So-called “on the road fees” (ORT fees), where vehicle credit providers add these extras to the financing deal, came under the legal spotlight in the Supreme Court of Appeal (SCA), with the National Credit Regulator (NCR) wanting to halt this practice.

The ORT fees are usually added to the financing agreement, which includes additional fees covering licensing, pre-delivery inspections, roadworthy certificates, number plates, and additional fuel.

The credit regulator appealed against the orders of the majority of the full court (three judges) of the Gauteng High Court, Pretoria, in which it was found that the credit providers did not charge consumers the OTR fees. 

The High Court found that vehicle financing providers merely financed the purchase of vehicles on credit, the purchase price of which included the OTR fees agreed upon between the consumer and the car dealers. 

The credit regulator, however, maintained that Volkswagen Financial Services SA, BMW Financial Services SA, and Mercedes-Benz Financial Services SA have unlawfully charged consumers OTR fees when financing vehicle purchases.

It earlier issued compliance notices to these financial institutions, in which it stated that they had contravened sections of the National Credit Act, as these charges are usually negotiated between the dealership and the client. According to the regulator, these fees were not listed among the Act’s permissible charges.

The credit providers successfully challenged the compliance notices, which were set aside as the High Court found that the credit providers did not contravene the Act. This, in turn, prompted the credit regulator to turn to the SCA.

The issue was whether the OTR fees, when financed by credit providers, did contravene the Act.

The regulator’s arguments included that the credit providers charged consumers the OTR fees despite not being chosen by the consumers to act as their agents in arranging the service for which the fees were charged. 

According to the regulator, the Act permits the consumer to be charged the principal debt, which is the amount deferred in terms of the credit instalment agreement.

Since that agreement does not include the principal debt items making up the OTR fees not listed in the Act, these items cannot be reflected in the purchase price under the definition of a credit instalment agreement. Thus, they cannot be charged as part of the credit instalment agreement, it argued.

The credit providers, in turn, argued that they did not set the OTR fees, which are determined by the dealers in agreement with the consumer. It said that, like all other extras, the consumer may request the dealer to include the OTR fees as part of the principal debt. 

Judge Tati Makgoka, who wrote the SCA judgment, said the credit providers’ contention that they only finance the credit agreement and have no responsibility to scrutinise the agreement between the dealer and the consumer is unsustainable.

“Unlike dealers, who are not bound by the Act, credit providers are subject to it. They are required to ensure that the amount they finance as part of the deferred amount in the credit agreement complies with the provisions of the Act,” he said.

While the SCA did rule that “on the road fees” may be charged, credit providers must adhere to strict rules. These include that OTR fees added to the purchase price must be specified, with the cost of each item listed.

Consumers must also be asked whether they want to pay cash for the OTR fees or have them financed as part of the vehicle’s deal. 

Judge Makgoka said consumers must at all times be told about the total costs they are facing, which include interest on the total amount.

zelda.venter@inl.co.za

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