How bank repossessions are impacting working-class families

One of the silent tragedies facing thousands of working-class families and homeowners are bank repossessions and auctions of their cars and homes.

This is a moment of unbelievable pain that countless workers drowning in debt fear and one that they and their families will never recover from.

A cursory read of the National Credit Regulator (NCR)’s reports reveal the shocking levels of debt most consumers find themselves in.

These are in the most instance because they have to support spouses who’ve lost jobs, unemployed relatives, cover education fees for their and their siblings’ children, haven’t received an increase, and are struggling to cope with the rising costs of living.  

As workers borrow money to cope these often come at exorbitant interest rates.  Eventually many are borrowing simply to pay other debt.

During Covid-19, over 2 million workers lost their jobs, though many were recovered as the economy reopened but at a heavy price to those families.

Whilst one does not dispute the need for consumers to fulfill their loan obligations, there is a need for checks and balances to prevent abuses and to assist those in need of help.

Increasing trends have been revealed in countless court cases of banks being overzealous in rushing to auction the homes and cars of consumers or drag them to court when they default instead of finding alternative and humane solutions.

At times there have been reports of some bank officials colluding with property developers to buy these houses for a fraction of their value at auction and then selling them a few months later at market prices, making a fortune at the expense of the misery of their owners.

The further tragedy, besides a family now being homeless or a worker having lost their means of getting to work or fetching children from school, is that they will be permanently blacklisted by the banks and very unlikely to ever get a car or home loan again.  In effect condemning them for the rest of their lives.

This rush to auction by banks often makes no financial sense as they have made their return on investments by the payments received over long periods and sell the home or car for the balance owed to them, even when it’s far less than the actual loan amount.

This is a devastating tragedy, and it is workers and their families who are made to pay the price.

Questions must be asked about the roles and responsibilities of the various oversight institutions that are meant to protect consumers and put in place some checks and balances over lenders.

Are consumers aware of the banking ombudsperson and how to contact it?  Clearly more must be done to empower consumers in this regard.

Similarly, is there not an overall policy role for the Financial Sector Conduct Authority?  Should it not be empowered and compelled to hold lenders accountable for such abuses?

Similar questions should be posed to the National Credit Regulator.  

Clearly consumers need a champion as the odds all too often are decked against them.

On a legislative front, action needs to be taken too.  The Conduct of Financial Institutions Bill seeks to put in place measures to hold lenders accountable and to protect the rights of consumers.  In short exactly the types of solutions needed. 

This progressive and badly needed Bill went through extensive consultation with industry and engagement with labour at Nedlac.  It has been a decade since it left Nedlac and has since been collecting dust at National Treasury for no apparent reason.  

Treasury needs to take the pain of such consumers and their families seriously and table this Bill at Cabinet and then Parliament.  

The Department of Trade, Industry and Competition too needs to promulgate the National Credit Amendment Act that was passed by Parliament in 2019.  It provides important protection for the essential property of consumers, e.g. kitchen appliances and school uniforms etc. when their assets are attached.  It needs to be further revised to take into account the abuses home and car owners often experience.

The possibilities of extending home and car loan insurance to cover the possibilities of owners losing their jobs should be required and provide for a reasonable gap cover whilst those workers look for another job.  

Such disputes between banks and their consumers should be resolved in Small Claims Court where consumers can represent themselves without the need to spend money they don’t have on lawyers or having to wait for years whilst their cases are resolved.

Treasury needs to expedite engagements on the next phase of the Two-Pot Pension Reforms with Cosatu at Nedlac to provide further relief to highly indebted workers. 

This needs to ensure that workers who lose their jobs are able to access their full pension funds and thus save their homes and cars.  It also must allow workers the option of preserving their existing savings accumulated when the reforms came into effect in their vested pot or to transfer any portion of those savings to the new two pots and thus have additional funds to settle debt.  

These engagements must be prioritised by Treasury given the painful experiences confronting millions of workers in a bleak economy with low growth prospects, high levels of unemployment and possible increases in the costs of living.

What we cannot afford to do is to normalise the tragedy of thousands of families, nor turn a blind eye to the shameful profiteering by some at the expense of the misery of many, or to think a broken system should not be fixed.

Cosatu will be tabling these progressive proposals to government led by the African National Congress at Nedlac and in Parliament. 

We need government as well as the banking sector to work with us to find common sense solutions to this crisis.

Solly Phetoe is the General Secretary of Cosatu.