Credit watchdog, vehicle financiers head to Constitutional Court over disputed ‘on-the-road’ fees

The National Credit Regulator (NCR) and three of the country’s biggest vehicle financiers are headed for another legal showdown over “on-the-road” (OTR) fees that the regulator argues are unlawfully charged under the National Credit Act.

The NCR has applied for leave to appeal against a Supreme Court of Appeal (SCA) ruling involving Mercedes-Benz Financial Services, BMW Financial Services and Volkswagen Financial Services in a case that could shape how fees and ancillary costs are treated in the credit market.

At the heart of the dispute is whether OTR fees form part of the principal debt financed by vehicle finance companies or constitute additional charges that are prohibited unless they fall within categories permitted under the NCA.

OTR fees generally cover costs associated with putting a vehicle on the road, including registration and licensing, number plates, fuel, predelivery inspections and vehicle preparation.

The NCR argues that credit providers cannot simply incorporate these charges into the amount financed and treat them as part of the principal debt. It contends that the NCA regulates what credit providers may charge consumers under a credit agreement and that OTR fees fall outside the permitted additional charges.

The three financiers reject that interpretation. They argue that OTR fees are agreed upon between dealers and consumers as part of the vehicle transaction before finance is arranged and that they merely finance the resulting debt.

Mercedes-Benz Financial Services (MBFS) says the OTR fee forms part of the principal debt reflected on the dealer’s invoice and that it finances the total amount payable by the consumer. BMW has similarly argued that it merely finances an amount already agreed between the dealer and consumer, while Volkswagen maintains that it does not impose a separate OTR fee but finances the total purchase price agreed by the parties.

The National Consumer Tribunal initially found that Volkswagen had contravened the NCA by charging OTR fees.