IT’S ten days to go before Magdalena Pietersen, Lukas Maarman and Soon Boesak appear in the Western Cape Equality Court, where they will represent thousands of low cost housing bond holders – all Black and living in townships. They accuse First National Bank (FNB) of charging them interest rates higher than those of their counterparts who hold high-cost home loans. These were Saambou’s clients who were taken over by FNB when it bought the former’s low-cost housing mortgage book in 1998/1999.
The bank is also accused of cheating its low cost clients of interest rate cuts. Whenever there was an interest rate cut, Saambou would reduce that of the high-cost mortgage loans only. Furthermore, a large percentage of the low-cost mortgage loans were charged interest rates above the permissible amount in terms of the Usury Act. Liliandah Chokwe, for example, was charged 21.5% on her home loan at a time when banks were allowed to charge upto 14% interest and no more. This was a shocking 7.5% more than was allowed in terms of the law.
Background to Saambou/FNB Saga
First National Bank bought Saambou’s home loan book when the latter collapsed in 2002. Although it obtained the mortgage book of Saambou for R1 after the bank collapsed on 9 February 2002, it had already obtained the Low Cost Housing mortgage book by securitisation in 1998/1999. This was confirmed by the Curator of Saambou, Mr T.J. Louw, in his founding affidavit as follows: “On my date of appointment (9 Feb 2002) Saambou had directly or indirectly sold to other banks, mortgage loans to a value of approximately R 2.6 billion, all of which are now held by FirstRand Bank Limited”.
The complainants assert that bank statements of Low Cost Housing clients indicate clearly that FNB started to administer the Low Cost mortgage book from 2 February 1998. They say the main discrimination started in February 1999 and FNB was therefore the proud owners of the Saambou mortgage book of Low Cost Housing when the discrimination started. The complainants say FNB was therefore responsible for the discrimination and should refund every low cost housing client because it collected the illegal interest.
We Are Ready for FNB
Emerald Van Zyl, the financial investigating consultant who calculated the overcharges, says they are ready but “of course we dont know about FNB who have pulled one tactic or another over many many years to ensure they never appear before the equality court to answer to the charges”. In 1998, he blew the whistle on Saambou’s unlawful conduct of charging interest in advance 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 were scheduled to repay their bond in 20 years found it was extended by another 10 years.
When the cheating was exposed, Saambou then converted to the correct method in September 1999. With this conversion, it lost one month of interest income, estimated at R 110 million. To recover this money, it’s alleged it penalised clients of low cost housing by increasing the interest rate on their mortgage loans and cheating them of interest rate cuts. As stated earlier, FNB had already acquired this book at the time when this discrimination was taking place.
In 2005, FNB admitted to the dubious accounting practices of Saambou and moved to rectify the problem but a trio of forensic experts including Gregory Johnson, Dr David Klatzow and Van Zyl alleged that the amount FNB paid-out addressed only a fraction of the problem – just R154 million. Media reports at the time described van Zyl as a “long campaigner against the overcharges”. At the time, he was said to have stopped 164 sales in execution arising out of supposed arrears in the bond book FirstRand took over from Saambou. “Only two of the clients he has represented have been found to have been in arrears,” www.security.co.za. wrote.
The case is scheduled to take place on 6 August 2018.