Volkswagen, Mercedes and BMW win SA court battle over fee refunds to car owners

The high court has ruled that VW, Mercedes-Benz and BMW did nothing wrong by financing on-the-road fees.

• The North Gauteng High Court has ruled that the financing arms of Volkswagen, Mercedes-Benz and BMW did nothing wrong by financing on-the-road fees.
• This means consumers won’t be getting the refunds that the National Credit Regulator ordered in 2017.
• The regulator wanted Volkswagen, Mercedes-Benz and BMW finance units to refund consumers all on-the-road fees and interest charged as far back as 2007.
• For more financial news, go to the News24 Business front page.

A new high court judgment brings good news for Volkswagen, BMW and Mercedes-Benz financing arms – but vehicle owners may be disappointed that they won’t get refunds for so-called “on-the-road” (OTR) charges.

In 2017, the National Credit Regulator ordered the companies to repay so-called “on-the-road charges” (OTR fees) and other fees that were added to vehicle loans and accrued interest over the years. The OTR fees include pre-delivery safety check costs, roadworthy certificates, and fuel costs. The fees could reach up to R9 000 per car.

The credit regulator contended that these charges were not allowed in terms of the National Credit Act (NCA) and shouldn’t be added to vehicle loans. The regulator went as far as declaring that it was a criminal offence to charge these fees.

The companies appealed that order. In 2019, the National Consumer Tribunal confirmed that Volkswagen Financial Services had to repay the money – but two years later, it cancelled a compliance order against BMW Financial Services and Mercedes-Benz Financial Services.

The three companies and the NCR appealed the tribunal’s conflicting decisions in the high court.

This month, the North Gauteng High Court in Pretoria ruled that they did nothing wrong by financing on-the-road fees. They didn’t charge them – they merely financed them.

Although the NCR argued during the appeal hearings that on-the-road fees were not contained in the list of permissible charges under the NCR, the financiers argued that they operated separately from their car dealers. It wasn’t them but the car dealers who levied those fees. Therefore, it would be absurd if they ended up being the ones who have to repay the consumers.

Two of the high court judges agreed that dealers and financiers perform separate roles which complement each other.

“In light of the aforegoing, I am persuaded that the financiers have not charged consumers on the road fees when they included these fees and services in the credit agreements,” wrote Judge Patrick Malungana. “It seems to me that the financier merely finances the principal debt, which is constituted the purchase price, and other extras including the ‘on the road’ fee plus other services,” he added.

The finance houses also argued that dealers charge on-the-road costs, regardless of whether the car is purchased for cash or is financed. The liability to pay these fees does not arise from the granting of credit. The NCR had only ordered refunds for consumers whose on-the-road costs were part of credit agreements when they financed their cars.

The court said there was no merit in the NCR’s argument that the credit provider had charged consumers on-the-road fees in contravention of the provisions of the NCA because the dealer imposed that monetary liability, not the financiers. Furthermore, it ruled that financing on-the-road fees in credit agreements helped vulnerable consumers who wouldn’t have money to pay these to the dealer upfront in cash.

“I, therefore, conclude that the financiers did not contravene the provisions of the implicated sections of the NCA,” said Malungana.

Judge Anthony Millar agreed with Malungana. But Judge Graham Moshoana disagreed.

He handed down a dissenting judgment, contending that on-the-road costs are not included in section 102 of the NCA.

“Thus, as a departure point, if added to the cost of credit as defined in section 101, then the NCA would naturally be contravened thereby,” he said. He added that he sees no merit to the defence used by the finance houses that the dealers charged those items.