The uneven battle between consumers and the big banks is explored by financial journalist Ciaran Ryan.

In a Moneyweb analysis, he cites the example – among others – of a Pretoria couple who recently had a victory against FirstRand Bank (FRB) in the Gauteng High Court (Pretoria) when they argued that the bank had not properly notified them that they were in arrears on two mortgage loans.

The court agreed and dismissed the bank’s attempt to recover its alleged arrears because it had not given the couple ‘proper and timeous notice of their default and statutory rights’ in terms of sections 129 and 130 of the National Credit Act (NCA)’.

The court pointed out that FRB could fix the defects in its application and bring a new one. In other words, notes Ryan, it could still attempt to recover its alleged arrears, but not by circumventing proper legal processes.

Instead, though, FRB chose to appeal the ruling, meaning more legal costs for the couple – money that could be used to pay down the mortgage bonds.

Consumer advocates have long campaigned for ‘equivalence of arms’ when it comes to consumer rights, says Ryan.

Banks have huge funds at their disposal to pursue legal cases, even badly-argued ones. Bank customers simply run out of funds and throw in the towel.

Most mortgage agreements are further tilted towards the banks by allowing them to load legal and other costs onto customer accounts, thereby driving them further into arrears.

It’s a losing proposition.

In the end, consumers who feel they have a good case against the bank face an uncomfortable dilemma: either pay the bond or use the money to fight the case in court. Should they choose to continue fighting the legal battle, they will fall further into arrears.

For the couple in the FRB matter, their legal victory is far from decisive. They must now deal with the bank’s appeal and, should they win, another possible appeal to the SCA. All of which comes at tremendous cost.

Another home loan case, this time involving Nedbank, was decided last month in the Gauteng High Court (Pretoria).

Again, the homeowner emerged victorious after falling into arrears on two mortgage loans over two properties. This homeowner told the court he would sell one of his properties and use the proceeds to settle the arrears on the other. In June 2021, the arrears amounted to R29 000 on the second property, and the homeowner paid over R60 000 to the bank.

On this basis, he argued, his mortgage loan had been reinstated, and the bank had no right to execute against (auction) the property as this would amount to arbitrary deprivation of property.

In February 2023, the bank issued a fresh section 129 notice (as required under the NCA) to the homeowner demanding R154 571. The homeowner paid over R150 000 to the bank on 8 March.

Despite this, the bank continued to pursue him in court, seeking a default judgment against the second property, claiming he was now still R75 000 in arrears.

Nedbank’s accounting was all over the place, and the judge called it out on this, particularly on the addition of untaxed (unauthorised) legal fees being added to the client’s account, observes Ryan.

The homeowner relied on the Nkata v FNB case, which ruled in 2016 that credit agreements are automatically reinstated on payment of the arrears and reasonable, agreed costs.

In this case, the legal fees were not agreed upon or taxed (authorised), and the bank had not notified the homeowner of the ‘nature, extent or balance of legal costs’ on the date he made the R150 000 payment.

Nedbank’s case was dismissed, and costs were awarded against it.

Consumer advocates complain that banks simply refuse to provide a proper breakdown of the claimed arrears. This violates the ‘equivalence of arms’ principle that undergirds our legal system, notes Ryan.

He points out banks can sometimes obtain judgments based on incorrect ‘certificates of balance’, relying on the public’s lack of knowledge of legal and accounting processes.

Another prejudicial practice is allowing banks to sue clients in the (more expensive) High Court rather than the Magistrate’s Courts.

Lawyers earn far less in the Magistrate’s Courts than in the High Courts, but judges still allow these cases to be heard in the higher courts – for the ultimate cost of the debtor.

Ryan argues the refusal of the SCA to force the banks to sue out of the (cheaper) Magistrate’s Courts has come home to roost.

It forces consumers to defend their cases in the High Court, leaving them in the unenviable position of either paying their debts or paying lawyers’ fees to defend.

The SCA ruled in Standard Bank and Others v Thobejane in 2021 that regardless of in which court a case is argued, the poor require appropriate expertise.

This, claims Ryan, raises the ‘equivalence of arms’ principle – the idea that the rights of the parties must be represented equally in court. The SCA’s reliance on NGOs and legal aid bodies to remedy this wholly unequal fight is not realistic, says Ryan.

'To truly level the playing field, debtors need highly specialised legal counsel with deep banking and consumer law knowledge. You can be sure that lawyers with this level of knowledge are virtually all in the employ of the banks. And they need to be able to argue their cases in the Magistrate’s Courts, not the High Courts.'

Full analysis on the Moneyweb site