FNB faces R158,8 mln bond suit

2011-08-05 00:00

ABOUT 2 400 mostly low-income homeowners who got loans from Saambou Bank in the 1990s are claiming damages of more than R158,8 million from First National Bank (FNB).

The homeowners, from all over South Africa, claim the bank overcharged their bonds by tens of thousands of rands over the years.

FNB took over Saambou’s bonds in August 2002 after the bank was placed under curatorship in February 2002.

Graeme Falck, the claimants’ attorney, has been serving summonses due to overcharging since July 2009, and after negotiations with the bank’s attorneys they finally have a date in the North Gauteng High Court.

“I suspect that this is probably the largest class action against a bank in the history of South Africa,” said Falck.

“We are negotiating with FNB’s legal team in an attempt to ease the task of the court by agreeing that the result of a few selected claims would set a precedent for the other claims that we made. Depending on how the matter is settled, the final judgment would therefore apply to the other claims …”

The homeowners have lodged a claim for the excess interest they had been charged and paid — on average R44 230 per bond — plus 15,5% interest per year until the claim is paid.

In court papers the home owners say Saambou had increased the interest rate on their bonds when the Reserve Bank increased its repo rate, but didn’t reduce it again when the Reserve Bank’s rate decreased.

Saambou had also calculated interest on a monthly basis instead of doing it on a daily basis as the law required.

The homeowners are all clients of the Cape Town-based cost consultant Emerald van Zyl, who appointed a team of experts to recalculate the interest rates on the bonds.

The average value per bond of the 2 400 bonds is R68 734.

While legal action around the bonds was pending penalty interest was also charged on the bonds, which increased the average overcharge per bond to R66 177. The total amount overcharged on the 2 400 bonds in the claim is R158,8 million.

Falck says that if the claim were to succeed other Saambou bondholders would also qualify to bring similar claims.

“Obviously FNB will be under no obligation to pay out if the claims aren’t instituted.”

Prospective claimants would also need to have the interest rate on their bonds recalculated, in the same way as Van Zyl has already done with the 2 400 bonds in this case.

It is understood there are 2 000 other Saambou bonds being recalculated, which could increase the claim amount.

FNB spokesperson Virginia Magapatona said the bank won’t comment on interest rate calculations.

“In June 2006 FNB alerted customers and the media to these errors and set about providing affected customers with reimbursements. Certain customers have elected to dispute the recalculations and other matters related to Saambou home loans that were transferred to FNB. In the light of pending litigation FNB declines to reply to media questions relating to these issues,” she said.

Nicky Lala-Mohan, general manager of the Banking Association of South Africa, said the case is an isolated incident given that it was “historical baggage from Saambou days”.

He said bondholders who suspect they were overcharged should approach the Ombudsman of Banking Services or the National Consumer Tribunal. The case is being heard in November.

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