June 23, 2017

Nowadays, owning a vehicle is no longer a dream given the various car loan options available in the market.

It is a fact that not all individuals can purchase vehicles by paying cash up front, hence, banks have made it much easier to obtain car loan packages. Obtaining motor vehicle loans have become far more convenient and accessible. However, when consumers borrow money from the bank, they are under the impression that banks will conduct the transfer of funds to the car dealer in an efficient and appropriate manner without any delay.

As far as an individual is concerned, he/she signs the loan agreement with the bank. Similarly, the individual makes loan repayments to the bank once the loan is approved.

Now, what happens in the case where the bank does not fulfill its responsibilities in a timely manner which results in the repossession of the vehicle by the car dealer?

Sam faced a similar situation not too long ago.

With the aim to start his own taxi business, Sam decided to take a car loan with a prominent bank in Fiji. After meeting the banks requirements, Sam was delighted to know that the dream of owning his own taxi business would soon be realised. Sam entered into a credit agreement with the bank for a sum of $14,000 on 17th August 2016. He already saved $5000 as a deposit, which he paid to the car dealer. Once the agreement was signed by Sam with the bank, the car dealer released the vehicle to Sam.

As per the credit agreement, Sam commenced with his account repayment from October 2016. Sam’s monthly repayment as per the agreement was $465, however, he was making repayments of $500 per month with the intention to clear his loans quickly.

It was not until after 8 months that things took an interesting turn. A bailiff, appointed by the car dealer, turned up at Sam’s doorstep to repossess his taxi. Shocked, Sam asked for an explanation as to why he was repossessing the vehicle. The bailiff advised Sam that his bank had failed to pay the car dealer. To add to Sam’s disappointment, the bailiff told him that the vehicle would only be discharged once a release fee of $750 was paid to the car dealer.

Shaken with what had happened, Sam decided to seek an explanation from the bank. To his dismay, the bank bluntly told him that he had to pay $750 for the release of his vehicle. Furthermore, the bank told Sam that the reason the car dealer had not been paid was because they were still in the process of verifying his taxi base permit. Sam was perplexed. He had signed the credit agreement with the bank after fulfilling all its requirements which included the submission of the taxi base permit.

This explanation was unacceptable considering that the bank had been accepting the repayment amounts every month from Sam. Why was the credit agreement signed in the first place if Sam did not fulfill the bank’s requirements for obtaining loans?

To make things worse, the bank demanded Sam to pay $750 for the release of his vehicle. Apparently, the Bank agreed to give $750 as a loan to Sam.

Distraught with the bank’s behavior, Sam ultimately lodged his complaint with the Council. The Council met with the bank officials to seek an explanation regarding this blunder. The Council needed to understand why the bank did not settle the matter after the vehicle was repossessed considering there was a duly signed Bill of Sale. Five repayments were already made, which were more than what the parties had agreed to be paid. The Council further tried to establish the following:

 Whether a letter was written to Sam to withdraw financing arrangement if base permit was not provided.

 Why did it take almost 8 months to arrange the taxi base permit?

 Why was there no communication in writing on the progress of obtaining the permit?

The bank agreed that they were at fault and were willing to pay $750 for the release of his vehicle.From the Council’s perspective, it was a wrongful repossession because the car dealer seized the vehicle without prior notice. Car dealer should have communicated with the bank or with Sam regarding the non-payment. Had Sam been informed of the non-payment, he would have followed up with the bank and the matter would not have escalated to this level.

Credit providers are urged to:

• Pay-off the car dealers in a timely manner once the loan requirements are met by the consumers.
• Keep regular communications with their customers if any requirements are not fulfilled by them.
• Act immediately to solve issues arising from their misconduct and negligence.

On the other hand, consumers must not sign credit contracts with blank spaces and unfair contract terms and they should keep a check on the progress of their loans on regular intervals.

Consumers are advised to call us on our National Consumer Helpline toll free number 155 to seek advice and lodge any complaints or visit any of the Council offices in Suva, Lautoka and Labasa.