R699 car scandal: who’s to blame?

The recent crumbling of the R699 per month car deal business has left South African consumers, banks and the Satinsky group all pointing fingers as to who is to blame for clients left unable to afford loan repayments.

Late last month (June 2014), Satinsky Group announced an abrupt end to a partnership agreement with Hong Kong based advertising company, Blue Lakes.

The dissolving of the partnership left many Satinsky clients without the monthly advertising earnings they had become dependent on to finance the cars bought through the scheme, and by many accounts, unable to repay the full monthly premium for the vehicles.

This has led to a number of accusations being laid against Satinsky – and the South African banks it dealt with – in an intensifying blame game as to who should be held accountable for the entire saga.

Consumers are blaming Satinsky for pulling the plug on their advertising revenue, and leaving them in the lurch, while some blame the banks for underwriting the scheme and issuing loans to people who could not repay them.

Satinsky says clients were always contractually responsible for the full payments, and the advertising deal was always a separate contract.

The banks are sitting on the fact that due process was followed while issuing the loans, and based on their checks of the information provided to them, consumers should be able to pay.

With fingers pointing everywhere, an accusations sits against Satinsky that client financial data was manipulated by the group to push loans through – effectively duping both consumers and the banks in the whole matter.

This claim has been vehemently denied by the company’s CEO, Albert Venter, who says miscommunication is the only mistake the group has made.

Due diligence

FirstRand vehicle finance arm, WesBank has issued strong statements about the scheme, claiming its due diligence into Satinsky pegged it as showing the signs of a Ponzi scheme, causing it to avoid the deals altogether.

The financing of the vehicles for Satinsky was underwritten by three South African banks: Standard Bank, Absa and Nedbank.

The banks have distanced themselves from Satinsky’s advertising business operations, insisting that loans were provided through proper channels, after the required checks, and did not take into account the additional contract with Blue Lakes.

Standard Bank said it treated Satinsky as it would any other dealer, while Absa has since terminated its relationship with the group after reviewing the business in 2013, and listening to consumer complaints.

Overlooked the facts

Another echoed opinion is that consumers simply have themselves to blame, with many commentators calling the deals “an obvious scam”.

In its statement, WesBank expressed a similar, if less direct view, saying that many facts about the deals were “overlooked by consumers” who were enticed by the promise of a very low installment.

“Consumers entered into these deals on the misguided belief that they would only ever pay the advertised installment, with the self-justification that it would fit within their available disposable income,” it said.

According to the banking ombudsman of South Africa, it cannot comment on any of the issues raised as it is yet to receive any complaints against SA banks regarding the R699 car deals.

While this by no account means there is no dispute – it does mean that there can be no indication of maladministration on the banks’ side until such a dispute reaches the ombudsman’s offices, is investigated, and ruled on.

However, in light of WesBank’s statement, and the move from Absa to re-evaluate its relationship with the group, the ombudsman said that it should raise flags for any banking group involved with this kind of business.

Dead ends

Further, queries put through to several banking bodies about the SA banks’ possible accountability on the matter were met with dead ends – predominantly due to doubts over jurisdiction.

The Banking Association of South Africa, the South African Banking Risk Information Centre (Sabric) and the Financial Services Board (FSB) have no comment on the matter, saying the banks would have to address the issue directly, themselves.

The South African Reserve Bank’s Banking Supervision Division said that, while it is mandated to regulate the South African banking system in terms of the Banks Act, it doesn’t comment on any investigations – previous, current or even potential – it may be involved in.

However, the reserve bank did note that illegal deposit taking schemes (or Ponzi/Pyramid schemes) are in contravention of the Banks Act.

When asked to comment on the accusations that it operates with signs of a Ponzi scheme – as well as its terminated relationship with Absa – the Satinsky group declined to comment.

More on the R699 saga

R699 cars deal is a scam: consumer activist

The inside story of the R699 car scheme

R699 cars a Ponzi Scheme: Wesbank

R699pm car business falls apart: report

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R699 car scandal: who’s to blame?