What is the right to surrender goods?
The consumer has a right to return movable goods to the credit provider to have them sold so that the outstanding amount can be settled.
Which consumers may exercise this right?
- Only a consumer in an installment agreement
An installment agreement is a credit agreement where:
- There is a sale of movable property (such as a motor vehicle, fridge, television, cellular phone, or furniture)
- The price is paid in periodic payments (e.g. monthly)
- Interest and fees are charged
- The consumer receives the right to use and possess the property
- The consumer becomes the owner of the property once it has been paid for.
What does this right entail?
- The consumer can, on his own, decide to return the goods to the credit provider if he/she is not in breach of the installment agreement.
- The movable goods returned must not be defective (another process is followed for defective goods).
In the process of surrendering goods, the:
- Consumer must notify the credit provider (verbally or in writing) that he/she wants to terminate the credit agreement;
- Goods must be returned to the credit provider
- Cedit provider must notify the consumer of the estimated value of the goods (within 10 business days from receiving the goods)
- Consumer may (within 10 business days) withdraw the surrender of goods after receiving the notice of the value of the goods, and resume possession of the goods, or the credit provider must sell the goods for the best price and use the proceeds to credit or debit the account of the consumer
- Credit provider must send the consumer a notice setting out the settlement amount before the sale, the amount received from the sale, and the net proceeds of the sale after deductions (such as the cost of the sale)
For example, the consumer buys a fridge for R5000 (this amount includes the principal amount plus interest and fees), and she agrees with the shop to pay it off at R500 per month for 10 months (1 January to 1 October). The fridge is delivered on 1 January, and on 1 June the consumer decides to upgrade her fridge. She returns the fridge on 2 June and tells the shop about her intention to have the fridge surrended. By no later than 12 June, the shop informs the consumer that it can sell the fridge for R3000. The consumer agrees. Once the shop sells the fridge, it sends the consumer a statement as follows:
- Settlement amount (4 months outstanding 1 July to 1 October x R500) = - R2000
- Sale of fridge = +R3000
- Reasonable costs of the sale = - R500
- Amount due to the consumer = +R500
If the consumer has a credit agreement with other credit providers, the amount outstanding on the consumer's account that has been surrended can be distributed amongst other credit providers, or the money must be returned to the consumer.
If there is a shortfall on the consumer's surrended account, the credit provider can claim it from the consumer (the credit provider can obtain a judgment from a Court for the shortfall where interest may be charged).
If the consumer is not satisfied with the sale of the goods, he/she can resolve the dispute with the credit provider, resort to alternative dispute resolution, or approach the National Consumer Tribunal for assistance (which LegalWise can assist with).
The National Consumer Tribunal may award the consumer an additional amount if it is not satisfied that the goods were sold as soon as reasonably practicable for the best price.
- SURRENDER: to return goods
- CREDIT PROVIDER: a lender of goods
- CONSUMER: a borrower of goods
- CREDIT AGREEMENT: an agreement where payment of goods is delayed
This is what LegalWise can help you with:
- An explanation of your right of surrender
- Write a letter to your creditor informing it that you will exercise your right of surrender
- Assist you with a dispute should your creditor deny you the right of surrender, or refuse to pay the outstanding amount owing to you