Consumers were the winners when the regulator won its case against Brusson Finance in the Free State High Court last week.
Brusson Finance is an unregistered credit provider that targeted blacklisted, cash-strapped members of the public.
Busson granted loans to clients on the condition they owned property with substantial equity (low mortages) and required them to sign applications forms as well as blank property transfer documents, including an offer to purchase, deed of sale and memorandum of agreement.
In most cases, clients defaulted on the payments because of the onerus repayment plan that required them to make payment of the repurchase price of the property within 24 months.
When clients defaulted, Brusson Finance had other investors with clean credit records and steady income standing by to register mortgage bonds over the properties Brusson “bought” for far less than their market value.
This reverse mortgage scheme saw Brusson scoring as the new bond amounts issued to the new clients included the cancellation amount of existing bonds plus costs, bond transfer and registration costs, arrears rates, taxes and utilities on the property, as well as a generous fee to Brusson, together with an investor’s fee.
The person who had taken out the loan was left homeless.
Unregistered credit provider
The National Credit Regulator (NCR) acted on behalf of two borrowers — Mr and Mrs Ditshego — who lost their home to the scheme. The NCR sought relief that Brusson’s scheme was contrary to the provisions of the National Credit Act (NCA) as well as common law in South Africa.
Brusson argued that it was entering into separate agreements and that it was not in fact a credit agreement. However, the ruling went the way of the NCR and the Ditshegos.
“The agreements concluded were illegal and void in terms of section 40(4) of the National Credit Act,” said advocate Jan Augustyn, manager for investigation and prosecution at the NCR.
Brusson Finance has been ordered to transfer the property back to the Ditshegos.
The court also granted an order that Brusson Finance be provisionally wound up and provisional trustees would be appointed to investigate Brusson’s affairs and deal with claims against the company’s estate.
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