A financial scam disguised as a loan scheme that steals homes from poor people has been taken to court in what may expose alleged complicity by major banks in the scheme.
This is playing out in a case filed in the Grahamstown High Court by the Legal Resources Centre (LRC) on behalf of the Tshatshu family.
The LRC was approached to intervene by the Tshatshu family who stand to lose their home due to a fraudulent lending scheme, approach it.
At the centre of the scheme is a company under liquidation, Dream World Investments, and their agent, also under liquidation, Asset Management Specialists (AMS). Both are cited as respondents in the matter alongside Standard Bank.
In a statement released last week the LRC explains that the Tshatshu family entered into an agreement to acquire a loan in an amount of R100 000 from Dream World Investments. “AMS marketed these loan schemes particularly at people who had been black listed by the credit bureau and who owned property. Unbeknown to them, as security for the loan, the Tshatshus signed documents which authorised the transfer of their home to Dream World.”
The LRC statement adds that the Tshatshus believed they were signing documents soliciting a loan and the house was being used as security for the repayment of the loan. At no point were they led to believe that they were selling their house. If they had been, they would not have signed the documents.
To finance their purchase, Dream World then acquired a loan from Standard Bank secured by a mortgage bond on the Tshathu home. The scheme envisaged that the Tshathsus would pay “rent” on the property and Dream World would use this to pay their monthly bond instalments to Standard Bank. In due course, Mrs Tshatshu stopped making monthly payments and Dreamworld stopped paying its bond.
In 2007, the Asset Management Specialist companies, including Dream World Investments, were liquidated. The liquidators first offered the Tshatshus their home at the price of the outstanding bond, which was in excess of R600 000. The loan they had received from Dream World was R100 000. They could not afford this price and their home was sold on auction. The Tshathus approached the LRC after they were faced with an application from the purchaser to evict them from their property.
The statement adds that Standard Bank argues that the home was legally sold to Dream World and that it has a right to benefit from the security of the registration of a mortgage bond for the payment of the loan.
The Tshatshus seek an order to declare the agreement concluded with Dream World invalid. They also seek an order declaring that they are entitled to restitution of the home, and for the Registrar of Deeds to register the property in their name within one month of the court order.
LRC explains that a similar matter went to the Supreme Court of Appeal in Absa v Moore (2015 ZASCA 171). In similar circumstances to the Tshathus, the Moore family was defrauded out of the ownership of their property by the Brusson Finance Scheme.
The SCA found that in respect of restitution of property in fraudulent money-lending schemes, such as the one run by AMS and Dream World, where there was no intention to transfer ownership of a property, the transfer and any bond registered by the transferee over that property has no effect.
The LRC says the question that the Grahamstown High Court must decide is whether the Tshatshus intended to transfer ownership of their property to Dream World, or whether they were defrauded into signing the documents that resulted in the transfer of their property.
The matter will be heard on 17 March 2016.
A search of the South African news media platforms will suggest that such a scam is becoming widespread.