Evidence of repossessed homes sold for a pittance can be used in R60bn class action suit – court

Credit regulator wanted damning evidence against banks to be withheld.
Some homes were sold for as little as R1 000, and wanting to protect the banks has led to an accusation that the NCR is a captured institution. Image: AdobeStock

An attempt by the National Credit Regulator (NCR) to suppress disclosure of a key piece of evidence showing how banks were repossessing homes and then selling them at auction – sometimes for less than 10% of their market value – was defeated in court this week.

Read: Evidence that banks sell repossessed houses for cents in the rand

“This is a major victory in our class action suit against the banks,” says King Sibiya, president of the Lungelo Lethu Human Rights Foundation.

The foundation has brought a R60 billion class action suit against the banks for selling repossessed properties at below market value, thereby depriving South Africans of equity built up in their homes.

“We are bringing this class action suit because the NCR, which is supposedly there to protect the consumer, failed to do so,” says Sibiya.

“South Africans have suffered abuse at the hands of the banks for long enough. It is time they were held to account.”

The NCR had applied to the Gauteng High Court to interdict Advocate Douglas Shaw, statistician Garth Zietsman and some 200 others involved in the class action suit from disclosing confidential information obtained while Shaw and Zietsman were doing work for the NCR.

Read:

Moneyweb previously approached the NCR for comment on the reasons for seeking an interdict against Shaw and Zietsman.

‘Unlawful’ says regulator

It replied: “It is unethical and unlawful for Adv Shaw and Mr Zietsman to use the information they obtained from the NCR for their own litigation. This information is protected from unlawful disclosure by the National Credit Act (sections 68(1) and 156(1)) and the Protection of Personal Information Act.”

The Gauteng High Court disagreed with the NCR’s argument.

In an affidavit before the court, Zietsman highlighted some shocking cases of property repossessions.

In one case, a R1.3 million property was sold for R1 000.

In this case, the lending bank was FNB. Standard Bank and Nedbank also had several properties selling at auction for R1 000 when the market value was R200 000 to R440 000. There is no comparable data available for Absa.

Read:

“The documents [obtained from the NCR] are from the banks’ own records and show thousands of instances where banks have sold properties for far less than what they were worth, with hundreds below 10% of what they were worth,” says Shaw.

“This is outrageous. These documents were brought to our attention by a whistleblower, Garth Zietsman, who analysed the document several years ago for the NCR and was shocked by the contents, as any right thinking person would be.”

‘Captured institution’

In his affidavit before the court, Zietsman accuses the NCR of being a captured institution.

“The mandate of the NCR is to protect consumers against behaviour of credit providers that is unlawful and/or unconstitutional. In this application it acts as a defender of the banks against the consumer and has therefore failed in its mandate and it is submitted that it is a captured institution and that this should be investigated by a high level commission for regulatory capture.”

The NCR rejected these accusations, saying they are inflammatory and unjustified.

It went on to argue that it had not been asleep on the issue of home repossessions, and had made oral and written submissions to the Rules Board for courts of law, resulting in a change to Rule 46, which now offers more protection to consumers during sales in execution of their residential immovable properties. The changes to Rule 46 include the court setting a reserve price for sales in execution (sheriffs’ auctions).

Consumer protection?

Advocate Shaw argued that the NCR could not claim to be protecting consumers by seeking to interdict the use of supposedly confidential information of incriminating behaviour by the banks.

“The people the NCR are claiming to protect will in any event benefit from a payout in the event of a successful class action suit.

“I had removed the names of the individuals involved, so there is no issue with confidentiality.

“This point was accepted by the judge, so the NCR started arguing that the confidentiality of the banks needed protection, which is somewhat incredible,” says Shaw.

“This removes a major barrier to getting a date for the certification for our class action, which has been delayed for almost a year by this NCR application.”

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Shocking. Isn’t the NCR supposed to be there to protect the people, or am I missing something?

In many countries a mortgage only gives the bank a claim against the property, not like here where the bank can also go after the client’s other assets.

If our banks’ recourse was limited to the property they won’t sell them for R1,000…

It is in the national interest for citizens to own property. Property ownership is the most powerful tool to bring about social stability and economic growth. One should expect that a political party that rules over a highly unstable and violent society with high unemployment, will implement tax benefits to stimulate popery ownership.

I stand to be corrected, but I believe that interest on home loans is tax deductible in the USA. If that were the case in South Africa, it would stimulate the property market, improve tax generation for municipalities, empower citizens to build capital, and bring social stability.

The shortsighted socialist ANC doesn’t want to incentivize the ownership of property. They would rather spend that money on an incompetent, lazy, and inefficient police force that fails to suppress social unrest. The ANC does the opposite – They tax the transaction, they tax the interest on the home loan, they tax the capital value of the property, they tax the capital appreciation of the property, and then they tax that property in the estate of the owner. This is how they plunder property to finance consumption. This policy is highly unstable because at some stage the property will be worthless, but the demands on consumption will be stronger than ever.

The failure to support and incentivize property ownership will inevitably lead to rampant unemployment and cause a violent uprising against that government.

Yes, the interest on your home loan is a write off in the USA.

We were already at the mercy of banks, now we are a the mercy of the NCR which is meant to protect us? Heads must roll

not perfect, but an automatic comparison of sale values to municipal valuation roll might catch these scams as well as other ways people can use to execute a corrupt transaction. If you are government official a potentially simple way to execute the bribe is I sell you a R10m property for R100k. No cash involved and I bank a capital gains loss on my bribe 🙁 Taxpayers get screwed twice.

I’d imagine all valuation rolls are digital and contain erf number and valuation. How hard can it be to flag sales at less than say ⅔ of municipal valuation for somebody to have a look at?

End of comments.

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