By Pinky Khoabane
In what could be the latest delaying tactic by First National Bank (FNB) in the case involving allegations that it had discriminated against its low cost housing clients – Blacks living in townships – the bank has queried the jurisdiction of the Western Cape Equality Court where the matter is to be heard in March next year.
Frans Mokomane who is co-ordinating the claims of the more than hundred clients in Kwa Mhlanga in Mpumalaga says they’ve been waiting for almost five years for FNB to do the right thing and pay back the money it fleeced off them in interest rates.
Mokomane and thousands other low cost housing clients who had initially taken-out bonds with Saambou, argue that they were charged higher interest rates than their white counterparts.
Internal documentation discovered by FNB reveals that in the 1998/1999 financial years the interest rate on low cost housing was to be increasesed with prime +1.25% and that of high cost housing be increased by prime -.75%.
In July 2001 the rate of high cost housing was to be decreased by -.75% . Low cost housing was excluded from this decrease. The same happened in November 2001.
“We’ve been patient as FNB uses one tactic after another to delay paying us what they took from us. It’s not as if we are asking for charity, we want the money they took from us. The records are there that they overcharged us in interest and we want them to pay it back,” Mokomane says.
UnCensored published the rates charged one of the claimants, Magdalena Pietersen, which indicate that at times she was charged an interest rate exceeding what was permissible by law. http://uncensoredopinion.co.za/fnb-cheated-magdalena-pietersen-interest-rates-decreases/
Mokomane is one of the 326 clients from Kwa Mhlanga who were on Saambou’s low cost housing book when FNB bought it at the time of the former’s collapse in February 2002. FNB obtained the Saambou low cost book for R 2.8. billion in 1999/2000 financial years by securitasation. FNB was therefore responsible for the discrimination.
Of the 326 clients, 258 were being charged beyond the maximum interest rate permitted by the Usury Act which is a criminal offence. This happened during the time FNB administrated the Saambou low cost housing mortgage book.
On taking over Saambou’s book, FNB didn’t amend what the complainants view as unlawful and discriminatory practices, which included among others, internal communication which showed that the bank didn’t inform low cost housing clients of fluctuating interest rates and the impact or benefits to them.
Mokomane says there was a time when he thought of giving up his home because he had no idea what repayments he would be paying from month-to-month. Like many in his situation, he couldn’t budget and fell easily into arrears. In 2010 Mokomane had his bond recalculated and he discovered he had been overcharged by R93,371.77 – with interest this amount could be around R150 000.
The black community members involved in the case have now vowed to embark on protest action that will include marches to FNB to demand their money.
The saga dates back to 1998 when financial investigating consultant, Emerald Van Zyl discovered that Saambou was charging its clients interest in advance – this in contravention of the Usury Act.
What this meant was that clients were charged interest on the entire bond before they even used it. Then further interest was calculated at the end of each month. The net effect was that clients who would were scheduled to repay their bond in 20years found it was extended by another 10 years.
Van Zyl says he raised the matter with the Registrar of the Usury Act and the South African Police Services and in 1999, Saambou adopted the lawful method of charging interest on arrears. This, Van Zyl says, the bank lost in the region of R110m in monthly income it had made from interest and in order to recover the R110m, Saambou began the discriminatory practice.
Saambou did not however refund clients the interest it had accrued as a result of charging clients in advance.
In September 2005, FNB conceded that Saambou clients had been systematically overcharged on a monthly basis and agreed to repay R154m. But Van Zyl challenged the calculation claiming that the R154m represented just a fraction of the Saambou clients and calculated that clients had been overcharged to the tune of R2 billion.
FNB knew of Saambou’s incorrect accounting before take-over
In an article in the Saturday Star in March 2010, FNB confirmed it had known of Saambou’s unlawful practice of overcharging clients before it took it over in 2002. A statement from a representative of the bank at the time said: “”In September 2002, the Saambou receiver placed adverts in major papers inviting claims by potential creditors – mostly homeowners affected by the incorrect calculation methods. Only a handful of claims were raised, and in September 2005 FNB took the decision to actively reimburse affected customers even though they had not claimed”.
FNB’s response to Forensic Experts’ Challenge
FNB published on their website, in media reports including Business Report two days later, that it was “prepared to pay for interest recalculators representing ex-Saambou clients to test this in court”.
It took Van Zyl and a team of forensic experts, Gregory Johnson and David Klatzow, almost a year to get the entire Saambou Book and the work of recalculating 3600 accounts began. “I only became aware that Saambou bonds were divided into two categories namely, High Cost Housing and Low Cost Housing, when I was handed the Saambou mortgage loan book in December 2010 by Cedric Dewrance, a former Saambou employer. It was only then that I discovered that the interest rate charged on low cost housing was higher than that of high cost housing,’ van Zyl explains.
Six years later he sent FNB an account to the amount of R1.8m for the recalculation but instead of payment, the bank accused him of using the race card to blackmail them for personal gain. “Interest recalculator uses race card against FNB for personal gain to the tune of R 1.8 million,” was the headline of the statement.
On 6 May 2013, van Zyl went to the North Gauteng High Court on two claims against FNB; that it had calculated interest in advance and had not adjusted interest rates in line with the prime rate.
Judge Louis Vorster rejected van Zyl’s claims and costs of R3m were awarded against him. The Judge said the bank had been reasonable in its calculations of interest. He further rejected the allegations that FNB had discriminated against Black clients. Van Zyl says this judgement was highly problematic because the issue of discrimination and racism had not been argued in Judge Vorster’s court.
Van Zyl’s Sequestration
When the bank called for their award, they found there were no assets to attach and on 19 March 2014, applied in the Western High Court to sequestrate van Zyl. They eventually won that case but the fight isn’t over yet.
The case now goes to the Equality Court and FNB is employing delaying tactics
In delaying tactics which date back to 2013, FNB initially refused to provide the information which would provide the claimants to draw a declaration and was forced to do so in a ruling by the Western Cape High Court in February 2014.
Once the declaration was drafted, FNB described it as vague which further delayed the matter by another ten months.
Correspondence which UnCensored has seen, documents delays from legal representatives of the bank in providing information required by claimants.
In September 2015, on two occasions, the claimants demanded information including interest rates charged, amounts in arrears and the codes of the various bonds which the bank used to classify its home loan clients. In correspondence from the claimants’ lawyers to FNB, they are forced to remind the bank of the Usury Act under which the loans were made and the National Credit Act of 2005 which both compel a credit grantor to release information required by a client. One of the letters makes reference to Rule 35(3) of the Uniform Rule of the Court which “requires compliance to ensure that parties are not prejudiced by obstructing behaviour on the other party”.
On January 2016, the claimants had to approach the Western Cape Equality Court demanding it compels FNB to disclose the information.
Only then did FNB on 15 February 2016 comply and release the information requested by the claimants.
The claimants – poor Blacks in townships – have had to apply to the courts to compel FNB to provide the information to properly prepare to go to court. Whatever move FNB may make to avoid going to court next March, one this is for sure – the natives in the townships have had enough – their patience has run out.
Attached (1) Application to compel FNB to provide info application-to-compel
Attached 2. FNB response where it was forced to provide information requested by claimants affidavit-shaun-chelin