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Repossession of Goods Explained

Repossession of Goods

Consumers are struggling to make ends meet in South Africa’s current economic climate, which can lead to poor decision-making when it comes to finances. The cost of living continues to rise amid the COVID-19 pandemic, causing many South Africans to default on their payments, of which the most common are vehicle instalment payments. 

A consumer runs the risk of good, such as their vehicle, being repossessed when skipping their monthly car payments. However, there are a few relief measures consumers can consider if they are unable to make their monthly payments, such as negotiating a lower instalment, debt counselling or a debt consolidation loan.

Less stressful than repossession is surrendering the goods voluntarily if you are unable to pay the monthly instalment. However, both repossession and voluntary surrender will have a negative effect on the consumer’s credit score. 

Section 131 of the National Credit Act (“NCA”) states:

“If a court makes an attachment order with respect to property that is the subject of a credit agreement, section 127(2) to (9) read with the changes required by the context, apply with respect to any goods attached in terms of that order.” This article will briefly address sections 127 and 129 as it is applicable to repossession and voluntary surrender.

Voluntary Surrender of Goods

A consumer unable to pay for goods under a lease, loan, or instalment agreement may choose to voluntarily return the goods to the credit provider. 

According to section 127 of the NCA, a consumer under a lease, instalment agreement, or secured loan may inform the credit provider, in writing, to cancel the agreement and:

  • Require that the credit provider sell the goods, where it is already in the creditor’s possession; or
  • Return the goods to the credit provider within five business days after notifying him or her, during business hours at the credit provider’s place of business, or within the agreed-upon date, time, and place.

The credit provider must provide the consumer with a written notice detailing the estimated value of the goods and any other relevant information, within ten business days after receiving the consumer’s notice, or receiving the goods. 

However, the consumer has the right to withdraw the notice of termination of the agreement within ten business days if the consumer wishes to do so, and resume possession of the goods that are in the creditor’s possession. It is important to note that a consumer may only withdraw the notice of termination if he or she is not in default under the agreement. 

Where the consumer does not withdraw the notice of termination, the credit provider must sell the goods for a reasonable price as soon as possible. Following the sale of the goods, the credit provider is required to debit or credit the consumer’s account with the same amount the goods were sold for, as well as deduct any reasonable charges. However, if there is still an outstanding amount after the sale of the goods, and the consumer fails to pay the demanded amount within ten business days after receiving a notice from the credit provider, the creditor provider has the right to proceed with legal action.

Debt Enforcement by Repossession or Judgment

A credit provider is required to send a final letter of demand to the consumer prior to the enforcement of a credit agreement. A letter of demand in terms of section 129(1) of the NCA must be sent to the consumer. This letter must indicate the exact amount in arrears, as well as refer to possible remedies as to how the consumer may proceed if unable to pay the outstanding amount. These remedies include debt counselling or alternative dispute resolution. The matter can also be referred to a consumer court or ombud with jurisdiction to resolve the dispute. 

It is important to note that legal proceedings may not be instituted where a credit provider fails to provide the consumer with a notice in terms of section 129(1)(a), either by registered mail or by hand to an adult person at the specified location. 

If the consumer fails to respond, within ten business days after receiving the notice, or rejects the credit provider’s proposal, the credit provider may approach the court to issue a summons. 

If the consumer fails to make a payment arrangement or neglects to file a notice of intention to defend after the summons was served, the credit provider has the right to obtain a default judgment. The court will also issue a warrant to repossess the goods, which will be given effect by the sheriff. The consumer will be provided with the original warrant and the sheriff will confiscate the necessary goods. 

In certain cases, a debt collector may approach the consumer to surrender the goods. However, the consumer is not obliged to do so, since this will be viewed as a voluntary surrender. A legitimate repossession is only given effect to by a sheriff. 

Once a car is repossessed, the consumer will be provided a final opportunity to settle the amount. If the consumer is unable to settle the outstanding amount, the goods will be auctioned off.

Debt Counselling and Debt Consolidation as Relief Measures

In many instances, consumers are unable to meet their financial obligations. When receiving a notice in terms of section 129(1) of the NCA, the consumer can consider applying for debt counselling. This entails the following: 

  • A debt counsellor will conduct an assessment and consider whether the consumer is over-indebted. 
  • If the debt counsellor concludes that the consumer is over-indebted, a repayment proposal will be drafted and sent to all relevant credit providers. 
  • The matter is then referred to the Magistrate’s Court for an order declaring the consumer over-indebted and to confirm the debt rearrangement plan. 

Credit providers are prohibited from taking legal action against consumers under debt review for as long as the consumer complies with the debt rearrangement order. The consumer’s assets remain protected and credit providers are prohibited from repossessing any goods. 

Consumers who are not over-indebted and have several loans to pay off should consider taking out a consolidation loan to repay all or some of those loans. This way, all loans will be consolidated and only one monthly payment needs to be made to the credit provider that granted the consolidation loan.


Chane Henney

Chane holds an LLB and is currently in the process of completing an LLM. She has in-depth knowledge of the debt review processes, debt consolidation, and applicable legislation such as the National Credit Act.