By Pinky Khoabane
First National Bank (formerly Saambou) has for several years ripped-off Black bondholders in the low income housing market by manipulating interest rates. The financial institution is now facing legal action in Equality Courts in the Western Cape and Gauteng.
The complainants, thanks to the assistance of Emerald van Zyl, a financial investigating consultant, have lodged cases in the Equality Courts in the Western Cape and the Gauteng. The hearing in the Western Cape has been postponed to 1st March 2017 while the documents filed in the North Gauteng and South Gauteng High Courts have disappeared.
A total of 23000 complainants have filed cases in the Western Cape against FNB for discriminating against them by denying them the benefits of interest rate decreases and abusing the Usury Act. The Act was amended in 1990 to provide for the admittance of initiation fees and monthly administration fees on housing loans as a way of preventing the use of interest rate fluctuations as a means of discriminating against smaller loans in the black low cost housing sector.
Van Zyl has analysed internal documentation and decisions made by Saambou which clearly show a series of instructions denying his clients the benefits of interest rate cuts. “On 1 July 1996 the basic rate decreased with 1%. The complainants did not qualify for the decrease,” court papers read. Over a period of three years thereafter, there were instructions within the bank which clearly excluded the low cost bond holders from the benefits of rate cuts. With each cut, high cost housing clients would receive letters of the rate decrease and their latest interest rates. The low cost housing clients on the other hand would not receive the letter or the decrease or increase.
Van Zyl has calculated that over R3bn is owed to these poor people as a result of FNB’s discriminatory action. In a letter to then Reserve Bank Governor Gill Marcus, the investigator outlines how three of the complainants were discriminated against as an example of the bank’s modus operandi, the web of sabotage in bringing the cases to the Equality Court with respect to access to their bank statements and the unwillingness of the banking ombudsman to pro-actively intervene in the matter. The investigator pleads: “Mrs Marcus, I am making a serious appeal to you as Governor of the South African Reserve Bank to intervene with immediate effect, as this action by the prejudice(d) communities will not only effect (affect) FNB, but the entire South African banking industry.”
Racist classifications and discrimination
One of the complainants, Maria Magdalena Pietersen, bought her house in July 1995 for R61 000. The bank classified clients according to race and her loan had the internal code of PRO 86 which represented “black low cost housing,” her affidavit reads. By 30 June 2003, Pietersen was paying 4% higher than white bond holders due to the discriminatory practices of the bank.
By 31 January 2014, her debt was R96 173,02 instead of being in credit for R14 176,05 according to Van Zyl’s calculation. “The difference of R108 349.07 represents the total damages suffered by Complainant as a result of the unfair discrimination,” her declaration continues.
Despite having effectively paid-off her house and the bank owing her money, Van Zyl has had to stop the sale in execution of her house three times.