IN THE NATIONAL CONSUMER TRIBUNAL
HELD IN CENTURION

Case number: NCT/139298/2019/141(1)(b)

In the matter between:

DAVID MUNYAI				 					APPLICANT

And

ABSA BANK LIMITED								RESPONDENT

Coram

Dr L. Best:		Presiding Tribunal Member
Adv F. Manamela:	Tribunal Member
Mr A. Potwana:	Tribunal Member

Date of Hearing: 2 June 2021, conducted via Teams electronic meeting platform.
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JUDGMENT AND REASONS
_________________________________________________________________________

THE PARTIES
1.	The Applicant in this matter is Mr David Munyai, a major male (“Mr Munyai” or “the Applicant”). At the hearing, the Applicant represented himself.
2.	The Respondent is ABSA Bank Limited (“ABSA” or “the Respondent”). The Respondent is a registered credit provider. At the hearing, the Respondent was represented by Adv. Robert Scholtz, with Ms Alex Wright as the instructing attorney from Lowndes Dlamini Attorneys, the Respondent’s appointed attorneys of record.

APPLICATION TYPE 
3.	 This is an application made in terms of section 141(1)(b) of the National Credit Act 34 of 2005 (“the NCA”).

4.	Section 141(1)(b) of the NCA states the following – 
“If the National Credit Regulator issues a notice of non-referral in response to a complaint, other than a complaint concerning section 61 or an offence in terms of this Act, the complainant concerned may refer the matter directly to –
(a)	…
(b)	the Tribunal, with the leave of the Tribunal.”

JURISDICTION
5.	Section 27(a)(i) of the NCA states that:
“The Tribunal or a member of the Tribunal acting alone in accordance with this Act or the Consumer Protection Act, 2008 may 
(a)	adjudicate in relation to any - 
(i)	application that may be made to it in terms of this Act, and make any order provided for in the Act in respect of such an application;”
6.	Accordingly, the Tribunal has jurisdiction to hear this application. 

BACKGROUND
7.	The Applicant was granted credit by ABSA to purchase a BMW i Series in 2017. At the time of the credit application, he had already been granted credit in 2012 by the ABSA bank for the purchase of a MAZDA, (both referred to as “the vehicles”).  Although he made instalment payments for some months, he was unable to afford to continue the monthly instalments on loan for the BMW. He alleges that ABSA should not have granted him the loan based on his monthly income and expenditure. Therefore, he submits that the loan was granted recklessly, in contravention of the NCA. 
8.	Mr Munyai lodged a complaint with the National Credit Regulator (“the NCR”) in April 2019 alleging reckless granting of credit by the Respondent. He received a Notice of Non-referral from the NCR dated 16 July 2019. The NCR Notice indicated that as per the Notice of Termination signed by the Applicant and dated September 2018, the Applicant terminated the credit agreement in terms of section 127 of the NCA by surrendering the BMW to the Respondent. The BMW was consequently sold on 30 January 2019. The stated reason then for non-referral was that the complaint submitted by Mr Munyai does not allege any facts which, if true, would constitute grounds for a remedy under the NCA. 

9.	The National Consumer Tribunal (“the Tribunal”) granted the Applicant leave to refer the matter directly to the Tribunal, in its judgment dated 21 September 2020.
APPLICANT’S SUBMISSIONS
10.	At the hearing the Applicant made the following submissions-

10.1.	At the time that he applied for a loan to purchase the BMW, he was in arrears with repayments on the MAZDA that the Respondent had financed in 2012. Monthly repayments on the MAZDA were R4600.00, including insurance; 

10.2.	That his net monthly salary was R17 900.00;

10.3.	That in addition to his monthly salary, he did also receive overtime payments during the month, but that these amounts were inconsistent as it was not certain if he would work overtime regularly every month;

10.4.	That the proposed repayment for the loan to purchase the BMW was R9600.00 plus insurance of R1000.00 per month;

10.5.	That the combined loan repayments would only leave him with R2900.00 for other expenditure every month. This demonstrates that the Respondent clearly did not properly consider his monthly expenditure or his credit obligations when doing calculations to determine his ability to afford the loan for the purchase of the BMW; 

10.6.	That he had a loan from TwoLoan, an informal money lender, and that he had to pay R9600.00 per month in repayments on this loan, but that he did not disclose this to the Respondent during the credit application to purchase the BMW; 

10.7.	Even excluding this undisclosed repayment, he would not have sufficient finances remaining each month to meet monthly expenses, and hence the Respondent granted credit recklessly by giving him the loan to purchase the BMW; 

10.8.	That he did not surrender the BMW voluntarily but rather had to sign a form when the car was taken from him when he was driving it in Gauteng;

10.9.	That he was in arrears with repayments on BMW at the time that it was taken from him, but he was told that he would be able to buy it back at an auction. Despite making enquires, he was not able to establish when the auction would be held; 

10.10.	The BMW was sold by the Respondent for a cheaper price which did not cover the arrears costs owing to the Respondent. As a result, he now owes the Respondent a balance in the region of R400 000; and 

10.11.	That his request is that his debt owing to the Respondent is cleared, as the credit was granted recklessly. 
RESPONDENT’S SUBMISSIONS
11.	The Respondent made the following submissions:

11.1	The Respondent’s understanding is that the Applicant is alleging that the Respondent’s affordability assessment method was flawed, as in the Applicant’s view it produced an outcome that Mr Munyai could afford the second instalment sale agreement pertaining to the BMW, when in his own version of the calculations, he could not; 
11.2	The Respondent used its standard evaluative mechanisms and procedures to assess the Applicant’s credit application and arrived at a fair and objective assessment of the Applicant’s ability to afford the credit. The assessment was based on information disclosed by the Applicant as well as information at the disposal of the Respondent, namely bank statements showing salary payments, including overtime salary payments, over a three-month period; 
11.3	On the credit application form, Mr Munyai recorded his gross monthly income as R27,000.00 and a net income of R24,000.00. As part of its assessment, the Respondent perused Mr Munyai’s bank statements which revealed an average monthly salary in the amount of R26,270.67, which exceeded Mr Munyai’s declared net income of R24,000.00;

11.4	On the application, Mr Munyai declared that his total monthly living expenses were R2,535.00. In determining affordability, the Respondent applied the minimum expenses norms table as per Regulation 23A of the NCA. Accordingly, the calculation of living expenses amounted to R3,019.00. The Respondent’s system affordability calculation used the higher amount between the declared living expenses of R2,535.00 and the calculated minimum living expenses of R3,019.00 in accordance with the NCA;

11.5	On the application, Mr Munyai declared his total monthly debt expenses as R6,258.00. The Respondent checked Mr Munyai’s credit bureau records which showed debt instalments of R3,739.00 per month. The Respondent’s assessment system’s affordability calculation used the higher amount, namely the Applicant’s declared total debt of R6,258.00, rather than the credit bureau debt instalments of R3,739.00.

11.6	Mr Munyai informed the Respondent’s credit risk department that he was settling his previous vehicle asset finance pertaining to the MAZDA. Despite this express undertaking, Mr Munyai failed to settle his vehicle asset finance pertaining to the MAZDA. However, the repayments pertaining to the MAZDA were included in the affordability assessment calculations, and Mr Munyai’s declaration of income and expenses still yielded a sufficient positive result to grant the credit requested pertaining to the BMW;

11.7	Applying the above amounts using the Respondent’s standard assessment model, the affordability calculation that was performed by the Respondent after taking the proposed monthly repayment instalment for the BMW into account, recorded remaining disposable income at the time of applying for the BMW credit as an amount of R8,926.00;
11.8		Accordingly, the Respondent submits that it took reasonable steps to assess Mr Munyai’s financial means, prospects and obligations before the instalment agreement was concluded with him and as such complied with a credit provider’s obligations under the NCA;
11.9		It is pertinent that Mr Munyai only started to default under the credit agreement some 7 months after conclusion thereof. The Respondent avers that if the Applicant’s allegations of unaffordability of credit were true, he would have immediately defaulted under the agreement after the conclusion thereof. 
11.10	The Respondent avers that there was nothing to indicate that Mr Munyai did not generally understand or appreciate the risks, costs and obligations under the agreement, when these were discussed with him during the application process; and
11.11	The Respondent is of the view that it complied with the application provisions of the NCA when granting credit to the Applicant for the purchase of the BMW. On these grounds, the Respondent asked the Tribunal to dismiss the Applicant’s case.

THE LAW
12.	  Reckless Credit: Section 80 of the NCA states:
“(1)	A credit agreement is reckless if, at the time that the agreement 	was made…-
   	(a)   	the credit provider failed to conduct an assessment as 		required by section 81 (2), irrespective of what the 			outcome of such an assessment might have concluded at 		the time; or
  	 (b)   	the credit provider, having conducted an assessment as 		required by section 81 (2), entered into the credit 			agreement with the consumer despite the fact that the 		preponderance of information available to the credit 			provider indicated that-
(i)   	the consumer did not generally understand or 			appreciate the consumer's risks, costs or obligations under the proposed credit agreement; or
    		(ii)  	entering into that credit agreement would make 				the consumer over-indebted.
(2)	When a determination is to be made whether a credit agreement is reckless or not, the person making that determination must apply the criteria set out in subsection (1) as they existed at the time the agreement was made, and without regard for the ability of the consumer to-
  	 (a)   	meet the obligations under that credit agreement; or
  	(b)	understand or appreciate the risks, costs and obligations under the proposed credit agreement, at the time the determination is being made.”

13.	 Prevention of Reckless Credit Section 81 of the NCA states:
…. “(2) A credit provider must not enter into a credit agreement without first taking reasonable steps to assess – 
(a)	the proposed consumer’s – 
(i)	general understanding and appreciation of the risks and costs of the proposed credit, and of the rights and obligations of a consumer under a credit agreement; 
(ii)	debt re-payment history as a consumer under credit agreements; 
(iii)	existing financial means, prospects, and obligations….

(4)	For all purposes of this Act, it is a complete defence to an allegation that a credit agreement is reckless if-
	(a) 	the credit provider establishes that the consumer failed 		to fully and truthfully answer any requests for information 		made by the credit provider as part of the assessment 		required by this section; and
   	(b)   	a court or the Tribunal determines that the consumer's 		failure to do so materially affected the ability of the credit 		provider to make a proper assessment.”
14.	Assessment mechanism and procedures Section 82 of the NCA states: 

“(1) A credit provider may determine for itself the evaluative mechanisms or models and procedure to be used in meeting its assessment obligations under section 81, provided that any such mechanism, model or procedure results in a fair and objective assessment and must not be inconsistent with the affordability assessment regulations made by the Minister.”
ANALYSIS
15.	The Respondent is a registered credit provider and is one of the larger banks in the country with a substantial client base. It has established vast systems to support and maintain its operations. One such system is for processing credit applications and the generation of instalment agreements. This operating system is the standard evaluative mechanism and procedure that was used to assess the Applicant’s credit application. 

16.	As part of this process, the Respondent took steps to determine the Applicant’s existing financial means by using information supplied by Mr Munyai on the credit application form regarding his salary. The Respondent further confirmed his net earnings through salary deposit records of his bank account held with the Respondent. 

17.	The Respondent confirmed the Applicant’s debt repayment history and credit payment obligations with credit bureaus. 

18.	When there was a difference between amounts provided by the Applicant, and the Respondent’s own calculations or the information provided by the credit bureau, the Respondent in each case erred on the side of caution and used the higher of the amounts, specifically regarding dept payment obligations and monthly expenses. 

19.	It is clear that the Respondent used its standard credit application system and undertook an assessment of the Applicant’s financial circumstances as required by section 81(2).

20.	Based on the information provided by the Applicant and supplemented by the Respondent from its own and credit bureau records, the outcome of the assessment demonstrated that the Applicant had sufficient financial means to be granted a loan to purchase the BMW vehicle. The figures used in the assessment were as they existed at the time the credit agreement was entered into. 

21.	Section 81(4) provides that it is a complete defence to an allegation that a credit agreement is reckless where there has not been full and truthful provision of information by a consumer as part of the required affordability assessment process. 

22.	By his own admission, the Applicant did not disclose a significant monthly debt repayment of R9600.00. Had the Applicant shared this information with the Respondent, it would have had to have been considered in the Respondent’s assessment of affordability of the credit application. This non-disclosure had a material effect on the affordability assessment outcome, to the extent that the Respondent would surely have reached a different conclusion regarding the Applicant’s ability to afford the credit, had the Applicant disclosed the R9600.00 debt repayment obligation.

23.	There is no evidence to suggest that the Applicant did not have an understanding and appreciation of the risks and costs of the proposed credit, and of his rights and obligations under the credit agreement. Indeed, it was not the first credit agreement that the Applicant was entering into with the Respondent. 

CONCLUSION 

24.	Having considered the parties’ submissions and the evidence before the Tribunal, the Tribunal finds that the Respondent complied with the NCA requirements of a credit provider, when arriving at the decision to grant credit to the Applicant to purchase the BMW. 

25.	Accordingly, the credit agreement entered into between the Applicant and the Respondent was not reckless. 

ORDER
14.	Accordingly, the Tribunal makes the following order –
14.1.	The Applicant’s application is dismissed; and
14.2.	There is no order as to costs.

THUS DONE IN CENTURION ON THIS 6th DAY OF JUNE 2021.

[signed]
Dr L. Best
Presiding Tribunal Member

Adv F. Manamela (Tribunal Member) and Mr A. Potwana (Tribunal Member) concurring.