VW dealt blow for charging illegal fees

VOLKSWAGEN Financial Services SA was dealt a blow at the National Consumer Tribunal this week, with a panel ruling that its on-the-road (OTR) fees, administrative and/or handling fees are illegal.

The tribunal confirmed that the compliance notice issued by the National Credit Regulator (NCR) to VW Financial Services SA for charging consumers these fees on credit agreements was invalid. The fees were declared unlawful and had to be refunded.

In its judgment, the tribunal ordered VW Financial Services to stop charging the OTR and other fees and to provide written confirmation to the NCR to this effect.

It also ordered the entity to calculate the total amount of charges, fees or interest levied on the OTR, admin and handling fees and refund consumers all those charges, fees or interest levied and submit a report by independent auditors to the NCR.

In a statement released on Monday, Nomsa Motshegare, the chief executive officer of the NCR, said: “The NCR welcomes this judgment as it affirms the protection given to consumers by the National Credit Act against illegal charges and fees on credit agreements.”

The regulator said it would “continue to conduct industry-wide investigations on fees and charges on credit agreements to root out illegal charges and fees on credit agreements”.

The ruling has massive implications for the entire industry, but before motorists get excited about an unexpected pay day worth a few thousand rand, VW is likely to appeal.

For now though, VW is studying the ruling. Sandy Naudé, the brand manager for VW front office, said they were reviewing the ruling and obtaining legal advice. “We shall revert in due course.”

In October 2017, the NCR ruled that lumping OTR fees on vehicle finance agreements was not permissible under the National Credit Act (NCA). This followed the regulator launching an investigation into both VW Financial Services and BMW Finance.

The fees have been illegal since 2007, with the introduction of the NCA; yet vehicle financing entities have continued to add them to credit agreements – masking “gifts” of flowers, champagne and even personalised key rings, as well as valet, pre-delivery checks and staff costs as “delivery and service fees” – even though the vehicles were often driven off the showroom floor by the customers.

The NCR has not gone after car dealerships, but their vehicle financing arms.

Under the NCA, the only costs allowable are initiation fees, actual delivery of a vehicle, extended warranties, a tank of fuel, and licence and registration fees.

Over and above those, the operating costs should be built into the purchase price, not added as extras which aren’t itemised or explained.

Stephan van der Merwe of the Stellenbosch University Law Clinic welcomed the ruling.

“If you buy a vehicle under the NCA, section 100 says you aren’t allowed to charge fees that aren’t set out clearly. Section 101 deals with allowable fees. And section 102 sets out the fees or charges that can be part of the transaction. That includes the initiation fee, extended warranty, initial fuelling charges, connection fees, taxes, licence and registration fee.

“If they do add the tank of fuel, they are only allowed to charge for what was put into the tank. And they have to provide slips to prove the expense.”

In 2017, the National Consumer Commission issued a compliance notice against VW and BMW Financial Services. BMW then applied to the tribunal to consolidate matters between the two finance arms, wanting the notices rescinded. On June 5, the tribunal decided consolidation would take too long and the matter needed to be expedited.

Nthupang Magolego, a senior legal adviser at the NCR, said the BMW matter would only be heard later this year. | IOL