A motorist received a write-off of nearly R300,000 in car loan debt after the bank repossessed and sold his vehicle without providing proof of voluntary surrender or a court order.
This case is one of two noted by the National Financial Ombudsman Scheme (NFO). The scheme warned that late payments on vehicles do not grant creditors unlimited rights to take consumers' cars without following established legal procedures.
NFO's head of Banking and Credit Ombudsman, Nerosha Maseti, noted that 'unfortunately, vehicle payments are often one of the first obligations that become difficult to maintain when a household budget is under strain.'
This warning came amid ongoing credit repayment issues for some drivers, although the overall situation has improved. According to the latest TransUnion data, in the first quarter of 2026, 7.1% of auto finance accounts were three months or more delinquent, which is 0.8 percentage points lower than the previous year.
R300,000 Debt Write-Off
In the first described case, the bank took the vehicle from an employed driver and sold it. The consumer denied voluntarily surrendering the car and claimed the bank had not received a court order. During the NFO investigation, the bank could not provide either a signed document of voluntary surrender or proof of judicial authorization.
Despite the driver having significant arrears, the NFO found that the bank could not bypass the legal safeguards governing repossession. Since the car had already been sold, the consumer was left with a deficit of about R300,000. The NFO recommended that the bank write off the entire amount, to which the bank agreed.
In the second case, a minivan taxi was detained at the border between South Africa and Zimbabwe after a passenger was found with illegal substances. Although the owner and driver were acquitted, the vehicle was transferred to the financing bank instead of being returned to the owner.
The NFO discovered that the owner violated the financing agreement by allowing the taxi to cross the border without adhering to the terms, but the bank also failed to follow proper legal procedure in its retention. Nevertheless, the bank accepted the NFO's recommendation to pay her R30,000 for stress and inconvenience, as well as write off legal and storage costs.
Maseti emphasized that the bank's right to recover debt and how it exercises that right are two different matters. She added: 'Voluntary surrender cannot be imposed on a consumer, and a bank cannot simply consider vehicle ownership as proof of voluntary surrender. Similarly, if a bank wants to repossess a vehicle, it must follow the applicable legal procedure.'
Non-Voluntary Surrender
Under the National Credit Act, voluntary surrender and creditor-initiated repossession are distinct processes. If a consumer voluntarily surrenders financed vehicle, they must notify the creditor in writing. The bank must then follow prescribed procedures regarding its valuation and sale.
Creditor-initiated repossession involves enforcement proceedings and requires a court order authorizing the seizure and sale. Returning the vehicle does not always result in a debt write-off. If it is sold for less than the outstanding balance, the consumer may remain liable for the shortfall. Any surplus must be paid to the consumer.
The Appellate Division ruled in May that the National Credit Act does not restrict creditors to magistrate courts for recovering these shortfalls, thereby allowing for conflicting High Court decisions regarding whether claims can also be filed in the High Court.
Know Your Rights
The NFO strongly urged consumers experiencing repayment difficulties to contact their banks in advance and not ignore correspondence or legal notices. Before surrendering a vehicle, consumers should determine whether the process is a voluntary surrender or a repossession, and should not sign documents they do not understand. If someone comes to collect the vehicle, the NFO advises asking who this person is, who they represent, and on what basis they demand possession.
Consumers should also keep all correspondence, notices, settlement amounts, and payment plans, and understand that they may still have debt after the vehicle is sold. If a dispute cannot be resolved with the creditor, consumers can seek assistance from the NFO.