Can a bank refuse to hand over a car's logbook?

Can a bank refuse to hand over a National Traffic Information System (Natis) document to a car owner who never fully paid off the car, even if that debt has prescribed?

It's a tricky question, and one that crops up in my inbox fairly regularly.

More than 20 years ago, car owners were issued with registration certificates or "logbooks", whether the car was financed or not.

But thanks to an overhaul of the licensing system, when a car is financed, the registration certificate - the Natis document - is now given to the financing bank, which is listed as the "titleholder".

When the car is paid off, the bank sends the Natis document to the consumer or owner, who must then re-register the car in his or her name, as both owner and titleholder. For a fee, of course.

But, without that document, there would be no further change of ownership.

So what happens if the owner defaults on the car payments and the bank doesn't recover the debt, or get the owner's commitment to pay it, within three years of the last payment, meaning the debt prescribes?.

Iris C faced this about 18 months ago.

In an email to" In Your Corner", she wrote:

"I have a 1997 Hyundai Accent, which is basically scrap as its engine needs to be replaced. I stopped [making] the repayments after I was retrenched, but not much was owing at the time, and the bank stopped pursuing the debt.

"Having just lost my husband I was offered an amount for it, so I contacted Wesbank for the logbook and was told the amount owing - R10 000 - had prescribed but that I should 'make an offer' if I wanted the logbook.

"I know that one wrong does not make a right, but Wesbank had years to pursue this and they did nothing. Are they allowed to do this?"

An attorney I spoke to at the time was of the opinion that it wasn't.

"If there is no debt then the client is not in default and the default clauses would not apply."

Iris offered the bank R2000, but was told it wasn't enough.

"In Your Corner" took up the case with Wesbank, which was firmly of the view that it had a right to retain the registration document, given the outstanding payment.

The bank offered to settle the matter and release the registration document for Iris's car if she paid half the debt - R5000. She chose not to do this.

I was happy to see the issue - featured in one of the Ombudsman for Banking Services' case studies - highlighted in his recently released 2016 annual report.

A man complained to the Ombud's office after his car finance bank refused to release his Natis document, despite his debt having prescribed.

The bank argued that its claim for the amount owing on the agreement might have prescribed but its claim to the car in question had not.

• It'll make you go spareI don't know how the car spares industry got the idea that its products are exempt from the warranty provisions of the Consumer Protection Act, but six years on it's getting really tiresome. 

"Our office investigated the matter and studied the case of Absa Bank v Keet of 2015, in which the Supreme Court of Appeal found that a vindicatory claim, which is a claim based on ownership of a thing, cannot be described as debt, as envisaged by the Prescription Act.

"So even though the monetary debt had prescribed, the bank still had a claim over the thing, being the vehicle.

"In light of the judgment, it was concluded by our office that the bank was under no obligation to release the Natis documents as its claim to the motor vehicle had not prescribed," the Ombud said.

So there you have it.

If you stop paying the instalments on your car and for some reason the financing bank doesn't recover the debt, or get your undertaking to pay within three years, that debt will prescribe, and there can be no "blacklisting" on your credit record pertaining to it.

But you'd better be prepared to hang on to that car for the rest of its working life because the bank is unlikely to surrender its registration document and, without that, you can't legally sell it.

WHEN IS A DEBT PRESCRIBED?

A debt has prescribed if, in the past three years, you have not acknowledged it in any way — promising to pay is considered to be an acknowledgement — or made a payment or been summonsed to make payment. There are exceptions — home loan debt and state-related debt, including income tax, rates and TV licences don’t prescribe for 30 years. Prescribed debt may not be listed on your credit record. Since March 2015 it has been illegal for prescribed debt to be sold or collected, meaning collectors may not demand payment of a prescribed debt. W

CONTACT WENDY:

Email: consumer@knowler.co.za
Twitter: @wendyknowler