Major banks face court challenge over repossessed home sales

Stephen Grootes speaks to Gerhard van der Merwe, consumer law attorney at Trudie Broekmann Attorneys, about a landmark High Court case challenging banks’ long-standing use of sales in execution. 

Listen to the interview in the audio player below.

A major legal battle is set to begin in the High Court of South Africa this week, where several applicants are challenging South Africa’s biggest banks over how repossessed homes are sold when borrowers fall behind on their mortgage payments.

At the centre of the dispute is the process known as a sale in execution, a forced public auction of a property to recover outstanding debt after a borrower defaults on their home loan.

Applicants argue that banks often sell repossessed homes for prices close to the outstanding bond amount rather than their market value.

For example, they claim that if a property worth R1 million has an outstanding bond of R500,000, it may be sold for around that amount simply to recover the debt.

They argue that repossession and forced sales should be a last resort, but claim the process is used too frequently.

The applicants want the matter certified as a class action and are seeking damages.

Speaking to Stephen Grootes on The Money Show, Gerhard van der Merwe, consumer law attorney at Trudie Broekmann Attorneys says this consumers would benefit from ruling.

"In terms of the mortgage, and even you just tie it down to instalments for vehicles, whatever the banks sell it for they don't really care because at the end of the day, you're still in for the difference. And eventually, now that they've sold this property it goes back into the market so there is an opportunity for that bank or one of the other banks to refinance a purchase of that property.

-  Gerhard van der Merwe, consumer law attorney - Trudie Broekmann Attorneys 

"We always advise our clients, as soon as you get into trouble and you see, I'm gonna have issues paying my bond this month, or I haven't paid for two months. Contact the bank. Explain your situation."

-  Gerhard van der Merwe, consumer law attorney - Trudie Broekmann Attorneys 

"Our courts have recently taken a very dim view...the summonses go out. The debt collection department does their thing. They don't want to properly engage with consumers, and a lot of our courts and judges have now said, you can't just see it as a box-ticking exercise.

-  Gerhard van der Merwe, consumer law attorney - Trudie Broekmann Attorneys 

Scroll to the top of the article to listen to the full interview.