Banks, car dealers ‘flout’ Credit Act
The Ministry of Industrialisation, Trade and SME Development says the practice by some car dealerships to offer cash-backs, and deposit or discount assistance to clients, is in contravention of the recently enacted Credit Agreements Act.
The ministry’s Permanent Secretary, Gabriel Sinimbo, told the Windhoek Observer that depending on the facts, this could be interpreted as inducement to enter into a credit agreement, which is not allowed in terms of Section 7 of the Act.
Sinimbo said any person who contravenes or fails to comply with any provision of the Act, is committing an offence.
“Such offenders were liable for a fine not exceeding N$50,000 or an amount equal to the deposit payable, as required by the Act, whichever amount is higher, or to imprisonment for a period not exceeding two years, or to both such a fine and such imprisonment, according to Section 23 of the Act, as amended,” he said.
The Credit Agreements Act was originally promulgated in 1980 to regulate credit on movable goods/vehicles that are leased or bought on credit, and the amendments came into effect from the beginning of August this year.
The amendments also place restrictions and thresholds on the percentages to be paid as a deposit on each category of moveable goods purchases, as well as the maximum repayment period.
Therefore, customers that want to purchase movable goods on credit will be restricted to a maximum repayment period of 24 months, with the exception of motor vehicles, which have a maximum repayment period of 54 months.
Investigations carried out by this newspaper show that some car dealerships were offering deposit and discount assistance, as well as cash-backs to clients, to lure them to purchase vehicles under the guise of promotions.
Some banks, who refused to speak to the Windhoek Observer, do not charge the 10 percent deposit for employees who are entitled to vehicle allowances from their employers, as prescribed by the amended Credit Agreements Act.
“If a client comes to us and the bank approves their loan application, but they do not have the deposit, we would advance them the deposit, but they would still be required to pay the car purchasing price in full,” said a sales consultant at a known car dealership in Windhoek, who spoke on condition of anonymity.
Sinimbo said the ministry had not yet received complaints over the flouting of the new regulations by car dealers.
He said that the anticipated results of the amended Act are responsible consumer borrowing and reduced household indebtedness ratio.
“We have not received any formal report, except for speculations. Our view and position, subject to further legal interpretations, is that not paying the 10 percent deposit is illegal. At this stage, and in the absence of the specifics, it is difficult to conclude (anything),” said Sinimbo, while reiterating the penalties involved if the deposit is not charged by car dealerships.
Quizzed on the sort of mechanism that had been put in place to police the dealerships, Sinimbo said the Act (Section 26) provided for inspectors to be empowered to conduct investigations and ensure compliance.
He said the Bank of Namibia (BoN) was empowered by Section 52 of the Banking Institutions Act, 1998 (Act No. 2 of 1998), as amended, to conduct examinations of the affairs of banking institutions to determine, among other things, whether banking institutions complied with the provisions of the Act or any other legal requirements pertaining to banking institutions.
“Through on-site examinations of banking institutions, the BoN can determine whether banking institutions abide by the requirement of the 10 percent (deposit), as set out in the Credit Agreements Act, when extending car loans to their customers,” he said.