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In National Credit Regulator v National Consumer Tribunal and Others and Similar Matters, the South African Supreme Court of Appeal ("SCA") provided clarity over whether on-the-road ("OTR") fees are permissible charges which may be levied on consumers, when credit providers grant finance for the purchase of motor vehicles.
Background
During 2017, the National Credit Regulator ("NCR") conducted investigations into Volkswagen Financial Services SA (Pty) Ltd ("Volkswagen"), BMW Financial Services SA (Pty) Ltd ("BMW") and Mercedes Benz Financial Services SA (Pty) Ltd ("Mercedes") relating to the practice of charging OTR fees. These fees include, but are not limited to, costs for conducting pre-delivery inspections, obtaining roadworthy certificates and licensing a vehicle. Dissatisfied with the credit providers' explanations about the OTR fees, the NCR issued compliance notices to each of the credit providers.
The compliance notices stated that the NCR's investigation revealed that the credit providers contravened sections 100 – 102 of the National Credit Act, 2005 ("NCA") by charging OTR fees on instalment sale agreements with consumers. The compliance notices also indicated that the credit providers charged consumers the OTR fees despite not being chosen by the consumers to act as their agents in arranging the service for which the fees were charged. In respect of Volkswagen and the compliance notice issued to it, the NCR contended that Volkswagen disguised and/or inaccurately disclosed the OTR fees as a service and delivery cost.
The NCR contended that the OTR fees are:
- Credit fees prohibited by section 100(1)(a) of the NCA;
- Not credit fees permitted in a credit agreement in terms of section 101(1) of the NCA; and
- Not credit fees that can be included in the principal debt deferred in terms of an instalment sale agreement or lease agreement in terms of section 102(1) of the NCA.
Each of the credit providers applied to the National Consumer Tribunal ("the Tribunal") to set aside the compliance notices.
Proceedings before the National Consumer Tribunal
In Volkswagen's application, the Tribunal Panel found that the OTR fees are credit fees prohibited by section 100(1)(a) of the NCA and that those fees are not credit fees that can be included in the principal debt deferred in terms of an instalment sale agreement according to section 102(1) of the NCA. It concluded that Volkswagen charged the OTR fees in contravention of the NCA.
Regarding BMW and Mercedes' applications, the respective Tribunal Panels disagreed with the reasoning of the Panel in Volkswagen's application. It held that the credit providers did not charge OTR fees. Such fees, it stated, were charged by the vehicle dealers. In any case, it concluded that vehicle dealers are not prohibited from charging OTR fees, nor is charging them unlawful in any way.
Aggrieved by the Tribunal orders against it, Volkswagen appealed to the full bench of the Gauteng Division of the High Court, Pretoria ("High Court"). The NCR cross-appealed against the Tribunal's orders in the BMW and Mercedes applications. The High Court heard the appeals together.
Proceedings before the High Court
The majority found that the credit providers did not charge consumers the OTR fees separately when these fees and services were included in the credit agreements. These fees are negotiated between the dealers and consumers. Credit providers only financed the principal debt, which included the purchase price and other extras, such as OTR fees and additional services.
The High Court concluded that section 100 of the NCA prohibits a credit provider from charging or imposing monetary liability upon a consumer. When financing the purchase of a vehicle on credit, the credit providers imposed no obligation or financial liability on the consumer. They merely provided finance for the principal debt, which had been pre-determined by the dealers.
Aggrieved by the High Court's findings, the NCR applied for leave to appeal to the SCA, which was granted by the High Court.
Proceedings before the SCA
After examining the interplay between section 100 (prohibited charges), section 101 (cost of credit) and section 102 (permissible fees) of the NCA, the court confirmed that section 102 provides a closed list of fees that credit providers may levy.
The SCA drew a clear line between "fees or charges" regulated by section 102 and costs forming part of the purchase price. It held that "principal debt" encompasses the purchase price together with accessories and services reasonably connected to the vehicle acquisition. Accordingly, OTR fees which are genuinely levied and reflect services requested by consumers and form part of the purchase price. They are not separate "fees or charges" barred by section 102.
Conclusion
The SCA held that credit providers cannot ignore their obligations under the NCA and must ensure transparency. Future requirements were established as a result of the judgment, namely that OTR fees must be specified with clear itemisation, consumers must be offered the choice between paying cash or financing these charges and the difference between the cash price and the cost of finance, including interest, must be explained to the consumer.
The appeal was upheld and each party was directed to pay its own costs.
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