A couple who nearly lost their home because of a bank’s attempt to penalise them for one late repayment, has been saved by the courts.
A Meyersdale couple must have had more than a few sleepless nights when they discovered their bank planned to repossess their home because they had made payment two weeks after the due date. A report published in The Pretoria News highlights that the old adage ‘better late than never’ doesn’t always apply in the financial world when their bank took the couple to court because of the delayed payment.
The drama started in July 2014 when they paid their bond two weeks late. Despite settling the arrears and having a solid track record (they often paid more than was required) they received a summons. The bank initially tried to get the court to foreclose on the home and when that failed, insisted the outstanding bond of more than R2.5-million be settled in full.
The Gauteng High Court in Pretoria dismissed both the application for execution (which the bank abandoned when the matter was argued in court) and the bank’s request that the balance of the mortgage be paid in full.
Citing a Constitutional Court judgement which clarified the consumers’ position vis-a-vis the National Credit Act (NCA), Judge DS Molefe noted the Nkata Judgement had had a significant impact on the rights of consumers in their relationships with their banks.
He pointed out that in the Nkata Judgement, the Constitutional Court made it virtually impossible for consumers to lose their homes, stating; "Even after a long period of being in arrears, if the consumer made up those arrears and the agreement has not been cancelled; the agreement is reinstated.”
The bank argued it was simply acting in terms of the loan agreement, which stipulated the loan had to be paid back on the 1st day of every month. The fact that the couple had failed to honour this, said the bank, entitled the bank to cancel the agreement and therefore claim the entire amount still outstanding.
It's difficult to know what the bank was thinking when it instigated the lawsuit. The homeowners had religiously paid their bond every month and had, on a number of occasions, paid more than was required. To all intents and purposes, the bank was trying to sue because of a late payment that had subsequently been settled and, reading between the lines, hadn't had any subsequent trouble with homeowners. In other words, the homeowners could hardly be regarded as ‘bad payers’ given that they not only settled the outstanding amount in due course, but had since continued to make regular payments on the bond.
While the homeowners in this particular case came out smiling - the judge ruled that the bank had to pay their costs - it's also very good news for other homeowners who have at some stage fallen behind with their bond repayments. This judgement, together with that of the Constitutional Court, emphasises that banks may not attempt to repossess homes or demand payment of the full sum outstanding on a bond if the homeowner has caught up on any missed payments in the intervening period. Constitutional Judge, Edwin Cameron made this very clear when he noted that the NCA contained clauses which spared consumers the harshness of an era of debtor-unfriendly laws.
“It is no longer a case where the powerful creditor could always rule over the weaker consumer,” he said. He also noted that while laws in the past had often enabled financial institutions to refuse late payments and to accelerate the repayment of the entire outstanding bond, things had changed significantly, much to the benefit of the consumer.
With the reinforcing effect of this judgement on the Constitutional Court’s previous ruling, it now seems that the balance has swung firmly in favour of property owners when it comes to fair treatment from banks.