Acceptance of Electronic Funds Transfer payment, specifically in sale of vehicles and transfer of registration on EnatisElectronic Funds Transfer (EFT), has become a popular payment method in South Africa, accepted by many in lieu of cash or cheque payments.

Many accept the printed EFT confirmation as proof of a cash payment into the bank account, especially in the sale and purchase of motor vehicles. Therefore the insistence for payment to be made there and then, and the vehicle is transferred and registered in the name of the buyer on the same day.

The abuse of EFTs made to the seller’s bank account, especially between different financial entities, is a devious manner by which the original Natis documentation or registration of ownership of a motor vehicle can be obtained on the eNatis system, with no intention to honour the actual payment.

EFT is governed inter alia by agreements between the various financial institutions. Depending on the agreement, an EFT transaction can take up to two days to actually reflect as a deposit on the statement of the seller. The risk of accepting proof of an EFT as “proof” of actual payment as if it were a cash deposit, puts the seller at a real risk of being defrauded.

Most people do not know that an EFT can be reversed within a few hours after it has been made, depending on the individual financial institute at which the account is held. Fraudsters who are au fait with the mechanics of the law and the financial systems in South Africa, use this knowledge to the detriment of others.

In the sale of a motor vehicle or any other object of which ownership is registered on the eNatis system, the Natis registration document is a very useful instrument to secure and verify payment prior to the transfer of registered ownership. The easiest safeguard against risk of loss because of non-payment is the current, valid and original Natis document, reflecting the registered owner and titleholder of the vehicle.

As long as the seller of the vehicle retains possession of the original Natis document reflecting the seller as the registered owner, no fraudster or any other person can obtain registered ownership of the vehicle. Once payment actually reflects on the bank statement the necessary documentation should be handed over to effect transfer of registration to the purchaser or his nominee. Should a seller hand the original Natis registration documents over prior to actual confirmation of payment, the vehicle can be traded and registered to any innocent third party, whilst the seller still awaits payment.

As no party to an agreement can transfer more rights than he is legally entitled to, the seller who has retained the Natis documents and registration will be able to claim the motor vehicle from any person who has such motor vehicle in his or her possession, even if the possessor at that stage has “purchased and paid” the vehicle. As long as the motor vehicle has not been transferred and registered to a purchaser who has not paid for same, the seller can safeguard himself in such a fraudulent transaction.

In the event of the payment then being not forthcoming, the rights of the seller can be enforced by means of a very simple but highly effective application to any court, which can be done ex parte, with an interim relief order for the sheriff to return the vehicle to the registered owner of the motor vehicle, and a date on which service is to be effected on the purchaser, whereafter the normal motion procedure is followed.

It is recommended to issue summons for the cancellation of the agreement, return of the vehicle, and cost and interest, simultaneously.

As long as the seller retains the original Natis documents and is reflected as the registered owner of the motor vehicle, the seller will have a prima facie right and be the entitled possessor of such motor vehicle.

A seller who has already agreed to registration of the vehicle being transferred to the purchaser prior to having payment secured, is left in a precarious position. The seller has very little hope of success against such a purchaser who had the intention to defraud. The litigation can be prolonged and costly with no guarantee of recovery of the loss.

For further reading, see Unitrans Automotive (Pty) Ltd v Trustees of the Rally Motors Trust 2011 (4) SA 35, just one of the transactions during a shopping spree of fraudulent transactions using EFTs, and other matters referred to in the judgement.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

Acceptance of Electronic Funds Transfer payment, specifically in sale of vehicles and transfer of registration on Enatis