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Cape Town - WesBank, the vehicle arm of FNB, said it doubted the authenticity and sustainability of the Satinsky Group vehicle Scheme as far back as 2011 and declined an invitation to become involved with the "Drive a new car for R699" scheme.
Responding to reports that the wheels have come off on the scheme, angering thousands of motorists who thought they would either earn while driving or earn while owning, WesBank said in a statement on Friday that the Satinsky Group's business model was not in line with WesBank's dealer strategy and not in consumers' best interests.
Fin24 has learnt that the Satinsky Group, which has close on 14 000 clients on its books, has dealings with Absa, Standard Bank and MFC, a division of Nedbank.
WesBank CEO Chris De Kock said WesBank chose not to be involved with Just Group, a subsidiary of Satinsky Group, in any way whatsoever.
His response follows a Fin24 report on Thursday that motorists who drive a car displaying advertising that states ‘Drive a new car from R699’ are up in arms after the company behind the alleged scam, the Satinsky Group, said in a statement on its website that it dissolved its management agreement with media platform company, Blue Lakes Trading and Promotions Ltd.
This means that the motorists acting as advertising service providers will not get paid according to the two options they signed up for.
The two options touted on Satinsky websites Drive a New Car and New Cars from R699 a Month are Earn While You Drive and Earn While You Own.
Read: Wheels come off on 'Drive a new car for R699'
De Kock said when Just Group approached WesBank in 2011, it was concerned about the sustainability of such a business model, as well as the ability of a foreign based marketing company, Blue Lakes Trading and Promotions, to support the needs of local customers efficiently.
"As part of our due diligence we do a detailed investigation of the financial integrity and strength of the companies involved before deciding whether or not to get involved."
In this case WesBank decided against getting involved.
De Kock said the vehicle finance firm's due diligence process indicated that the simple mathematics behind reducing an installment of R2 000 or more to the advertised R699 did not point to a sustainable vehicle finance model and structure for the consumer.
It is understood that the vehicles sold through the scheme were financed at their full retail price, without any deposit or manufacturer discounts as with normal deals.
In addition, the reported long finance periods together with high mileage conditions on the contracts make it difficult for any customer to replace such a vehicle over the average replacement period of 36 months without significant shortfalls, resulting in financial difficulties for the affected customers.
"We believe that these facts were overlooked by consumers, thus being misled by the promise of a very low installment.
"Consumers entered into these deals on the misguided belief that they would only pay the advertised installment, with the self-justification that it would fit within their available disposable income.
"However, for most of the affected customers, the full installment remained unaffordable, and recent media reports indicate that consumers' affordability could even have been manipulated to reflect a higher amount of disposable income.
"If this is true, then the credit providers may have been misled into making incorrect lending decision as well."
A Fin24 user who wish to remain anonymous told Fin24 on Friday that call centre staff at Satinsky would manipulate the clients' affordability scores in order for them to qualify for vehicle finance.
For example, she said, one client earned R8 000, but expenses for transport, food and cellphone cost would be stipulated as R1 200 in total.
De Kock said it appears that the profits from deals comprised the vehicle retail margin, as well as commissions on finance and insurance products sold by the group.
"Some of these profits also appear to have been used to fund the company's ongoing commitments but we could not see any evidence of financial reserves, proving that the company could not have sustained any long-term commitments as more customers participate in the scheme.
"It, therefore, seemed blatantly obvious that the scheme relied on these upfront profits to fund its downstream obligations, the historical traits of a true Ponzi scheme," said De Kock.
Consumers rely heavily on the trust they place on banks to thoroughly investigate their suppliers and intermediaries before making any financial commitments of this nature.
De Kock said the onus is on the bank to properly investigate firms like the Satinsky Group and their schemes before deciding to appoint it as an approved financial intermediary.
"It is a pity that so many customers are now going to pay the price of using such a scheme instead of a trusted and proven dealer model," he said.
Numerous calls for comment from the Satinsky CEO Albert Venter and other Satinsky Group representatives have still gone unanswered.
Responding to reports that the wheels have come off on the scheme, angering thousands of motorists who thought they would either earn while driving or earn while owning, WesBank said in a statement on Friday that the Satinsky Group's business model was not in line with WesBank's dealer strategy and not in consumers' best interests.
Fin24 has learnt that the Satinsky Group, which has close on 14 000 clients on its books, has dealings with Absa, Standard Bank and MFC, a division of Nedbank.
WesBank CEO Chris De Kock said WesBank chose not to be involved with Just Group, a subsidiary of Satinsky Group, in any way whatsoever.
His response follows a Fin24 report on Thursday that motorists who drive a car displaying advertising that states ‘Drive a new car from R699’ are up in arms after the company behind the alleged scam, the Satinsky Group, said in a statement on its website that it dissolved its management agreement with media platform company, Blue Lakes Trading and Promotions Ltd.
This means that the motorists acting as advertising service providers will not get paid according to the two options they signed up for.
The two options touted on Satinsky websites Drive a New Car and New Cars from R699 a Month are Earn While You Drive and Earn While You Own.
Read: Wheels come off on 'Drive a new car for R699'
De Kock said when Just Group approached WesBank in 2011, it was concerned about the sustainability of such a business model, as well as the ability of a foreign based marketing company, Blue Lakes Trading and Promotions, to support the needs of local customers efficiently.
"As part of our due diligence we do a detailed investigation of the financial integrity and strength of the companies involved before deciding whether or not to get involved."
In this case WesBank decided against getting involved.
De Kock said the vehicle finance firm's due diligence process indicated that the simple mathematics behind reducing an installment of R2 000 or more to the advertised R699 did not point to a sustainable vehicle finance model and structure for the consumer.
It is understood that the vehicles sold through the scheme were financed at their full retail price, without any deposit or manufacturer discounts as with normal deals.
In addition, the reported long finance periods together with high mileage conditions on the contracts make it difficult for any customer to replace such a vehicle over the average replacement period of 36 months without significant shortfalls, resulting in financial difficulties for the affected customers.
"We believe that these facts were overlooked by consumers, thus being misled by the promise of a very low installment.
"Consumers entered into these deals on the misguided belief that they would only pay the advertised installment, with the self-justification that it would fit within their available disposable income.
"However, for most of the affected customers, the full installment remained unaffordable, and recent media reports indicate that consumers' affordability could even have been manipulated to reflect a higher amount of disposable income.
"If this is true, then the credit providers may have been misled into making incorrect lending decision as well."
A Fin24 user who wish to remain anonymous told Fin24 on Friday that call centre staff at Satinsky would manipulate the clients' affordability scores in order for them to qualify for vehicle finance.
For example, she said, one client earned R8 000, but expenses for transport, food and cellphone cost would be stipulated as R1 200 in total.
De Kock said it appears that the profits from deals comprised the vehicle retail margin, as well as commissions on finance and insurance products sold by the group.
"Some of these profits also appear to have been used to fund the company's ongoing commitments but we could not see any evidence of financial reserves, proving that the company could not have sustained any long-term commitments as more customers participate in the scheme.
"It, therefore, seemed blatantly obvious that the scheme relied on these upfront profits to fund its downstream obligations, the historical traits of a true Ponzi scheme," said De Kock.
Consumers rely heavily on the trust they place on banks to thoroughly investigate their suppliers and intermediaries before making any financial commitments of this nature.
De Kock said the onus is on the bank to properly investigate firms like the Satinsky Group and their schemes before deciding to appoint it as an approved financial intermediary.
"It is a pity that so many customers are now going to pay the price of using such a scheme instead of a trusted and proven dealer model," he said.
Numerous calls for comment from the Satinsky CEO Albert Venter and other Satinsky Group representatives have still gone unanswered.
