submission, please do not hesitate to contact Rohan Venter of our office on telephone number (011) 372 6507, fax number (011) 372 6555 or e-mail [email protected].

Yours faithfully