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Nedbank accused of reckless lending

Education specialist approaches Ombud on behalf of financially ignorant employee.

A retired education specialist has approached the Ombud for Banking Services on behalf of a financially ignorant employee, effectively alleging that Nedbank has engaged in reckless lending practices by not adequately explaining the implications of the credit granted.

Myrlene Pieterse from Port Elizabeth, a Nedbank client herself, has approached the Ombud after her complaints to the bank’s service department were not resolved to her satisfaction.

The background

Pieterse became involved in the matter after realising that the employee – who cares for her 94-year old mother – was experiencing financial stress.

Upon closer inspection, it emerged that her employee had received a personal loan of R30 182 from Nedbank, (roughly 5.5 times her average monthly salary), at an interest rate of 35.4% per year and had to repay a total of R66 501.60 over a four-year period. She also received a Nedbank and American Express credit card from the bank. The personal loan was granted in April 2016 before the introduction of interest rate caps.

“On enquiring I discovered that she had hardly any money after all her deductions for the month had been made by Nedbank immediately after the salary is deposited. That was when I asked her to show me bank statements… This past weekend [April 2017] she actually phoned me in tears and requested some of her savings she keeps with me because she was starving,” Pieterse initially wrote to Nedbank’s client service department.

Pieterse says she repeatedly asked her employee whether the financial implications of the credit had been discussed with her, and she indicated that it wasn’t. Nedbank disputes this. With regard to the credit cards, her employee said she was told that she could use them if she needed to pay for something but didn’t have money available.

“When I asked as to who pays that back [the credit card installments], she was not aware that she has to do it – at interest!”

Pieterse is of the view that the transactions were conducted for financial gain and that no guidance or care for her employee was shown. She is also concerned about what she believes are lending practices that misled vulnerable individuals, which result in poor individuals spiraling into debt.

“This is blatant robbery from somebody who has nothing.”

In an e-mailed response to Pieterse’s query, an official from Nedbank’s complaints department referred her to the affordability assessment it conducted at the time, which showed that the employee had surplus funds available after her debt repayments, living expenses and loan installment were deducted (see below).

Affordability Assessment

Total income (3-month average)

R5 461.33

Less debt repayments

R1 509.00

Less living expenses

R2 074.00

Less Nedbank loan instalment

R1 385.45

Surplus

R492.88

“Taking the above facts in to account it is evident that the client had a surplus amount after all expenses were taken care of, as such we believe that the loan was not granted recklessly as alleged.”

Pieterse disagrees. To be left with only R492.88 to live off per month is not acceptable, she argues.

Nedbank also points to a Multichoice account for R319 previously listed on the employee’s credit bureau record, that it says she failed to disclose when she applied for the loan. The bank then refers Pieterse to the National Credit Act (NCA), which indemnifies credit providers from liability for reckless lending in cases where consumers did not truthfully disclose information.

But Pieterse says this account was closed when money got too tight, suggesting that her employee would not have seen the need to disclose it.

According to the NCA, a credit agreement would be considered “reckless lending” if the credit provider failed to do an affordability assessment, if it became clear that the client did not understand the risks of the credit, or if the debt pushed the client into a situation where she became over-indebted.

The aim of the NCA is to “promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers”.

With regard to the credit cards, Nedbank said the employee’s ability to afford the first credit card was verified and confirmed, but it admitted that she should not have been granted a second card.

“We have looked at [the employee’s] second credit card application and, considering her income, her monthly expenses and listed debt at the bureaux, she should not have been granted the credit card.”

“To immediately resolve the matter, we will write off the second card and treat it as a paid-up account.”

Nedbank’s response

In response to specific questions posed by Moneyweb, Nedbank said there were binding legal reasons that obliged it to refrain from disclosing sensitive client information.

“We therefore cannot respond on an individual client level. We can though confirm that we have been in discussions with the client and her employer and as far as our records tell us, we were under the impression that this matter had already been settled.”

Nedbank said its staff were trained to provide advice and guidance to clients and to ensure that the clients understood the implications and obligations of the credit product.

“If there are instances where there is a deviation from our standard procedures, we will address this with the client and reassess the client’s products, to ensure that the client has the correct and appropriate product offering.”

It said it was fully committed to promoting a fair and transparent credit market and would only lend money or give access to credit, to people who can afford to meet these obligations, based on a diligent credit assessment.

Pieterse is awaiting feedback from the adjudicator at the Ombud for Banking Services, Johan Brouwer, and has requested that the loan transaction be cancelled.

Moneyweb has also approached the Ombud for comment.

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Looking at the recent court case involving the University of Stellenbosch regarding salary emolument orders it is clear that credit providers have still not caught on to the requirement of making sure that people without the necessary financial skills should be handled totally from a different angle. That affordability assessment is a joke – and speaking from my background as a retired banker the people in charge of training staff to handle these types of clients should be FIRED !. In my days we had a thing called Borrower education where fine detail of expenses were analized and borrowers were taught how to properly budget. It is not rocket science to see that this borrower was a financial disaster looking for a place to be born and it found it in the arms of NEDBANK

Nedbank certainly have a history here! I have a family member who is not wise in the matters of finance. He gets motor finance from Nedbank and the credit vetting was done purely on a payslip(one only) gross earnings of R9k per month, his liabilities were R80k owing to Stannic HP, R15k overdraft, R20k loan to Standard Bank and R50k due on his credit card at the time of granting the facility of R128k!! All banks need to be audited by a competent body as to the extent of malpractice that exists and is practiced by the banks and their staff – too much rides on performance bonuses et al!!another example of “THE NEED FOR GREED”

Vetting is not done on payslips alone. Clients need to fill in forms for their expenses(on which they usually lie if they have bad dept)…

I have some questions. The table shows living expenses of R2074 and a surplus of R492. Pieterse claims that R492 is not enough to live on, but then what is the R2074 for? Why does this person need a Multichoice account if she has financial troubles? I would close my Multichoice account immediately if I had financial problems, that is the least important expense.

FFS…how can Nedbank give someone who has less than R500 spare per month an American Express card!!!!

I have been a Nedbank client since 1979 and I receive many calls to try and induce me to take out an American Express card, the most useless card in SA. I too, question the judgment of issuing an American Express card to someone who has less than R500 a month to spare.

NEDBANK as corrupt and evil as KPMG?

The furniture stores do a similar thing. They sell stuff to people who can’t afford it, after 3 months they repo and then hand them over to debt collectors. They then are hounded for years with their R100 repayment not even covering costs, because the store sold the book to a bank.
Evil practice.
when I was still farming my bank on a weekly basis wanted me to extend my credit lines. I always told them what I had was fine, why do I need more? I was a good customer they said.

I get calls offering me credit facilities from banks I have never banked at. I ask the lady if she knows my record. They soon ring off but I could accept and get into trouble.

How about reckless borrowing for a change? People are quick to lie about their real expenses and existing commitments when they need money and then shout foul because “the bad big bank is taking my money”. Some people could be naive about money but this tops it all – to expect you can pay when you need money and not have to repay anyone anything?

“Taking the above facts in to account it is evident that the client had a surplus amount after all expenses were taken care of, as such we believe that the loan was not granted recklessly as alleged.”

Whichever official (from Nedbank) responded with those words is an utter clown. How in heck does s/he expect someone to survive on R492 for a full month?? Would that very official even survive a WEEK on that amount? Nedbank ought to deal with that official’s reckless statement. And to think this is one of the people we entrust with our finances gives me incubi.

The figures show that the person claimed living expense of R2074. The R492 was the SURPLUS according to the borrower, nobody claimed that one had to live on that amount. I suspect that some of the expenses were either not put on the application or were higher than claimed.

Surplus, you say?

Now, let’s take a look at the possible expenses that the R2074 could POSSIBLY accommodate: groceries, airtime, daily kids’ allowance for lunch, monthly stokvel contributions, public transport and clothing. Having listed just those FEW NECESSARY expenses, please tell me how a bank (with personnel that have an understanding of a budget…..so I assumed) could possibly think that R2074 could cover ALL those expenses and magically retain a “surplus”, on a salary of R5 500 (round up).

Methinks, the assessment was done incompetently with the subsequent unfair granting of debt to a person who CLEARLY couldn’t afford to take on a loan.

Agreed. The truth is also that the borrower provided the living expenses to the bank. So anyone asking how someone can live of that amount needs to remember that it wasn’t the bank that provided the number.

That the client provided the bank with the expenses is irrelevant. The bank’s assessment should have detected that the client is a huge credit risk (having regard to the reasonably low salary the client takes home) and, therefore, shouldn’t have been granted such as huge loan amount.

It’s called credit application fraud when not disclosing all your deductions…

A bank is not your friend, never was, never will be, even though they spend billions trying to convince you otherwise. Beware the wolf in sheeps clothing. On the other hand many (the majority?) of consumers will have no compunction to lie and cheat to get what they want. Many people are not responsible and lurch from one crisis to another throughout their lives using other (gullible) people as their stepping stones. These comments are made from personal experience in business over the past 50 years. I lost my first fortune being idealistic in thinking that I could help people by sorting out their mess and show them how to become financially responsible. Approximately 99 out of 100 failed to keep their end of the arrangement leaving me worse off for trying to help them. However, all of them had believable well worn stories as to why they were going through tough times. No good deed goes unpunished so they say. My advice? Leave charity to the charities and count your fingers when you leave your bank!

Reckless lending is very real within banking in SA. I have met someone who had 3 personal loans + overdraft and credit card from the same banking institution???? how can they do that?

bank employees have targets to meet every month, simple as that!!! you should see how many loans & credit cards bank staff have!!! most indebted people I have ever met!!!

“Nedbank also points to a Multichoice account for R319 previously listed on the employee’s credit bureau record, that it says she failed to disclose when she applied for the loan.”
If Nedbank had checked the credit bureau BEFORE granting the loan, this fact would have been revealed.

Given the balance of resources and skills/sophistication, Nedbank deserves to loose the entire debt over this.

Reckless and rapacious loan-sharking such as this article describes are what gives “the system” (capitalism) a bad name and drives people into populist parties.

PS: Customer-centred Capitec recently overtook Nedbank. Perhaps its directors need to do a bit of soul-searching.

A bank is a business like any other, that what’s reported has been practiced over the ages, more importantly, as alluded to by some of the comments is that we need to inform ourselves about every condition / detail. Example the cost of the so-called credit insurance and / or life cover in case “you get retrenched or die from the shock of what you still owe the bank.”

Do we have our priorities wrong e.g. Multi-choice, mobile phone etc, cars
An interesting amazing picture: go have a look at Alex on the left side of the Gautrain there’s a concentration of terrible shacks made out of rusted corrugated material, however, every one stands out because it has a new brand DSTV dish.

Does Myrlene Pieterse really believe that NB has not done its home-work or that its legal council has not reviewed it practices. It would have been better for Myrlene Pieterse to assist her employee from her own funds.

OH Pleeze. Give us a break. Everybody is a victim these days. As soon as they have problems they look for somebody to blame. SA disease. Everybody ” did not know” or “was not explained” or ” did not understand” although they signed a 50 page form. No more accountability or common sense. Everything must be for free.Why is this news on MW??? What did this person think she/he was getting from a bank- a gift??

Let me ask this: would YOU lend a R5 500 salaried person R30 000 from your personal savings?

Before you answer that q, please take a moment to think about the term ‘credit risk’.

Interesting question. Personally I wouldn’t. If I were a bank that borrows money as my business model and the borrower passes all the required compliance tests, then yes, I would.

Your statement should have read: “If I were a bank that DOESN’T HAVE MORALS AND DUE CARE FOR ITS CLIENTS……”

One of the pieces of legislation which governs banks is the National Credit Act (NCA). If one were to filter the NCA and get its fundamental principle, one would realise that reckless lending and credit risk are the core principles of that piece of legislation. The situation in the articles lends itself to a breach of the NCA. Period!

I also refer you to principle of the King Code (Corporate Citizenship). If you measure Nedbank’s actions against that principle, it is clear that Nedbank infracted ITS RESPONSIBILITY to act morally and just towards the borrower.

This push by banks to increase the creation of debt is almost criminal. The case illustrated shows how ridiculous the screening process is. To advance this sum in relation to the negligible “surplus” reflected in the bank’s credit analysis, is totally absurd. What cushion does R400 odd rand provide for any emergency at all?

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