The National Credit Regulator warns that these schemes are in fact scams – a way to circumvent the National Credit Act and run off with consumers’ vehicles.
Need cash now? The pawn-while-you-drive scheme appears to be an enticing option, promising consumers the ability to raise cash on their vehicles, bikes and boats – while still in possession of them.
The lenders essentially take ownership of the consumers’ vehicles for the entire loan period. Should consumers fail to repay the loans, the lenders retain possession of the vehicles. And in most cases,On the surface, these schemes offer consumers – who might otherwise not meet traditional lenders’ requirements under the NCA – the ability to access a loan by using assets as security.
“I borrowed R50,000 and the agreement was that I would need to pay a monthly rental for my vehicle of R7,500 until I was able to pay back the full loan amount. A Tracker was installed in my car and they asked for my car papers. I paid until October 2022 when I had paid them in excess of R75,000. I could no longer afford the monthly payments and subsequently stopped paying.”
the estimated resale value of the goods exceeds the value of the money provided or the credit granted, or Since the suppliers extended credit to consumers, they were required to be registered as a credit provider. Failure to register as a credit provider is a contravention of sections 40 and 89 of the NCA. The regulator furthermore says the agreements are unlawful and void as per the NCA, since no affordability assessments are conducted in any of the agreements.
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