Rudco Homeloans at 6%

[Harryf]

Thanks for the welcome, Dave!

Now would those limits be applied against the funds valued in Rands or in the currency of source over the period?

To answer your question: On the exchanged Rand value of the currency. Any change in conversion rate will only apply once the money goes back to where it came from - and is not interest.

It has not been touched upon during the post as far as I can recall, but even more inherent issues that the investor should have taken into consideration (i.e. should the person/entity be from outside our borders, by the way - it's not been confirmed, has it?), are the following.

Let's assume the worst: Our dear ol' Rand will DEvalue against this "other currency" by 10% per year. This simply boils down to the following: If more money is brought into SA 365 days after the first amount, that money will earn 10% more interest than the money brought in a year earlier (same interest rate applied against 10% more Rand) - and there's nothing the investor can do about earning more interest on the original first investment, for the post states that the repayments are at a fixed rate. Only when the money is taken out of the country will the devaluation become a gain for the investor.

Because we've come to assume that the "scheme" was originally built on low (even 0%) interest plus a high(ish) admin fee, any "potential loss in interest earnings" (to the entity bringing the money into SA) can only be calculated against the interest portion of the combined payment, as the admin fee is not affected by this change. This simply means that the (still only "potential"!) INCOME loss will be less than 10% for whoever earns the "payment".

Remember, this is purely academical to show "potential losses" due to the SA currency devaluating. The investor could have earned more interest had it waited for a year - and then another and another etc. The point is purely to ask a question: Is potential loss of income earned important, or is any gain in the underlying value of the investment enough to offset any such potential future losses?

The opposite applies if our Rand strengthens, obviously.

I am getting hugely philosophical about something that may have worked great had it not been for so many downsides. I'd also like to dream up such "schemes", but would not like to be found guilty of transgressing some Act or Law somewhere, and even more importantly, I'd like to make sure that the receivers of these benefits that I dream up are not simply swindled into something because I am good at weaving great tales, and the only one to benefit is me.

I will (still) not touch Rudco.

But I've learnt a lot! Thanks!

[duncan drennan]

Now I have done some work on the consequences of unlawful credit agreements in our wiki, and if I've got it right - what Rudco might lose, the state shall gain.

Now this is quite interesting. Here is the part that I'm wondering about,

(5) If a credit agreement is unlawful in terms of section 89, despite any provision of common law, any other legislation or any provision of an agreement to the contrary, a court must order that-

(c) all the purported rights of the credit provider under that credit agreement to recover any money paid or goods delivered to, or on behalf of, the consumer in terms of that agreement are either-

(i) cancelled, unless the court concludes that doing so in the circumstances would unjustly enrich the consumer; or

(ii) forfeit to the State, if the court concludes that cancelling those rights in the circumstances would unjustly enrich the consumer.

So, let's dream up a scenario: consumer buys a house and receives a loan from Rudco. All is well, house is transferred and things are hunky dory. The state then finds the agreement to be "unlawful" ito the NCA.

I wonder what the court would find in this case? It seems that the consumer is being unfairly enriched (they just got a house for free), but what about the poor guy who is now stuck without a roof over his head? Would the state evict them? What kind of just mercy would be shown to the consumer?

I think the simplest would be if the consumer could transfer the loan to another bank (and the state would then get the value of the original loan), but what if the consumer does not qualify for a loan under the NCA? Would the state possibly take on the role of mortage loan provider in this case?

[Dave A]

I think Harryf covers what has always been a concern of mine if we are to believe the trick is being done with offshore funding. Someone has to carry the exchange rate risk.

As for "who would carry the mortgage." If the loan funds are already advanced, then the seller has their money. All that needs to be dealt with is how much the purchaser must pay. And given that no funds need to be raised, if I was the state I wouldn't hesitate to take the installments, no matter what the court might deem them to be.

It really gets interesting if the loan funds have not been paid out yet, though. I could see some very burnt fingers.

[duncan drennan]

Rudco has one week left to refund all of its clients...

Rudco Finance Company - famous for its elusive 6% home loan offering - has until the end of the month to return instalments to its clients.

Two months ago Rudco was found by the National Credit Regulator (NCR) to be in contravention of numerous sections of the National Credit Act (NCA) and also its predecessor, the Usury Act.

One of the main problems with Rudco's scheme was that it was accepting instalments for loans that had not yet been granted.

The NCR issued Rudco with a compliance notice ordering it to return illegal instalments and also to operate its business in a manner that complies with the Act.

Rudco has told the NCR that it will comply with the notice and return money to clients. This must be done by October 31. On top of this, Rudco must provide the regulator with an independent audit report verifying that it has fully complied with the notice and made the required payments to clients. This audit report must be filed by the middle of November.

Full article on MoneyWeb

Then, further on in the article the spiky bit,

"All the indications are that Rudco will comply," says Augustyn. However, he concedes that he has not seen evidence that Rudco does indeed have the necessary cash to refund all its clients.

[QUINN]

I stand corrected

Noose tightens on Rudco
If Rudco doesn’t repay clients by Monday, it will automatically be guilty of a criminal offence.

Julius Cobbett
23 Nov 2007 16:37
Rudco Finance Company has until midday on Monday to repay instalments it allegedly received in contravention of the National Credit Act. If it fails to repay the instalments, it will automatically be guilty of committing a criminal offence.

On Friday, the National Consumer Tribunal, issued an order that Rudco comply with a previous agreement it had reached with its nemesis, the National Credit Regulator (NCR).

Rudco has failed to meet previous deadlines given to it to repay clients. But Friday's order gives the NCR greater powers to act against Rudco, says Jan Augustyn, an advocate at the credit regulator's investigations and prosecutions department.

Augustyn regards Friday's order as a victory for the NCR. "With that order in hand we have the leverage to take action," he says. "Apart from non-compliance with the order being a criminal offence, it also enables us to pursue other avenues."

Augustyn declined to state which "avenues" these might be for fear of making his master plan public. But he warns that the NCR intends "using all means available."

Rudco and the NCR have been at loggerheads since August this year. This was when the NCR found that Rudco had breached numerous sections of the National Credit Act and its predecessor, the Usury Act. The NCR said it had investigated Rudco after it had received a number of complaints and enquiries from the public.

Moneyweb has published a series of articles on Rudco, the first of which appeared on July 5 this year.

Rudco's modus operandi is to lure prospective clients with the promise of extremely attractive interest rates. However, it accepted "instalments" for the loans without first granting them. This is illegal.

By its own account, Rudco owes instalments worth R7m to about 1 800 clients.

Despite the warnings, a handful of die-hard brokers continue to actively promote Rudco products. One such broker is Gerald Labuschagne of Total Investment Solutions; another is Gary Audie of FinFix Finance.

However, not all brokers are still believers. Former Rudco broker Bill Wentworth was once an ardent supporter, and defended the company in a blog entry titled Response to negative publicity. The blog entry has since been removed from the public domain, but a copy is in the possession of this journalist and is available on request.

In an e-mail to Moneyweb yesterday, Wentworth noted: "I wasted money in doing business with Rudco. Fortunately I have no ties to them and can happily distance myself from Rudco."

Meanwhile, financial journalist Angelo Coppola has discovered a potential Rudco offshoot. In a piece titled Rudco Resurrected?, Coppola reports that a company called the Intel Property Group, "is set to become the property business or at least a division of Rudco with one common director." Intel will apparently be launched at the end of the month.

The Rudco collection (in chronological order):
Home loans fixed at 6%

6% home loans: with salt, not ice

Regulator to probe Rudco

NCR clobbers Rudco

Hundreds applied for Rudco loans

Rudco madness rages on

Rudco has a week to pay up

Rudco: where's the money?

[Dave A]

The effectiveness of regulation cannot be known for sure until fully tested in courts of law. Perhaps we're in for the first test as to just how well drawn up the National Credit Act really is.

[Debbiedle]

I may well be way off mark here but is this not also what Saambou were doing?

I know I am eagerly anticipating a credit on my home loan account for something or other. In fact, was this not the way all banks approached our home loans?

[QUINN]

Debbie did you use to be with Saambou Bank?

[Debbiedle]

Yup, had my bond with them.

[Dave A]

I may well be way off mark here but is this not also what Saambou were doing?

I think that was a case of "miscalculating" the interest charged rather than fees taken up front without funds being advanced as yet. The Ursory Act provided for such instances of interest overcharging rather well, although I believe it is a beast to calculate and prove.

Isn't the Saambou business all wound up yet?

[Karenwhe]

Rudco latest

I think anyone contemplating Rudco services, should have a look at this article.

http://www.moneyweb.co.za/mw/view/mw/en/page91?oid=174345&sn=Detail

The product sounded good, but sometimes things that sound too good to be true are probably not true.

Hope this helps.

[Dave A]

Great link - Karen. Thanks.

WOW! The National Credit Regulator has successfully obtained a liquidation order against Rudco! Clearly the NCR means business.

Two questions arise:

• Will Rudco clients be getting any money back?
• How did Rudi end up being the sole director given this little snippet from the same story?

In court documents it emerged that Rudco CEO Rudi Visagie is a convicted criminal. He was convicted of theft in 1995 and was barred from being a company director. Despite this, he became the sole director of Rudco.

[Karenwhe]

I don't really think people will get their money back by the state of things right now.

I heard somwhere that most of them already had financial trouble and this was a major reason for changing to Rudo.

Since Rudco did not take over the bonds, these people are likely to be repossessed by the respective banks. I think one article in the media stated that Rudco has/had 1,800 clients. That is a bit sad.

What I would like to know is why and how did the National credit regulator give temporary license to Rudco as a credit provider without background checks? If they don't protect the public from scams and give licenses easily, then who will? No one can possibly expect the public to do the background checks on credit providers.

[Skulk]

Rudco

Yip, that was a near miss for many.

A 6% bond opportunity means easy money for all of us.

I registered an enquiry with Rudco but first ran a credit report on them, their directors and their personal records.

Needless to say, the informaton was negative and I did not proceed with my application.

Much to my surprise though, I received a phone call from a very irate Rudi, demanding an explanation as to "waarom krap jy in my persoonlike sake rond!"

My response that surely he has nothing to hide was met with a blunt silence.

By the way, he is not the only director, the other one is a Ms Wyeth - according to the credit report anyway.

Liquidating the company is one thing. Question is, what does the NPA intend doing with Rudi, given that he has again broken the law? Will he be prosecuted or just rapped over the knuckles?

Sadly, the registrar of companies is still failing the public where they allow unrehabilitated insolvents and convicted criminals to be company directors.

This is not a free punt but www.deedsearch.co.za provides and excellent service to expose these individuals and is worth joining.

[anakin]

Believe it or not!

Rudi Visagie is the guy who lived right beside us - my neighbour. The front door was left wide open during the night and we contacted his wife to find out. She asked us to close the door. I just found out the guy is Rudco's Rudi Visagie.

Police is looking for him now. His son has been arrested.