Claims of discrimination against black FNB customers heads to court

More than 4 000 bank customers claim they were charged 30% more than whites on mortgage loans.
FNB will have to prove that it did not discriminate between its ‘low-cost’ and ‘high-cost’ housing mortgage loan clients. Picture: Moneyweb

Cape Town-based usury expert Emerald van Zyl has waged a nearly 10-year fight against banking abuse. This time he is asking the Cape Equality Court to rule that FNB’s FirstRand Finance Company discriminated against more than 4 000 black customers by charging them 30-40% more than white customers on their mortgage loans. The total claim is likely to exceed R3 billion.

The claim relates to mortgage clients of the former Saambou Bank, later taken over by FNB. Though this case involves FNB clients, Van Zyl says he has substantial evidence of discrimination by other banks.

Source: Munro Consulting Actuaries

Van Zyl’s case was dismissed with costs six years ago in the Pretoria High Court, which found no evidence of racism by the bank, but Van Zyl says the judgment is flawed in several respects. For one thing, racism was not part of his pleadings in that case. He was looking for financial relief for seven FNB customers, who happened to be black, on the grounds that the bank exceeded the allowable interest rate in terms of the Usury Act. The judge ruled otherwise, declaring the interest rates charged “reasonable”.

This time Van Zyl wants the Equality Court, where the burden will be on FNB to prove that it did not discriminate, to hear the case.

In 2005 he appeared on Carte Blanche accusing the bank of overcharging interest on thousands of mortgage loans – and he was proven right. FNB subsequently admitted the overcharge and refunded customers R154 million. In that case, the bank had charged double interest in the first month of the loan, which causes the bond to be in arrears from day one.

The charging of so-called ‘interest in advance’ is illegal in terms of the Usury Act and can result in jail time for offenders. As far back as 1990, the South African Reserve Bank (Sarb) warned banks to stop the practice, but Van Zyl claims Saambou carried on regardless. In 2002 there was a run on Saambou and the Sarb scrambled to rescue the bank before things got further out of hand. It was at this point that FNB acquired R8 billion worth of Saambou mortgages, of which R2.6 billion was for low-cost housing.

In about 2010, Van Zyl was handed a leaked Saambou customer database by a former bank employee. It showed roughly 80 000 customer accounts of which 23 000 were low-cost housing clients. Further investigation by retired university professor of sociology Cornie Groenewald estimated that 99% of these low-cost housing units were black-owned. Van Zyl reconstructed the accounts of these customers and found they were being charged as much as 30% or more than ‘high-cost housing’ customers.

FNB has refuted the charges of discrimination, in part because there is no reference to the race of customers in the Saambou database acquired by Van Zyl. But Groenewald’s research suggests otherwise. The ‘low-cost housing’ units referred to in the database qualify for government subsidies, for which the recipient must be black and earn below certain income thresholds.

Code words

Van Zyl says any reference to ‘low-cost’ and ‘high-cost’ housing in Saambou’s internal documents is effectively code for black and white customers. The discrimination is claimed to have started in 1998, four years before Saambou collapsed and was bought by FNB.

Van Zyl lodged a complaint with the SA Human Rights Commission over one FNB customer, Simon Michaels of Mitchells Plain in the Cape, who took out a 20-year mortgage loan for R64 000 in 1996. After 21 years, his outstanding balance was R77 000. This was the result of discrimination, says Van Zyl’s complaint.

In his affidavit before the Equality Court, Van Zyl presents evidence that “high-cost housing” (white) customers would benefit from a drop in interest rates, but not “low-cost” (black) customers with a mortgage loan less than R220 000. The interest rates charged to several black customers cited in his affidavit were kept at the old, higher rate even though the prime lending rate had dropped for all other customers.

An expert report by Munro Consulting Actuaries analysed 75 000 loan agreements, 58% owned by whites, 1% by Indians, 10% coloureds and 31% blacks. It found that white clients with large loans (above R150 000) pay on average 1.1% below prime, while black and coloured clients pay 0.45% below prime. But on small loans (less than R100 000), white clients were paying 0.75% above prime and black and coloured clients 2% above prime.

Source: Munro Consulting Actuaries

“Black and coloured clients within the same loan size groupings pay higher interest than white clients,” says the Munro report. The actuaries also looked at different product categories and found the same pattern: black and coloured clients were paying higher interest rates than whites for the same product.

Breaking it down further to suburbs, the report shows the southern suburbs in Cape Town have the lowest interest charged, followed by Stellenbosch. Kroonstad and Bloemfontein clients are charged the highest interest rates in the sample examined, though the sample size at suburban levels becomes sparse. “We note that these samples are mostly not large enough to give statistically reliable results, but they do confirm that even within the suburbs, race has a noticeable effect on the interest rate gap,” says the Munro report.

In the Pretoria High Court case heard six years ago, Van Zyl says he was unable to rebut the testimony of an FNB witness because he was taken ill during the hearing and had to have emergency surgery. In the Equality Court in August this year, Andrew Strachan of Norton Rose Fulbright, deposing for the bank, argued that it could not have been guilty of discrimination prior to June 2003, when the Promotion of Equality and Prevention of Unfair Discrimination Act came into effect. The Equality Court’s Judge Fortuin advised Van Zyl to amend his pleadings to reflect the fact that the court’s jurisdiction only came into effect in 2003. The case will likely be heard in the Equality Court in the New Year.


Van Zyl says in the Pretoria case that the relief sought was financial recompense for the seven clients, who happened to be black. There was no claim of discrimination. Van Zyl’s affidavit now before the Equality Court claims the bank at various times violated the Usury Act in respect of 4 000 customers by charging higher than the allowable interest rate.

He argues the discriminatory practices go back to 1990 when parliament passed an amendment to the Usury Act to prevent discrimination against low-cost housing customers. The banks lobbied against this on the grounds that low-cost housing was higher risk and therefore required a higher interest rate. As a compromise, banks were allowed to charge a R5 a month ‘admin’ fee, which was subsequently bumped up to R50 a month when the National Credit Act came into force in 2007. “The purpose of this fee was that low-cost housing would be charged the same interest rate as clients of high-cost housing,” says Van Zyl.

Judge AJ Vorster of the Pretoria High Court found that the cessions giving Van Zyl the right to approach the court for interest rate relief were “bad in law and of no force or effect”.

The judge was scornful of Van Zyl’s ongoing media campaign characterising Saambou and its successor as racist. “During cross-examination of the Plaintiff (Van Zyl) it appeared that his conclusion that black people were charged higher interest rates than white people is completely unfounded.”

That hasn’t stopped Van Zyl.

This is thought to be the first time the Equality Court has heard a case alleging discrimination by a bank.



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Clearly he hasn’t heard of risk profiling – when banks lend funds to customers

Agreed. To get a truly equal society, we should all go and farm with 3 chickens and a goat. Then we will all be equally dirt poor and nobody will more happy than anybody else. In fact, everybody will be equally miserable all the time.

what about all the white people(like me) who worked for a bank and paid 4.5% interest when rates were around 18% in SA. that’s why I could afford to live in Rondebosch CT.

@rovertamsneets. The difference in low bank staff rates, and the higher retail rates available to the public, would’ve been taxed on your IRP5 as a “general fringe benefit” code 3801 😉

The reason(s) you could afford to live in Rondebosch (btw love your area, but second to Franschhoek) is that you’ve achieved a certain level executive success in your banking career (by hard work, leadership & responsibility) and/or career helped along by “who you knew” or your parents lived there, or benefiting from inheritance being passed down by past generations 😉

I doubt if the bank teller can afford to live in Rondebosch, even if they benefited from the same %-rate staff discount?

….those lesser bank-staff can however afford it on the other side of the M5, in Athlone/Lansdowne…conveniently tucked far away from Rondebosch…

As compared to what? Other people subsidising your livelihood using race as the criteria?

Doesn’t matter. If all else fails (or for some as an opening salvo) play the race card.
It gets you bargaining power that in SA is hard to beat and in this instance get you a nice, second bite at the cherry. (And puts a burden of proof on the attackee.)

Race card nywe nywe race card nywe nywe. Are you even capable of providing a sound argument?

Clearly you could not comprehend all the info shared in this article.

Why are our comments censored under the guise of ‘moderation’?

It is not censoring, it is discrimination…. Proven.

Yes you are right. Journalists fight tooth and nail when it happens to them when what they have to say is censored, but then never allow others to have freedom of speech if it does not suit them.

Low cost is exactly that, low cost, if there are white people in the low cost products I am willing to bet top dollar that they paid high interest rates as well, its not based on race, its based on risk profile / credit score and all the rest.

100% correct but the headline “low credit means higher interest” is not as sexy as “black people getting wronged by banks because whites get a better rate based on race alone”.

teamed 209 – You are spot on. Ciaran Ryan, the author of this article will nom doubt be the hero at the free lunch table when in fact it is not pointed out in bold type what the real issues are. Smaller mortgages in riskier areas will attract a different rate just like rates on more riskier insurance will be higher than rates where there is less likelihood of a claim happening.This article, and possibly the author are biased.

@PJJ, you’re correct in that white people in low cost products paid higher interest than those in high cost products.
“It found that white clients with large loans (above R150 000) pay on average 1.1% below prime, while black and coloured clients pay 0.45% below prime. But on small loans (less than R100 000), white clients were paying 0.75% above prime and black and coloured clients 2% above prime.”

But even within that group of low cost products, black and coloured people were charged more.

@MkhontokaShaka I think just looking at the size of the loan is not reflective of the risk as it disregards:

(a) the loan-to-value or the portion of the purchase of the house that was funded by a deposit. The small 100k loans might include some loans on say a 500k property, where existing home owners are using equity built up from a previous purchase to fund 400k of the purchase. Given our history it is more likely that homeowners with existing equity in their homes will be white. Or well-to-do parents might stump up a sizeable downpayment.

(b) the location of the property. The risk to the bank for lending against a property in Mitchells Plain is higher than lending against a property in Rondebosch

(c) Credit scores of the individual borrowing. On average black people – even of similar income as their white counterparts have worse credit scores. This is not racist but reflects the pressure of “black tax” – where successful black people need to take care of extended family and also black borrowers do not have the advantage of financial literacy being passed down from parents.

I honestly believe that this is not about racism but it is quite reflective of the structurualk economic imbalances that still exits.

Lol let’s overlook the fact that FNB has essentially admitted guilt already by agreeing to settle some of the cases. But continue arguing how it’s all based on fairness and credit scores.

This seems to be a very clear case of confusing correlation with causation. Differences in rates are derived from the credit risk rating of the borrower. To ascribe this to discrimination is misguided.

The discrimination of different interest rates is nothing compared to the discrimination of different tax rates. The government rewards people who do not use their faculties, and punishes people who apply their mental power. People who work hard and take risks are punished with a higher tax bracket, to fund the social benefits of those of lower ability.

Income tax is a penalty for intelligence and hard work. Punishing people because they apply their mental capabilities, is the worst kind of discrimination. Society got so used to this type of discrimination, we even see it as fair.

Quick back of the matchbox calc of what high income earners pay in tax in SA:

42-45% gets wiped out immediately.
The remaining amount will attract either VAT or CGT/Div tax. Let’s simplify and say that is another 15%. We are therefore at 57% to 60% taxed.
Rates & taxes, fuel levy, electricity payments, water payments, refuse removal, sewage, medical, schooling, security are all either charged separately by gov or procured from private sources due to a lack of reasonable service delivery. I’d say that can easily add up to another 10% to 30% depending on provider.

I therefore think the amount of pure tax (excl medical, schooling etc) is somewhere between 60% and 70% of your salary. In response for making this huge contribution to society, the highest income earners/drivers of the economy are more often than not ostracized by gov.

Moneyweb, instead of giving a spotlight secure airtime on your site, why not do an investigation into what the actual tax rate is for different classes in SA? From my perspective, I would argue you that we are a borderline socialist country that has a ton of theft and incompetent people running the show hence the equality gap.

Surprising that the so called educated do not see the flaw in calculations and are instead flooding your comments with up votes.Firstly the SA tax system is progressive. However the higher tax rates apply to the higher parts of your income. So on a salary of 50k you are in the 40% bracket. However you effective tax rate is only between 25% and 26%. My highest expenses are my home payments and school fees. Both attract no vat. Fuel also attracts no VAT (but there are other taxes of course)

All told at that tax bracket… Taking all taxes into account a person earning 50k pay no more that 45% tax and more likely less than 40%. Certainly no where near 60 to 60%

Wrong. The income tax regime in sa is progressive. Even of you ar t the 45% marginal tax rate, you effective tax rate is still much lower.

Clearly prior comments missed the point. The banks agreed to charge the same rate to all clients regardless of race on condition they be subsidised with the R5 fee from all clients. It appears the FNB did not comply therewith. Risk profiling was thus not a factor.

So the guy who lived in Rondebosch on a 4.5% loan was sponsored by my 18% overdraft????

Yes, but you know you should not have an overdraft…naughty. Stop spending money you don’t have.

Nonsense I’m and ex banker and I run an overdraft, and a bond which allows me to make investment choices when rates are favourable or share prices are reasonable – its all a case of how you cut your cloth

I thinks we are rather sponsoring the Banks execs salaries.

And the payments system which allows us to have an economy.

and my banking charges – free

Not strictly true you still pay o/d interest on current account,cards, loans and bonds – subsidized yes but you are paying CGT somewhere in the mix

…I can happily AFFORD my banking fees 🙂

(And needless to say, I’m with Nedbank Business banking! They’re not shy to charge!)

But at least my wife gets her annual SARS-return done FREE of charge (and no f/b tax for her either) 😉

I see everyone is talking about risk profile, nowhere in the article does it get mentioned but rather the bank adopted a blanket approach when it came to low cost finance. There’s no way everyone financed at that level can have the same risk profile

Your risk profile is based on a number of metrics like are you employed, length of employment, other facilities enjoyed, credit records, bounced cheques, time with present bank and others – this gives a clear indication as to whether you are worth taking a risk on

We have not yet lived down the sins of our fathers in this country.

Way back in 1980, Apartheid firmly in place,my husband and I, both young and white, applied for a modest home loan. He a medical doctor working for the State and I a teacher. Our salaries were so low, the interest rate on offer was 26% and in fact the bank manager laughed us right out of his office. It’s called risk profiling, not racism. Get real.

Wow, that was a high rate! 🙁 I checked some historic charts & the prime lending rate was close to 20% p.a. in the early 80’s. Inflation of the day…

Interestingly, I have possession of an old archived SARS tax booklet (1980): the top marginal tax bracket was 55%. Scary! (But having said that, back then things sort of worked…e.g. no need to pay extra for private healthcare, one can safely catch a train, etc.)

In 1982, the average salary of a teacher was R702pm (and R450pm for an admin clerk/secretary). A loaf of 900g bread was 35c. A new Toyota Corolla 1,6 cost R6,785 in 1982. About 10X the gross monthly salary of a teacher back in the day 🙂

In 1988 the monthly pay (as conscript in the old & bad SADF) was R200pm. Attain the rank of Corporal or 2nd Lieutenant, your pay increased to R450 pm. Saved enough to pay cash for my 1st used car *lol*

The poor poor rand….

Respect for not taking out a car loan.

And a black person with a similar profile would have been charged a higher rate. That makes it discrimination.

Really unneccesary race baiting by an ambulance chasing lawyer. The question one should ask is what on earth would FNB gain by discriminating against black people?

What did apartheid government and white people get by discriminating against black people? More wealth and money

So according to these naïve, ignorant and insecure people everyone should get the same mortgage rate. Is it just me or have South African morphed into some of the most pathetic people on earth.

The social justice movement is on steroids in this country. Apparently everybody must be equal regardless of talent, effort and behavior.

We should not get rates based on race.

It’s an interesting article you have here, Ciaran.
If the argument in the comments is that FNB’s and Saambou’s risk profiling are non-racial and are based purely on credit and risk assessment – then it’s pyrrhic. Essentially, the argument agrees that Black and Coloured people are higher risk because of their financial standing – which is the argument for having BEE. And to quote someone here, I’m willing to bet top dollar that people arguing for this pricing practice, would also be staunch opposition to BEE.

Not quite, the difference is that a person cannot change their skin color, but they can change their finances. So the two are not equivalent.

Black/Coloured people who have their finances in order will get good rates too.

Yes but @MkhontokaShaka’s point it is harder for black/coloured people to “get their finances in order” because of lasting structurual imblances. As I mentioned in an earlier post, white kids have the benefit of possibly some support from parents for putting down a deposit, while successful black youngsters often need to take care of extended family. But maybe most importantly I had the benefit of parents that advised me what to study, sorted out all my university applications and finances, advised me on how to build up a good credit score, warned me of the pitfalls of buying clothes and consumables on credit. Some people refer to this as social capital – really just knowledge passed from one generation to the next. I know there will be loads of chest thumping replies from people telling me how they did it all on their own. I am quite happy to admit that most of my success is due to the upbringing and support I recieved from my parents.

This was brough home to me so clearly when a friend relayed the story of the daughter of her domestic worker. The kid got 4 distinctions and wanted to apply to university, but wading through all of the paperwork required for admission and financing was obviously very daunting for an 18 year old, fortunately my friend could assist her.

Maybe those of us with the benefit of social capital should try and pass it on to those that do not have that benefit, it cost nothing.

@notwarren, Yes, but the bank does not care about social capital or how hard it is to get your finances in order, it cares about your ability to repay the money.

It is also not that difficult to get the knowledge to better yourself. We have plenty of free libraries where you can read self improvement books by the dozens.

@Notwarren my parents highest qualification was standard 2 and myself and my older brother have been supporting them plus my two younger brothers for the past 5 years.

Any success I have had is built on hard work, determination and prioritising resources into the long term. You can try and teach that on a Saturday morning at a big brother programme but the penetration rate is tiny.

As much fan as these little ideas are, the real solution is to invest heavily into high quality public education, healthcare, transport and security. That will bring many more into the formal economy with a knock on impact of reducing population growth rates in the poorest sectors. That is the only solution.

Just a bit of empathy guys. Have made this comment countless times but MW comment section shows zilch of the ability to walk in somebody else’s shoes. Poor (black) people by and large are not poor because they are stupid or lazy just as rich (white) people are not rich solely because of hard work and their own brilliance. Luck and support from family, friends, broader community all plays a role.

@notwarren, Google “IQ by country”. Your mind will be blown and you will get a brand new insight into why the world is the way it is. Enjoy.

And you have empirical evidence of this claim?

I am a strong proponent of broad based empowerment schemes for the poor. I could not care less what race they are.

It is tragic how discrimination against black people immediately get a racism label. When discovery bank/ sasol, however, discriminate against whites, all is OK and well on the western front. We are truly a F-up society.

It’s called fair discrimination. Go look it up in the constitution. And it has valid reasons.

Can we just wait for the judgement please? Media are ambulance chasers!

Its already 4 years after my credit score dropped to 450 after missing payments on my credit cards because I went off to boot camp. I was in the process of settling my outstanding credit card was like a nightmare to me when all (3) of my credit cards reached a maximum limit and the banks keep on calling me like hell and the reminder letters they kept sending to me. My biggest drag on my score as at first week of January 2018 was 400 ,credit inquiries (8),credit card debts of $8000. i read in a newspaper where Cyberhacker55@outlook com was said to be a solution place for credit issues. Without delay i sent a mail asking if i was directed to the appropriate channel after the inquiry message i sent. Yes, He told me to check back after 5 days after which I dropped all necessary info to carry on with the credit fix, which i did and what i saw made me overwhelmed with all 8 debts cleared,770 score, and all credit card debts removed.i f i had been adamant, all this would have been unachieved. That’s the real reason i’m broadcasting a brave and smart work from Cyeber hacker.

End of comments.



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