Cash breather for car buyers

Tribunal outlaws hidden costs

The National Credit Regulator (NCR) instructed Volkswagen Financial Services (VWFS) to stop the practice of charging consumers "on the road", admin and handling fees
The National Credit Regulator (NCR) instructed Volkswagen Financial Services (VWFS) to stop the practice of charging consumers "on the road", admin and handling fees
Image: www.pixabay.com

It is considered an emotional purchase and, when getting caught up in the rush of buying a new car, consumers are not always aware of hidden costs and fail to ask the necessary questions before signing on the dotted line.

The final tally owed comes with what has been ruled as unlawful costs in the form of “on the road” (OTR) fees and admin or handling fees, the National Consumer Tribunal found in a judgment handed down on April 4.

This follows a compliance notice issued in October 2018 by the National Credit Regulator (NCR) instructing Volkswagen Financial Services (VWFS) to stop the practice of charging consumers OTR, admin and handling fees by April 10.

The tribunal further ruled that VWFS must calculate the total amount of charges, fees or interest levied on the OTR, admin and handling fees and refund all the consumers charged with the illegal fees since 2007.

The financing service also has to submit a report by independent auditors to the NCR.

The stage was set in 2018 for the legal wrangle between the NCR and VWFS after the publication of the book Eff you very much: How you are screwed by dealerships and banks when buying a car, penned by Port Elizabeth resident Crystal Slabbert and John Titmus of Jeffreys Bay.

In the book, Slabbert and Titmus detail how dealerships add the illegal costs to the total purchase price of a vehicle unbeknown to the buyer.

Slabbert said the judgment was an affirmation of what was happening out there.

“My phone has not stopped ringing.

“Many people said they should have listened sooner,” Slabbert said.

Since the publication of the book, Slabbert said she had received a number of threats from people in the industry .

According to Slabbert, dealerships have been adding the costs for years “because they got away with it”.

In a recent survey conducted by Slabbert to determine if sales persons were aware of the regulations stipulated in the National Credit Act and Consumer Protection Act specifically regarding the inclusion of third party costs in the form of OTR and admin fees, only four out of 20 people surveyed knew it was against the law.

“Dealerships are not allowed to charge third party costs,” Slabbert said.

Credit Regulator CEO Nomsa Motshegare welcomed the tribunal judgment “as it affirms the protection given to consumers by the National Credit Act against illegal charges and fees on credit agreements”.

“The NCR will continue to conduct industry-wide investigations on fees and charges on credit agreements to root out illegal charges and fees on credit agreements,” Motshegare said.

In a statement issued by VWFS, the company – which is a separate entity to Volkswagen South Africa (VWSA) – said it acknowledged the order by the tribunal and had taken legal advice on the matter.

VWFS confirmed an appeal against the order had been lodged.

Marc Siedler, spokesperson for VWFS SA majority shareholder Volkswagen Financial Services AG, based in Germany, confirmed external legal advice had been sought and that the legal team had indicated there were “good prospects of success on appeal”.

“The noting of the appeal will suspend the order of the tribunal and VWFS will not be making any refunds until the appeal is finalised,” Siedler said.

While the legal wrangle continues to play out, the SA Auto Training Academy, which has partnered up with mediation company Equillore, is offering training and meditation services in response to the issues stemming from the battle between dealerships, financiers and the NCR.

Andrea van Rensburg, of the academy, said the training offered would help educate dealerships and their employees, especially sales personnel, about the National Credit Act and Consumer Protection Act.

Van Rensburg said it had the support of the National Association of Automobile Manufacturers of SA and the Motor Industry Ombudsman of SA.

Credit Regulator CEO Nomsa Motshegare welcomed the tribunal judgment ‘as it affirms the protection given to consumers’

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