Fairland, Gauteng -- (SBWIRE) -- 02/20/2013 -- Latest data from leading all-asset financier, WesBank, has revealed a marked increase in the number of consumers electing to fix the interest rate on their car loans when buying a vehicle. A rise in the number of incidents of ‘hula hoop’ schemes - where a business practice arranges to have the financing of a vehicle taken over by a third party - is leaving an increasing number of local consumers in serious financial straits.
According to Nicholas Litton, Head of Risk at WesBank, South Africa’s leading all asset financial solutions provider, hula hoop scheme advertisements are often found in the classified sections of newspapers offering assistance in taking over vehicle instalments, with headlines such as ‘take over vehicle instalments’, ‘blacklisted’ and ‘can’t get finance’.
“These advertisements are directed at those consumers who are experiencing severe financial difficulties and who can no longer keep up with their repayments or who are struggling to obtain finance through proper channels.
“The assistance the company provides is finding a ‘buyer’ who will take over the instalments to the bank. This is an illegal business practice as the financial obligations of a consumer cannot be transferred without the knowledge and agreement of the financial services provider.”
Litton says that when consumers contact the advertiser they are told that the practice is legal and that they are operating with the permission of the banks. “This is not true, as no bank will authorise these business practices to operate on their behalf. The client will also be informed that the business practice will pay the arrears on the account or pay a deposit for the vehicle.”
He says the consumer signs an agreement regarding the ‘take over’ of the asset and the vehicle is then given to the new ‘buyer’, who is then responsible for paying the instalments. “In practice, however, the repayments are often not made to the bank and the account will be left in arrears, leaving the original owner without a vehicle and still being held responsible for the remaining debt on the account.
“The new ‘buyer’ who contacts the business practice to purchase a vehicle will be asked to make instalments into a private bank account - which are often not passed on to the bank - or sometimes directly to the bank through manual payments. They are also often required to make a large deposit on the vehicle before it is given to them.
“This private arrangement is illegal and even if the buyer does make the payments to the bank, they will not have ‘legally’ purchased the vehicle. It remains the property of the bank until the account has been paid in full and even then, the buyer does not have the right to retain the asset.
“It is critical that consumers do not contact such companies as at best they may just lose their asset, at worst they could also be left paying off a huge debt on an asset that they no longer have in their possession,” concludes Litton.
WesBank has over 40 years of experience in asset and vehicle finance. As a leading asset-based finance provider in South Africa, we finance new and used vehicles for personal use, both privately and through dealerships, as well as leisure vehicles, and also offer expert advice and professional service to our clients.
Our other main focus is providing quality asset finance and fleet management solutions for a number of market sectors. WesBank’s asset finance services cover aviation finance, agri finance, commercial vehicle finance, company vehicles, plant equipment, office equipment, public sector finance and franchise finance. In addition, we offer personal insurance, vehicle insurance, personal loans as well as business insurance, and we are perfectly placed to structure a finance deal to suit your needs.
WesBank is a division of FirstRand Bank Limited, which in turn, is part of the FirstRand Group. FirstRand is South Africa's most innovative Bank Assurance Group with interests in Retail and Merchant Banking, Life Assurance, Financial Planning and Medical Schemes.