A homeowner almost lost his house last month after his bank obtained judgment against him, in spite of the fact that he was sticking to a repayment plan that he had negotiated with his bank to catch up on the arrears on his home loan.
First National Bank (FNB) client “Mr R” went into arrears in February 2009. He owes R223 000 on his home loan, which is R40 000 in arrears. Mr R had been paying FNB a restructured amount according to an agreement he made with the bank in 2010. Mr R’s bank statements reflect that for the past nine months he has honoured this agreement. Four months ago, and in line with the agreement, Mr R increased his instalment from R1 350 a month to R3430 a month, yet FNB proceeded with legal action against him.
In obtaining judgment against Mr R, FNB succeeded in having his property declared executable. This means the bank has a court order to repossess – or “attach” – a property and sell it in execution.
Following questions from Personal Finance, FNB said it would get the order reversed (see “This is obviously an error”, below).
Jan Kleynhans, chief executive: FNB Home Loans, says the bank is committed to the greatest levels of customer service and acts with the best intentions at all times.
Mr R is in debt counselling. He is a former client of debt counsellor Goodman Makhanya of Your Debt Helpline (YDH), a Durban-based company that has gone into liquidation. Mr R is one of the 1 100-odd clients who were on YDH’s books and have been referred to a new debt counselling firm.
Mr R got into financial difficulty in 2009, a year after he was diagnosed with cancer. He found YDH online, applied via the company’s call centre and was admitted to debt counselling. But Mr R’s home loan was already in arrears and he had received a section 129 notice from FNB.
A section 129 notice is a prerequisite to legal action (see “Definition”, below). At the time, when a section 129 had been issued in respect of a debt, the debt was included in debt counselling. The section 129 does, after all, invite the indebted consumer to engage a debt counsellor to help rectify the account. But in April last year, the Supreme Court of Appeal ruled that a creditor that issues you with a section 129 letter before you go into debt counselling can take legal action against you.
YDH made a repayment proposal to FNB, and Mr R’s money was disbursed according to the proposal drawn up by YDH. But some time in 2010, Mr R received a call from FNB advising him that the bank was proceeding with legal action against him. It was then that Mr R discovered that the repayment proposal made by YDH was unattractive to his creditors and that his creditors were not receiving regular payments from YDH’s payment distribution agency.
Most of Mr R’s creditors had terminated or begun to terminate the debt review process. (If, 60 days after applying for debt counselling, the credit provider and debt counsellor cannot agree on a repayment proposal that suits both parties, the credit provider can withdraw the debt from the debt counselling agreement.)
In November 2010, Mr R engaged the services of his current debt counsellor, who managed to negotiate with his creditors to reinstate most of his debts into debt review. But his home loan was not one of them, because Mr R had already negotiated directly with FNB a payment arrangement. Mr R says that since accepting FNB’s counter offer, “virtually every three months FNB cancels it for no apparent reason”.
In April, while upcountry undergoing treatment for cancer, Mr R received a phone call from FNB asking him for documents – a recent pay slip, a statement of income and expenses, and a utility bill – which the bank said it needed in order to finalise the agreement that it had made with Mr R in 2010.
The bank said unless Mr R lodged these documents, it would be forced to act against him.
To stave off legal action, Mr R rushed home from Johannesburg to get the documents to FNB. He sent them on May 26, and one week later FNB took judgment against him.
Mr R’s debt counsellor has slammed the bank for its actions, saying “it smacks of bullying”.
“There was no need at all for FNB to take judgment,” she says. Mr R has demonstrated his ability to pay his debt and rehabilitate his account. And he maintained constant contact with FNB from the time that he went into debt.
An affidavit from Mr R’s debt counsellor as evidence of his attempts to meet the bank’s requirements was submitted to the courts. But, according to his debt counsellor, the judge disregarded it as hearsay, because his home loan is not in debt review.
When Mr R’s debt counsellor tried to appeal to FNB Home Loans’ legal department, she says she was told “the client can make an arrangement [with the bank] even after judgment is taken”.
Why then was judgment applied for in the first instance, asked the debt counsellor, concerned about the cost of legal action to the client, who is already over-indebted. She was told that unless Mr R could produce the documents by the court date, the judgment proceedings would not be halted.
“This happens too frequently,” Mr R’s debt counsellor says. “It is our experience that the banks’ lending departments, especially those dealing with secured assets, are unnecessarily aggressive and hostile when dealing with clients in trouble, and particularly towards clients in debt review.
“Little regard is given to the impact on clients. There is little to nothing by way of support or regard shown for specific circumstances.”
Mr R says he feels “emotionally abused” and at the point of giving up his fight against cancer. He says he has endured constant harassment from FNB. “Over the past six months, I have lost 17 kilograms, largely due to stress and worrying about my house.”
* Kedilatile Malakalaka, acting manager of debt counselling at the National Credit Regulator (NCR), this week confirmed that YDH has been liquidated. When asked if debt counsellor and owner of YDH Goodman Makhanya is being investigated by the NCR, Malakalaka said the regulator “does not divulge investigation details”.
‘THIS IS OBVIOUSLY AN ERROR’
In a letter to Mr R, FNB’s head of customer collections, Lynne Loizakos, wrote: “Please accept our sincere apologies for the fact that judgment was taken against you after we had negotiated and finalised a payment arrangement with you. This is ... obviously an error. We confirm we have instructed our attorneys to rescind the judgment at our cost.”
But in response to questions from Personal Finance, Wendy Zulu, head of legal and compliance at FNB Home Loans, said the bank was entitled to proceed with litigation. Judgment against Mr R “was unfortunate [and] due to his delay in submitting the essential documentation to finalise the new payment arrangement. We were not aware of the physical condition of Mr R, which prevented him from submitting documents,” Zulu wrote.
DEFINITION
Before a credit provider can proceed with legal action against you, it must send you a section 129 notice to notify you that you are in default and to inform you of your right to refer the credit agreement to a debt counsellor, an alternate dispute resolution agent, the Credit Ombud or a consumer court in an attempt to resolve any dispute or agree to a plan to settle your debt.