R699 car scheme collapses

The National Credit Regulator (NCR) has issued a Compliance Notice to Satinsky 128 (Pty) Ltd - the company operating the deal.
The NCR says this is in a bid to combat predatory lending practices, including credit marketing practices.

 

The NCR's effectively saying the advertising of the R699 finance deal was misleading because it didn't give the whole story about how it was structured.

 

Earlier this month, with no warning or consultation, the company behind the deal, Satinsky, effectively pulled the plug on the current arrangement - the advertising fees will no longer be paid.

 

This means clients are now on their own with their monthly repayment to their bank.

 

The fall-out is unfolding on a Facebook page for victims of this saga; people are pleading with their banks for help, and Satinsky is not engaging with them at all. Victims of the New Car from R699pm scheme have been sharing their advert sticker-removal tales since the collapse of the scheme earlier this month on the Facebook group: I have been done in by Drive a New Car From R699 per month.

 

All the company did was put out a statement suggesting that their clients sign up for another rewards programme. 

 

The advertisement by Satinsky discloses the monthly instalment of R699 only.

 

The National Credit Act (NCA) requires that if an advertisement discloses the monthly instalment, it must also disclose the instalment amount, number of instalments, total amount of all instalments (including interest, fees, and compulsory insurance), interest rate and residual or final amount payable.

 
The advertisement of Satinsky, appearing on the website, also contains the statement that consumers will pay a reasonable interest rate without disclosing the cost of credit.

 
The NCR's notice requires Satinsky to submit an audit report to it confirming that its advertisements for credit comply with the NCA and that it has implemented systems and procedures to prevent the issuing and publication of non-compliant advertisements.

 
“The audit report will provide assurance that all advertisements appearing on vehicles are in compliance with the provisions of the NCA,” says Nomsa Motshegare, Chief Executive Officer of the NCR.

 
“Satinsky has an opportunity to bring its credit marketing practices in line with the provisions of the NCA, however, should it fail to do so, the NCR will approach the National Consumer Tribunal for stringent orders which may include an administrative fine,” says Motshegare.

 
Motshegare says the NCR is also investigating the Satinsky’s R699 vehicle scheme for other possible contraventions of the NCA.

 
“The purpose of the investigation is to establish if vehicle owners were granted credit in accordance with the NCA. This is a separate issue from the credit advertisements appearing on the vehicles,” concludes Motshegare.

Above: General view of Albert Venter's mansion in Pretoria. Venter is the man behind the R699 per month car scheme which is on the verge of collapsing. He started Satinsky general dealership in 2006 and introduced the R699 scheme to the market in 2008 but now the scheme has left thousands of South Africans to make their full repayments. (Photo by Gallo Images /Foto24 / Alet Pretorius)

 

 

How did the whole scheme work?

 

Satinsky, which comprises a number of divisions, including Just Cars Africa and Drive Car Sales, acts as a dealership, providing new cars to people, most of whom cannot afford the monthly repayments.

 

Venter is the chief executive and mastermind of the car ownership model.

 

Satinsky also arranges the bank finance - no deposit required - and delivers the new car to the customer, with the six-year car finance agreement ready to be signed. The company then requires the customer to sign a second, entirely separate contract with a Hong Kong-based company, Blue Lakes Trading and Promotions, for which it says it acts as an agent.

 

It is that contract that governs what the car owner gets paid for driving around with an impossible-to-miss advert on their back window.

 

In fact, there are two contracts: Earn While You Own, in terms of which the owner gets a flat R570 a month, and if a car gets sold on the basis of their back-window advert, they get paid R3000.

 

With the second contract, Earn While You Drive, owners get paid an amount based on the mileage they do in a particular month. The more kilometres they do – 500km being the lowest permissible monthly mileage – the more they get paid.

 

But things have gone downhill for Satinsky, the banks as well as the people who signed up.

 

Last month Satinsky sent all clients an SMS offering to arrange for their payment term to be extended to lower their monthly car repayments.

 

It read: “We have taken note of the contents of the article (presumably this is a reference to Consumer Watch) as well as the complaints by many of our clients that they are experiencing financial hardship.

 

“We believe that you as a client deserve better and as a means to enable you to drive your vehicle for less, we propose that we make use of our long-standing relations with your bank to extend your vehicle payment term as a means to lower your car payment and make it even more affordable.”

 

They were told to respond via SMS if they were keen.

 

In her weekly Consumerwatch column, Wendy Knowler stated:

 

The entire premise of Satinsky’s car ownership model is that it allows those who couldn’t otherwise afford a new car, to own one, thanks to the advertising fee.

 

So logic dictates that although they are made to sign a contract with a financing bank, making them solely responsible for the full instalment, they would battle to afford it every month without the Blue Lakes income.

 

I asked the three participating banks how they justified approving the finance applications, given that the Blue Lakes contract makes it clear that the advertised fee may fluctuate or stop altogether for a number of reasons, which would jeopardise the clients’ ability to pay the full instalment.

 

But all three - Absa, Nedbank’s Motor Finance Corporation and Standard Bank - along with Satinsky, insist that a client’s affordability is assessed without taking into account the anticipated advertising fee.

 

And none of the banks answered my question on whether they had noted a trend in recent months of Satinsky clients defaulting on payments.

 

Satinsky’s Siyanda Zuma said: “Please note that all customers who purchase vehicles from our group qualify to do so without taking into consideration any potential advertising revenue.

 

“It is an offence for consumers to misrepresent their income and expenses which they declare to financial institutions when purchasing a vehicle on credit.”

Update: The Pretoria High Court has granted a certificate of urgency thereby allowing the matter to be heard on Tuesday, 22 July . This application to be heard on Tuesday will revolve around whether those affected by this car deal can pursue a class action suit against the respondents.