Judge slams bank behaviour on home loan default
Category Banks
Durban High Court Judge Fikile Mokgohloa has labelled a leading bank as "reckless" in failing to participate in a debt review process involving home owners who defaulted on their bond payments.
This comes after Judge Rashid Vahed criticised banks last month for adding legal costs to defaulters' bills without court sanction.
Mokgohloa dismissed with costs an application brought by Firstrand Bank against Durban home owners Nagine and Kursheda Raheman.
In the application, the bank had asked for judgment in the amount of about R220 000 plus interest, as well as an order declaring their Trenance Manor, Phoenix, property executable.
Mokgohloa said the Rahemans had admitted they had failed to pay the necessary bond instalments, but had raised a special plea, saying they had been placed under debt review in January 2010.
In February 2010, the debt counsellor, representing the Rahemans, forwarded a proposal to the bank with regard to repayments of the money owed.
The next month, the Rahemans forwarded a revised proposal increasing the contribution in respect of payments that would be made to the bank.
The bank did not object to the proposals made or make any suggestions, and the Rahemans continued to make payments to the debt counsellor.
In May 2010, the proposal in terms of their debt was made a court order in the Durban Magistrate's Court.
However the bank claimed in court papers that it was entitled to the relief sought, as it had terminated the debt review in accordance with National Credit Act, and that notice of this had been sent to the Rahemans in April 2010.
Mokgohloa found that, since a court order regarding the rearrangement of debt had already been made, the bank was not entitled to "exercise or enforce" by litigation any right under the credit agreement.
She added that the bank had failed to participate in the debt review.
"The legislation obliges the consumer and credit provider to participate in good faith in the review, and any negotiations should result in responsible debt rearrangement.
"The bank failed to respond to the proposals... I am of the view that the plaintiff 's failure to participate in the review proceedings is reckless."
Last month, Judge Vahed warned banks to refrain from adding huge legal fees to defaulting home owners' bills without a court order.
He was dealing with an application brought by Changing Tides 17 (Pty) Ltd and the trustee of the SA Home Loans Guarantee Trust against Newlands West homeowner Sthembiso Mbazana, asking for judgment and an order declaring his home specially executable.
When the matter was later settled, advocate Dees Ramdhani, acting for SA Home Loans, told the court that banks always tried to resolve such matters before heading to court because they recovered very little at auction.
