For many years, Lamna has been warning South Africans about the pitfalls of so-called “pawn-and-still-drive-it” car loan schemes. For example, see our article from 2019.
In 2023, The Daily Maverick has amplified this warning in its article Pawn-while-you-drive: Be warned – you won’t get your car back without a fight.
Concerns raised by The Daily Maverick
As published in The Daily Maverick, the National Credit Regulator (NCR) has referred to pawn and still drive it schemes as “scams”.
Dishonest lenders are circumventing provisions of the National Credit Act (NCA) by ostensibly offering pawn services to consumers when, in reality, they are taking ownership of people’s vehicles – and then charging them to rent their own cars.
The article notes the following:
“The lenders essentially take ownership of the consumers’ vehicles for the entire loan period. Should consumers fail to repay the loans, the lenders retain possession of the vehicles. And in most cases, consumers lose their vehicles.”
As per the NCR, “pawn-and-drive transactions are credit agreements, not pawn transactions, and subject to the NCA”.
According to the Act, lenders operating in this space are required to:
- register as a credit provider
- conduct affordability assessment
- provide consumers with quotations and statements prior to signing an agreement.
However, pawn and drive it lenders in South Africa are not meeting these mandatory requirements.
By concluding “sale agreements” and “lease agreements” with consumers, they are circumventing the provisions of the NCA.
From a customer’s perspective: an example
Andile is one of a multitude of South Africans who have fallen prey to pawn-and-drive schemes. He borrowed R50,000, agreed to a monthly “rental” of R7,500 to use his own vehicle and handed over the car’s registration papers.
After paying more than R75,000 in monthly instalments, Andile defaulted. He faced a barrage of threatening demands, and was tracked down by two men sent to repossess the vehicle.
The “police” turned up and escorted Andile and a few family members to the lender. A demand for a further R88,000 was made to release the car. Andile was unable to pay this sum.
With threats against him and the fact the “police” had subsequently disappeared, Andile had no option but to surrender his vehicle.
All this happened without a shred of documentary evidence being presented to Andile – a statement of account, breakdown of costs or letter confirming repossession of the vehicle.
Our position at Lamna
At Lamna, we offers loans against cars (and other assets of value) in several cities across South Africa.
Those offering “pawn and still drive it” schemes are our competitors – BUT it’s not just because of our own financial interests that we so strongly advise against this loan type. Instead, it’s because we’ve heard too many stories of customers losing their vehicles or being scammed.
These stories ultimately harm the reputation of all businesses in our industry.
This is unfair because there are finance providers in South Africa that operate in an ethical fashion.
How our loans against cars work
At Lamna, we offer conventional asset-based loans, which are loans secured by assets of value (such as cars). We do not offer pawn and still drive it arrangements. Instead we hold any asset provided as collateral in safe storage for the loan duration.
Our normal process does NOT involve taking ownership of customers’ vehicles, or charging customers rent to use their own possessions.
In extraordinary cases of loan defaults that prove impossible for us to resolve, we may be obliged to take steps to recoup our losses. However, this isn’t in our or our customers’ best interests. We do everything we can to prevent this.
Lamna is a registered credit provider (registration number NCRCP7428) and complies fully with NCR regulations. Contact us for more information or apply now for a legal and much safer alternative to a pawn and still drive it scheme.
Client borrows R10,000 for 90 days.
Total Cost of Loan
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.