FNB to reassess all bonds granted

06 August, 2008

First National Bank issued a comment on 05 August advising that it would look to individually reassess mortgage bonds that the bank had previously granted to successful borrowers in instances where the property had not yet been registered.

Whilst the Ombudsman for Banking Services, Advocate Clive Pillay, agrees that it is sound and prudent to reassess bonds granted in principle, he has cautioned that each matter be reassessed in a manner that does not unduly prejudice the customer.

Pillay cites the hypothetical example of a bond being granted to a prospective purchaser. The purchaser then pays a deposit to the seller and whilst the parties are awaiting registration, the bank withdraws the bond, either completely, or offers the purchaser a smaller bond. Because of the bank's decision, the purchaser is unable to proceed with the transaction. The seller, however, insists that the purchaser fulfils his contractual obligations. The seller retains the deposit paid and sues the purchaser for the balance of the purchase price.

Clearly, this scenario will severely prejudice the purchaser and the bank should consider alternatives to assist the customer.

The reassessment is done by the bank to determine whether the customer still qualifies for the bond in the amount granted, in other words, whether the customer will not be over-indebted by the granting of the bond, and whether the bank will not be guilty of granting credit recklessly. This exercise by the bank is in compliance with the provisions of the National Credit Act.

The Ombudsman for Banking Services is a free dispute resolving service to all bank customers, and we encourage customers that have lodged complaints with their banks and are not happy with the outcome to approach the office.