Car Repossessions: Know Your Rights as a Consumer

If you default on your vehicle loan, the bank or finance company that provided the loan has the right to repossess your car. However, the law requires lenders to follow a standard procedure when doing so. You need to know how the procedure works and your rights and protections under South Africa’s consumer laws.

In a 2023 press statement on car repossessions, the then Ombudsman for Banking Services, Reana Steyn (now the Head Ombud for the National Financial Ombud Scheme), said it was important to be aware that, under vehicle finance agreements, the vehicle remains the property of the lender until the loan is fully repaid. She said that if you miss repayments, you can expect the following:

• The adverse information will be listed on your credit report, limiting your ability to access further credit;

• Legal action may be taken against you, which may incur legal costs; and

• The vehicle may be repossessed and sold on auction. You will be liable for the shortfall should the vehicle be sold for less than what you still owe on it.

The legal procedure

Steyn said that lenders must follow the procedure set out in the National Credit Act (NCA) before repossessing a vehicle.

Before taking legal action, the lender will normally first exhaust its internal debt collection process. It will contact you and attempt to make an arrangement with you to bring your payments up to date.

It’s important to note that a lender can only repossess a financed vehicle with a court order or with your direct consent (voluntary surrender). If the former, the following steps must occur:

• The lender sends you a section 129 notice (letter of demand). This can happen only after the account has been in arrears for 20 days or more. On receiving the notice, you have a certain timeframe (often 10 days) to rectify the situation, such as arranging to pay the debt.

• A summons for you to appear in court is served on you by the Sheriff of the Court.

• A judgment is made against you declaring the vehicle executable.

• The Sheriff of the Court delivers to you the warrant of execution (court order) stating that the vehicle can be repossessed.

The person who comes to repossess your vehicle must provide proof that they represent the Sheriff of the Court and must produce the original court order stating that the vehicle can be repossessed. If this doesn’t happen, you are not obliged to sign any documents, nor are you obliged to hand over the vehicle.

When lenders act unfairly

Providers of credit must afford defaulting consumers a fair opportunity to address their obligations before taking legal action, especially if they are willing to come to a payment arrangement. This was the message of a judgment handed down recently by the High Court in Cape Town, which dismissed a credit provider’s application to repossess a man’s car.

FFS Finance, trading as Ford Credit, sought to repossess CP van der Merwe’s 2015 Ford Ranger because he had defaulted on the monthly payments. According to the finance company’s records, Van der Merwe owed R112 888 in December 2022.

In court, the finance company argued that Van der Merwe’s failure to maintain payments justified the cancellation of the agreement and the repossession of the vehicle. It had contacted Van der Merwe to arrange a repayment plan, but he had found the terms too onerous – the finance company had demanded an immediate 50% payment of the arrears followed by a three-month repayment period. Van der Merwe had made a proposal of his own, but this was rejected by Ford Credit.

In his judgment, Judge Daniel Thulare found that Ford Credit’s approach did not align with the NCA’s principles of fairness, transparency, and consumer protection. He criticised Ford Credit’s inflexible repayment offer, noting that Van der Merwe had proposed an alternative arrangement to bring the arrears up to date, demonstrating an intention to resolve the matter. He dismissed the application.