# General Business Category > Business Finance Forum >  Rudco Homeloans at 6%

## Dave A

Questions are being asked how Rudco is going to finance homeloans at 6%. But reading this article, it seems that is not the only question here.




> More questions are being asked than answered about a little-known company that launched a home loan product this week offering a fixed interest rate of six percent on a 20-year bond.
> 
> This is seven percentage points below the current prime rate and 0.9 percentage points below the inflation rate. If you borrowed money at six percent, you could invest it in cash and earn almost three percentage points more.
> 
> The very best variable interest rate you can obtain from a bank or home loan finance company is 2.5 percentage points below the current prime rate of 13 percent. The average home loan rate is about 1.6 to 1.7 percentage points below prime, but fixed-rate home loans attract higher rates.
> 
> Rudi Visagie, a director of Rudco Finance Company, says that his business model is all about strategy and that "maybe" he has enough money to offer the six-percent rate to 1 000 home loan applicants. He says he does not have enough money to finance the entire home loan market, and perhaps after six months he will change the interest rate Rudco is offering.
> 
> The repo rate - the rate at which the Reserve Bank lends money to commercial banks - is 9.5 percent.
> ...

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## duncan drennan

This whole story seems a bit odd. Anyone got any ideas what strategy could make sense? Maybe the goal is to get hold of title deeds?

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## zulu

> This whole story seems a bit odd. Anyone got any ideas what strategy could make sense? Maybe the goal is to get hold of title deeds?


Hi Guys I am new to the forum but do know about Rudco. I will give all the information I have. 

The first line of defence for financial industries if they feel threatened is to attack any new business that will take away some of their market share. And this is a classical example. We also know that you cannot believe everything that the newspapers say because most of them have people from the banks etc envolved, I know I have been their working for the bank for 15 years. If Rudco has been doing business for a year why only now are they querying the business, or have the banks only now realised that they pose a serious threat and will stop at nothing to discredit them. 

About Rudco.
The R5700 so called initiation fee that they charge is not uncommon. The banks also charge an initiation fee but they add this onto your bond. Sources say that the banks will also be increasing their amounts to about the same amount in an effort to make up for the loss in income due to the new credit act. Their are a lot less loans being granted as a reult of the new act and they have to make up for it and already their is signs of increased costs.

6% ??? What the big financial guys are not mentioning is that their are various ways of getting finance at those rates, and anybody with internet can do some research, I do not know if they are using this but one way will be by "ASSET SECURITIZATION" and a lot of the major banks are using the same system Deutche Bank is one of them. It is common practice in USA but I do not think that it has been used here, maybe for that reason all the sceptics are jumping in. 

If you read the articles one major concern is that if this works that is will seriously impact on the reserve banks inflation targets, and put our banking system in shambles. And maybe that is the reason for all the negative publicity, what better way to stop your business from loosing money than to discredit your opisition. 

I know that there is definite ways of doing this, I just think that nobody has ever had the guts to come out and take on the big boys.

After speaking to some of the guys, I can honoustly say that they are realy trying to help the public, The loan agreements that the clients will sign has also been studied by a few attorney firms and no irregularities were found.

I say - if their are people out their that want to make a difference, give them a chance.

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## duncan drennan

I think it is really interesting, I just don't understand it at all. The problem (from an uneducated point of view) is that it looks too good to be true. I really would like to understand how their system works.

What are the implications for inflation and the reserve bank?

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## zulu

> I think it is really interesting, I just don't understand it at all. The problem (from an uneducated point of view) is that it looks too good to be true. I really would like to understand how their system works.
> 
> What are the implications for inflation and the reserve bank?


The implications for the reserve bank is that if Rudco can provide loans at 6% a lot more people will be able to afford loans and that will increase the money supply in the country. It is difficult to explain but a person who studied economics will understand. This will mean that their is a lot more credit causing inflation to rise, I also suspect that it will have a huge impact on property prices.

Maybe I can also try and explain he possible system- if they are using it.
Take SA Homeloans for instance they do not use monye from banks or the reserve bank. The pool their homeloans together and get finance on the money market. Investors then get a return from the monthly bond repayments.

Now in Rudco's case- Say they are acting as agents for an international company and they issue "mortgage backed securities" they can get funding at rates that less than the reserve bank. Japan currently has a lending rate of only 0.25%  a ten year "Samurai bond" has a return of +- 2.85 %. This means that international investors can get higher interest rates and they fund the bond being issued in SA. It is a lot more complicated but should give you an idea of what is possible. Banks all ove the world are using the same system.

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## Dave A

Welcome zulu. And thanks for filling in some background. Very much the purpose of raising subjects here in the first place - to give people the opportunity to have their say and hopefully make sense of things.

The SA Homeloans scenario came to mind for me when I first saw this. The main trick there was to target low risk clients. As long as bad debt was kept out of the equation, there was (still is I'm sure) more than enough money in the markets happy with the return.

The idea of obtaining off-shore finance is interesting. The risk there is now you have to factor in exchange rate movements in establishing your margin. Not for the feint-hearted!

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## zulu

> Welcome zulu. And thanks for filling in some background. Very much the purpose of raising subjects here in the first place - to give people the opportunity to have their say and hopefully make sense of things.
> 
> The SA Homeloans scenario came to mind for me when I first saw this. The main trick there was to target low risk clients. As long as bad debt was kept out of the equation, there was (still is I'm sure) more than enough money in the markets happy with the return.
> 
> The idea of obtaining off-shore finance is interesting. The risk there is now you have to factor in exchange rate movements in establishing your margin. Not for the feint-hearted!


Exchange rate changes is a risk, but as with every good system you must have a plan B, and with the possibilities that I have listed before, they all have built in securities" and their is also aspect like forward cover which you can purchase to make sure that the value of the rand against the foreign currency does not change during the period.

Their are many other ways if the finance guys would just do some research before making negative statements.

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## Dave A

> Their are many other ways if the finance guys would just do some research before making negative statements.


Well for me it was more a case of ^^ raised eyebrows than being negative. It certainly is interesting! 

I think, given that they are stepping quite far off mainstream rates, Rudco should not be surprised at all the questions from the mainstream players, and more than a little curiosity from folks such as me. 

With any luck they don't view it as negative comment (unless they _do_ happen to have something to hide) - and it certainly is doing some good marketing mileage  :Big Grin: 

An old saying - there's no such thing as bad publicity.

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## RKS Computer Solutions

Zulu, I agree with you completely...  Maybe I should post to my main page a conversation I had with Axiz because the other retailers in SA was complaining that I was selling Asus Motherboards to the public at a cheaper price than what they were buying them for from Axiz...  

What no-one is realising is that there are never just one big player, if someone comes to the plate with a better way of doing things, and have better backup in place and can actually give a better service for a better price, they should be given a chance...

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## zulu

I have been in contact with a few of the agents, They are certainly not detered by the negative comments. And dont seem to be hiding anything. They said that they are going full steam ahead with their marketing campaign.
I think that there are a few "BIG BOYS" that are realy worried about what will happen to their profit margins if this works.
After speaking to the agents it seams that Rudi Visagie did give information to Raport, he even informed them to read the Raport as it was going to be positive-but in stead everything he said was published incorrectly with everybody giving their own version. 
My personal opinion is to let them show us what they have got. If this works it will transform the way our financial industry work and will certainly give us other options than the big finance houses that own the monopoly. 
before passing judgement make sure of the facts.

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## RKS Computer Solutions

Exactly, get the facts and make your own decisions....  If you believe the newspapers, you must be mad....

One point I can think of right now is some thickhead reporter saying that bloggers were uneducated and silly little wannabe's... He had all his days after making that post, silly bugger...

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## duncan drennan

> One point I can think of right now is some thickhead reporter saying that bloggers were uneducated and silly little wannabe's... He had all his days after making that post, silly bugger...


That was actually hilarious and I think that the journalist was brilliant. What was a bit sad was how the bloggers reacted like uneducated silly wannabe's...

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## zulu

> Exactly, get the facts and make your own decisions....  If you believe the newspapers, you must be mad....
> 
> One point I can think of right now is some thickhead reporter saying that bloggers were uneducated and silly little wannabe's... He had all his days after making that post, silly bugger...


You are making a good point. How many times have we read articles in the newspapers just to find out six months down the line that they had their story completely wrong. And what is even worse is that they never apologise and say that they were wrong. They have done a lot of damage to a lot of companies. 
I Applaud the people who are brave enough to stand up and take on the "Big Guns"  :Boxing:

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## Dave A

They do get it right sometimes too, though. Remember Trader Vic and biodiesel franchising? He called that one way early.

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## zulu

Ok I must admit they do sometimes get it right. But when it envolves large stories every reporter seems to be the expert. If you look carefully at the Rudco report. Their allegations are based on nothing more than speculation. They have no facts and are fishing for answers.Brings us the fact in stead of writing up a storm over hearsay.
I have another statement that I want to make " insurance companies promise to give you a guaranteed 1 million rand on maturity for a low monthly premium. Nobody seems to thinks that is odd.
Maybe we will be lucky and a few months from now these guys would have shown us what is possiblle and we will think back and say how could we have been so blind. But that is just me

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## duncan drennan

Here is Moneyweb's take on it. Also a transcript from a show where Rudi Visagie was supposed to be interviewed.

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## Dave A

> Visagie claims to have more than 250 agencies ready to sell Rudco products.


At 10% of the monthly instalments, I'm not surprised.

All I know for sure is that whatever happens, this is going to be really interesting!

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## zulu

> At 10% of the monthly instalments, I'm not surprised.
> 
> All I know for sure is that whatever happens, this is going to be really interesting!


10% is correct but again that is not the full story. The agencies do not get funding from the head office. The 10% they get must pay salaries and rental space etc as they are basically run as a seperate business. Taking that into consideration it is not a bad amount. How much must the bank make to fund their branches?????

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## RKS Computer Solutions

If the agencies are already established, this could be some nice extra income for them....

Don't know if anyone else has noticed this, but locally, a new estate agent company rises every week, seriously, every week local newspapers are full of new ads, and it seems 90% of the papers are dedicated to property...

Are we in the wrong line of business?

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## zulu

> If the agencies are already established, this could be some nice extra income for them....
> 
> Don't know if anyone else has noticed this, but locally, a new estate agent company rises every week, seriously, every week local newspapers are full of new ads, and it seems 90% of the papers are dedicated to property...
> 
> Are we in the wrong line of business?


I think we should all become estate agents. Just in on the East Rand of Johannesburg their are more than 3000 estate agents. HOW DO THEY ALL MAKE MONEY?????.
Back to the Rudco debate. Some more interesting stories have surfaced. Everybody seems to have their own take on this. Some people are now even saying that Barclays and Richard Branson are envolved :EEK!: . It is amazing how people will make up their own stories if they do not have the facts, I have to wonder how much of what is being said in the papers and on the net is actually true. 
What is certain is that this is turning out to be very interesting and that it has some of the biggest fnancial institutions on the edge of their seats.

a Report on moneyweb says that Rudi Visagie was suppose to be interviewed on radio, He responded by saying that he already had plans that evening to drink wiskey with his mates. I am glad that some people have their priorities straight - Go Rudi you good thing. I am sure that this type of attitude towards the press is realy killing them. They are digging for answers
and the man wont budge. I am sure that we will find out who is really behind the whole Rudco strategy, in the meantime let the reporters sweat.

I am so exited by this whole story that I felt the urge to wright a poem. 




> Rudi Visagie was the Man
> But money web had other plans
> They told a story of money from the states.
> Rudi responded by drinking wiskey with his mates.
> How the story unfolds nobody nows.
> but if it goes to plan the banks will close.
> Years from now we will look back and say
> Rudi You good thing, you knew the way.
> 
> ...


Do you think I can get it published :Big Grin:

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## Dave A

> Do you think I can get it published


Given that anyone with an internet connection could access this - consider yourself published  :Big Grin: 

That was really good. Impressed.

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## RKS Computer Solutions

Go zulu!

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## zulu

I am glad you liked it.

I see that there was another article in Rapport on Sunday. When will these guys ever stop. One thing that blows my mind is how the NCR issues a lisence
and then after the s&@# hit the fan, they want to launch an investgation. Surely they must have an idea of how the business is structured before they 
issue a lisence. Or are they just "launching" an investigation to satisfy the big players in the industry.

These Reporters are amazing they all suffer from selective amnesia. The report said that a lady reported rudco because she did not receive all her money. What they do not say is that this lady wanted to obtain the money illegaly. and that she wanted finance for her mothers business and gave the impression that she "OWED" money to the business in an effort to get the "DEBT" consolidated, these types of loans are not done by rudco and her applicaton for this amount was declined after they found out what whe was busy with. 
It is nice to now people who actually know the truth. Maybe I should wright a report on the true story, after Rudi and I have a few wiskeys.

The problem with Rudco's system is that people in SA are very conservative and if something moves away from traditional methods we kick up dust, and Rudco is definitely moving away from traditioanl ways of doing things. Maybe we should all just relax for a moment.

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## RKS Computer Solutions

Yup, everyone in SA needs a "chill pill"...  About my above comments about the little guys taking on the big guys, read me blog here: David vs Goliath

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## Dave A

Nice one, Riaan.

You don't have a comment facility as far as I can see - so perhaps if I can comment here:



> So,  the first thing that comes to mind is am I really that big a threat to other retailers that they have to go to the local distributors and complain about my pricing?


I'm amazed at who else they'll go to as well. Holding office in an industry association can lead to the most amazing phonecalls...



> No need whatsoever to go screw the public on high prices and bad service when it can be done professionally,


On my first read, I had a mental picture of something like "No need whatsoever _(for amateurs)_ to go screw the public..." - I nearly wet myself  :Rofl:

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## RKS Computer Solutions

> Nice one, Riaan.
> 
> On my first read, I had a mental picture of something like "No need whatsoever _(for amateurs)_ to go screw the public..." - I nearly wet myself


Is that a good or a bad thing your mental picture?

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## RKS Computer Solutions

How's that, 16minutes after you posted about not being able to comment and the comment system is live....  Long live great service!

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## Dave A

Plain text only? Or is there a coding option for italics, bold etc?

(Think of this as "how to refine a product"  :Big Grin:  )

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## Dave A

> Is that a good or a bad thing your mental picture?


I reckon it's fine. In fact better than fine. It's great. Don't change a thing!

I had this picture of people being badly screwed over whereas they should rather try to get properly screwed over by a professional... A misread - and my warped sense of humour getting the better of me. I simply had to share.

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## RKS Computer Solutions

Coding options and HTML gives spammers ideas...  Don't want to be sitting moderating the whole day...  I know, it's basic, but it does what it needs to in the most effective way right now...

Refining will come, the new design is coming along at snails pace, but it will be worth it...  Always improving and going one better...

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## RKS Computer Solutions

I was hoping your funny bone was getting tickled....

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## Debbiedle

I got into this one a bit late.

Hi Zulu, you mention that you know Rudco.  How come you know so much about them?

My passion and enthusiasm lie with you on this one, let the small guys stand up and be heard.....................my finances tell me I need to be ultra cautious, play devils advocate and then think some more before I take any bold steps....

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## zulu

One thing that I have noticed in our country and maybe it is the same abroad - is that people do not want to see other's making a sucess. 

Back to Rudco -  I am sorry but this story is realy interesting, and I just have to say a few things. This small unknown company is suddenly very well known, and if the NCR finds no misconduct on the part of Rudco the newspapers actually did them a favour because now the whole country knows about them.

Why do people think the worst before exploring the possibilities. Just think of what this will do for us, the "normal" people, That is if you can call living off a tip and struggeling to survive each month normal. 
It will be the start of a financial revolution. Instead of writing negative stories on the net  and in the newspapers about Rudi Visagie, we should all start praying that this will actually work. Because I know that I could do with every bit of help available.

With that I will end this cession with a poem ---- "AGAIN" based on Sundays Rapport article. I am no writer but this story has my ceative juices flowing :Big Grin: 
Maybe I should put a copyright on it, I might become famous.

OK here we go :Boxing: 




> While Rudi's money is rolling in from the states.
> The banks are discussing his ITC credit rate.
> He failed to pay Metcash & carry. 
> maybe he forgot after to many wiskey's with harry. 
> America Swiss was also on the list.
> but the bells and soda got him totally pissed.
> Who could blame him for not paying his debt.
> With parties like that I'd also spend a few weeks in bed
> The NCR is going to investigate the case
> ...


I think this is my best so far. What do guys say.personally I feel that I at least deserve a 7 out of 10 don't you think :Whistling: ?

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## zulu

> I got into this one a bit late.
> 
> Hi Zulu, you mention that you know Rudco.  How come you know so much about them?
> 
> My passion and enthusiasm lie with you on this one, let the small guys stand up and be heard.....................my finances tell me I need to be ultra cautious, play devils advocate and then think some more before I take any bold steps....


I make it my business to find out as much as I can, then to report back on my findings. It is not difficult to find out about the company if you just spend some time talking to somebody that is working for them. It is true that their are some over eager agents that are spreading stories about Rudco and the newspapers are using this to discredit Rudco. But my personal feeling is that we have not seen half of what these boys at Rudco are capable of.

The newspaper reported on one lady that did not receive all her money. I think they should have a look at how many complaint about insurance companies and banks there are with the ombudsman complaining that they have lost money. If they publish all of this we will be able to get into the the record books for the largest newspaper ever published. 
For all te guys spreading negative news, put that in your pipe and smoke it. :Boxing: 

We all complain about about the financial industry, but now that somebody actually has the balls ( sorry for the language) to take them on. we dont want to support them but rather complain about them as well. What is up with these people???

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## leuce

I heard about Rudco about 4 months ago.  I was so excited because it meant that I could get a loan at a much lower rate.  In the end I decided not to go for it because Rudco is too secretive about where the money comes from.

Here is what I had been able to find out:

* There is really no 6% interest rate.  It is just an example rate which is used to lure potential clients.  In reality, the loan is interest-free.  Your monthly payment are a fixed about plus an administration fee.

* Your contract with Rudco is for 20 years' worth of administration.  You can pay off your loan sooner, but you'll be liable for the balance of 20 years' fees regardless.  With a bank, if you pay your loan quicker, you end up paying less, but with Rudco you don't pay less simply because you pay quicker.

So if you borrow R300 000 from Rudco, you have to pay back R480 000, regardless of whether you pay back in 5 years, 10 years or 20 years.  If you borrow R600 000, you have to pay back R960 000.  If you borrow R900 000, you have to pay back R1 260 000.

Now say you buy a flat for R300 000, and you want to sell it again after 3 years.  If the flat's value increases by 15% per year, you can sell it for R450 000.  If you had a Rudco loan at the so-called 6% interest rate, you'd make a R30 000 loss on the sale.  If you had a bank loan at 14% interest, you'll make R50 000 profit on the sale.

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## zulu

> I heard about Rudco about 4 months ago.  I was so excited because it meant that I could get a loan at a much lower rate.  In the end I decided not to go for it because Rudco is too secretive about where the money comes from.
> 
> Here is what I had been able to find out:
> 
> * There is really no 6% interest rate.  It is just an example rate which is used to lure potential clients.  In reality, the loan is interest-free.  Your monthly payment are a fixed about plus an administration fee.
> 
> * Your contract with Rudco is for 20 years' worth of administration.  You can pay off your loan sooner, but you'll be liable for the balance of 20 years' fees regardless.  With a bank, if you pay your loan quicker, you end up paying less, but with Rudco you don't pay less simply because you pay quicker.
> 
> So if you borrow R300 000 from Rudco, you have to pay back R480 000, regardless of whether you pay back in 5 years, 10 years or 20 years.  If you borrow R600 000, you have to pay back R960 000.  If you borrow R900 000, you have to pay back R1 260 000.
> ...


Good day

I do not want to be rude, but whoever gave you this information has no idea what they are talking about. We received a copy of the loan agreement that will be signed if your bond is approved and took this to the attorney. They could not find any problems with the contract. The interest is calculated in the same manner as the banks, and the same rules apply to the early settlement of the loan. All NCR regulations have also been met according to the attorneys. 
The fixed monthly admin fee was used but this changed as soon as the new credit act came into effect, and they had to charge an interest rate.


Maybe you should do yourself a favour and look at the conract if you can find one you will see the real picture.

I think your "agent" needs some training on their products. :Whistling:

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## leuce

> The fixed monthly admin fee was used but this changed as soon as the new credit act came into effect, and they had to charge an interest rate.


I doubt if what you've been told, is true, for these two very simple reasons:  (1) Rudco only started giving out loans after the NCA came into effect, and (2) the Act and its regulations weren't a secret before the Act came into effect.

Therefore Rudco would have known from the start (and from the point of their giving out their first loan) what the requirements of the Act would be, and there would have been no reason for them to "_change_ as soon as the new credit act came into effect".




> Maybe you should do yourself a favour and look at the conract if you can find one you will see the real picture.


Perhaps you could post the contract here, as an attachment in the forums, and I'll do just that.

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## Dave A

> Perhaps you could post the contract here, as an attachment in the forums, and I'll do just that.


I was thinking that might be useful in clarifying this, too. It's all a bit speculative without a copy of the contract to peruse. Is there any hard evidence to support either positiion?

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## zulu

Here is the part of the contract the specifically deals with the interest and early settlement. The contract is lenthy and includes the quotation part as prescribed by the NCR and also all the other explanation of terms etc. I will post the parts as we go along with the conversation.




> (n)	BORROWER'S RIGHT TO TERMINATE
> The BORROWER may terminate this Agreement at any time by paying an amount equal to the aggregate of :
> 
> 1.	the unpaid balance of the principal debt as at that date ie the date of repayment; and
> 
> 	2.	all unpaid interest and all other fees and charges due or payable by the BORROWER to RUDCO in terms of this Agreement up to and including the settlement date; and
> 
> 3.	an early termination charge in an amount equal to :
> 
> ...




If you check your mortgage agreement from the bank this is exactly the same. I am also a sceptic but could not find anything wrong during my attorney's search. Everybody seems to have their own story to tell and some of them are so far fethched that they should be in a harry potter book. 

I won't try to pursuede anybody to go to Rudco all that I am saying is that people should stop listening to crap and do some research for themselves.

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## duncan drennan

> * There is really no 6% interest rate.  It is just an example rate which is used to lure potential clients.  In reality, the loan is interest-free.  Your monthly payment are a fixed about plus an administration fee.
> 
> * Your contract with Rudco is for 20 years' worth of administration.  You can pay off your loan sooner, but you'll be liable for the balance of 20 years' fees regardless.  With a bank, if you pay your loan quicker, you end up paying less, but with Rudco you don't pay less simply because you pay quicker.


It would appear (from my uneducated perspective) that the contract and the two statements are not in contradiction. If the principal amount is the full loan amount over 20 years, and no interest is charged, then settling the principal amount would still be the full value of the loan + "interest", as described by leuce.

It is certainly an interesting concept, and possibly quite well suited to a lot of people, so I'm interested to find out more.

Zulu, could you possibly post the part about how the principal amount and interest are determined?

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## zulu

> It would appear (from my uneducated perspective) that the contract and the two statements are not in contradiction. If the principal amount is the full loan amount over 20 years, and no interest is charged, then settling the principal amount would still be the full value of the loan + "interest", as described by leuce.
> 
> It is certainly an interesting concept, and possibly quite well suited to a lot of people, so I'm interested to find out more.
> 
> Zulu, could you possibly post the part about how the principal amount and interest are determined?



As you will see, by the quote below. The principal debt does not include the interest. Interest is calculated dayly exactly the same as as with the banks




> PART A : AMOUNT AND DETAILS OF MORTGAGE LOAN Ã¢â¬âPrincipal Debt (which includes the following) :
> 1.	  Cash Amount of Loan being part of the deferred amount R________
> 2.	  Initiation fee (if BORROWER declines offer hereby granted to make payment separately)	           R__________________
> 3.	*Bond Registration Fees and Disbursements (if applicable)			R__________________
> 4.	*Transfer fees and disbursements				R__________________
> 5.	*Valuation Fee in respect of property offered as security for loan						R__________________		Total Amount of Principal Debt :			R_______________All the fees mentioned above are exclusive of VALUE-ADDED TAX (Ã¢â¬ÅVATÃ¢â¬Â) thereon which will be added thereto for payment by the BORROWER.*NOTE : These items will not form part of the principal debt if the loan relates to switchinga Bond from another institution and will be paid by the BORROWER when due in terms of the Mortgage Loan Agreement.
> 
> PART B : INTEREST RATE QUOTEDA fixed rate of ______________________% per annum payable over the period of the loan calculated on the Total Principal Debt and the balance thereof outstanding from time to time.


This part as well





> 3.	Interest calculated daily as aforesaid will be added to the deferred amount monthly on the last day of each month during the term of the loan until repayment thereof in full. In the final month of the period  interest will be added to the deferred amount on the last day of the said period



Sorry for the spacing but for some reason I cannot paste the document correctly. I hope that this answers soe questions.

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## zulu

I just wanted to add the following.

I sent the loan agreement to two different attorney firms, and both of them looked at the agreement, and said that it is a normal loan agreement with no
funny stuff.

Interest is calculated daily and then added to your bond at the end of the month in the same maner that the bank would do.
The bond is then also registered in the clients name, the same as the bank would do.

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## duncan drennan

I realised that there is something we failed to look at at all in this thread - where does the profit come from?

Maybe I'm stupid and don't understand these things at all, but if CPIX is around 6% and you are loaning money out at 6%, where does the profit come from? There is no margin on the loaned money (in fact the margin is negative at the moment), so effectively you are losing each money month (inflation is outstripping the growth of your money).

Where do their profits come from?

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## mike07

> I realised that there is something we failed to look at at all in this thread - where does the profit come from?
> 
> Maybe I'm stupid and don't understand these things at all, but if CPIX is around 6% and you are loaning money out at 6%, where does the profit come from? There is no margin on the loaned money (in fact the margin is negative at the moment), so effectively you are losing each money month (inflation is outstripping the growth of your money).
> 
> Where do their profits come from?


Good point I never realized that at 6% it wouldn't showmuch profit. I need to apply for a home loan soon as I am purchasing a house so I hope I myself can get 6%. I'm sure they have profit coming in from some source.

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## Dave A

I think this is where the controversy comes from. Chances of finding investors locally for a fixed return of less than 6%, even if it is a 20 year bond, is pretty slim. But they can be found overseas. The catch is one would expect that to be in the currency of origon. Which brings foreign exchange rate fluctuations into the equation.

I was idly wondering about bond issues being a possibility. You could find investors on a low return if there were prospects of trading them on a drop of interest rates down the line. But right now the short term prospects seem to be the other way.

It all is a little fascinating.

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## duncan drennan

> I think this is where the controversy comes from. Chances of finding investors locally for a fixed return of less than 6%, even if it is a 20 year bond, is pretty slim. But they can be found overseas.


I can understand the profit margin for a foreign investor (e.g. Japan's interest rate at 1.88%), but what about the people who are based here. I know the maths on what I'm about to explain is not quite right, but I think it is at least illustrative (please correct me if I'm wrong).

Say that a foreign investor is happy with 3% interest on their money (I won't even pretend to understand how exchange rates play with this), then there is 3% left over for the local people's profit. I suppose that if you've put no money in, then that 3% is a real profit, and actually quite good money. Money for nothing really. Even if after all your agents fees and so on only 1% is coming back to you, it works out quite well.

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## duncan drennan

> Good point I never realized that at 6% it wouldn't showmuch profit. I need to apply for a home loan soon as I am purchasing a house so I hope I myself can get 6%. I'm sure they have profit coming in from some source.


Mike, give us some feedback as to the process. It would be great to hear about it from you.

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## Eugene

Interesting comments - I for one would also be interested in the whole mechanics of the deal. Who knows, might even consider switching to them if they are in the up-and-up. Anyone know if there are any penalties involved should you change from eg. Absa to them?

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## Eugene

Just Googled Rudco and must say that there are a lot of hype for such a small firm entering the market, still have my doubts though, but will give them the benefit of the doubt.

Zulu, if possible, please post the whole agreement (or PM me with it). Would be interesting to make a comparative study in relation to the normal bank agreements.

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## Daman

Has anyone been able to successfully register a bond and received the funds?

I would be very interested to know.  At this stage there just seems to be a lot of talk.

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## Eugene

The National Credit Regulator (NCR) has found Rudco Finance Company to be in contravention of a number of provisions of the National Credit Act. 

The NCR said it investigated Rudco after it had received a number of complaints and inquiries from the public, notes a Moneyweb report. Rudco raised warning flags because it was offering to fix its clients home loans at 6% a year, for up to 20 years. 

The NCR found that Rudco had contravened the Act in five primary areas: it requires consumers to make loan repayments and monthly services fees before loans have been advanced; it charges monthly service fees ranging between R500 and R1 500 per month, which is in excess of the R50 per month prescribed in the NCA; it does not provide consumers with quotations, pre-agreement statements or credit agreements that meet the requirements of the Act; advertisements which are placed by Rudco Finance or by its agents contain statements that are misleading and that contravene the National Credit Act; it does not meet the requirements of the Act in respect of its agents, does not provide its agents with identification cards or adequate training, and does not maintain a register of its agents in the prescribed manner or form.

Full report: http://www.moneyweb.co.za/mw/view/mw...6099&sn=Detail

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## duncan drennan

The NCR's Rudco file will now been forwarded to the national prosecutor.




> Hundreds of investors applied for cheap loans with suspect finance company Rudco. National Credit Regulator (NCR) advocate Jan Augustyn says that for the month of June, Rudco had about 600 applications for debt consolidation and about 200 for home loans.
> 
> On Thursday the NCR announced that it had found Rudco had contravened a number of provisions of the National Credit Act (NCA), and its predecessor, the Usury Act. One of the major contraventions of the law was Rudco's policy to accept payments for loans before they had even been granted.
> 
> *"We are concerned about the clients who haven't received their money," says Augustyn. He says that some of the documents the NCR had inspected indicated that Rudco provided for periods of up to 12 months where it would receive repayments before granting loans.*
> 
> Augustyn said he was not aware of one loan that Rudco had paid out in full, but conceded that the NCR had not investigated every one. He said loans had either not been granted, or only partially granted.
> 
> Augustyn said he would forward the Rudco file on to the National Prosecuting Authority for possible prosecution.
> ...

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## Harryf

Hi everybody!

I've been a regular "guest" before - but not anymore:  I shall from now be classified as a "member"!  Great to be one.

Back to Rudco.  It's been an interesting post this, from "letting the sun shine on all/letting it rain on the just and the unjust", stuff being too good to be trus, stuff actually being true (the contract), etc.  

As for me, I am a wary critter by nature and was the last, as a 20 year old, to buy Adriaan Nieuwoudt's "Kubus" culture on the Thursday before Raport's headline on Sunday lost me my investment (actually, my dad's) . . .

A few things come to mind.  I'll note them first and then attend to them as I go along:


In post #35 (page 4), leuce comments that it is, in fact, a 0% interest loan BUT with an admin fee attached;In post #39, (still page 4) zulu supplies a section of the loan agreement.  Refer to note 2:  ". . and all other charges and fees due or payable . ."In post #51 (page 6), eugene notes that admin charges of up to R1,500 were noticed by the NCR

OK

I understand that it is actually easy getting money into SA - but not (always) as easy getting the same out.  And if the money entering SA is to be used as a LOAN to anything in SA, the interest earned on said money may not be more than a maximum of the prime lending rate of the country of origin (as per mr X, SA Reserve Bank).  In some cases, exceptions may be made and the interest earned on such loans may be increased to the prime lending rate of the county of origin plus 2% points.

So, if the money comes in from Japan, and their prime lending rate is 1.8%, and it is to be used lo finance loans (and earn interest), the maximum interest allowed should not ne more than 3.8%, possibly limited to 1.8%.

Now, back to leuce's comment about the 0% interest.  On a bond of R1 million, payable over a 20 year term, the monthly installment (capital only, obviously) will be R4,166.67.  If the actual interest rate was 1.8% (for the Japan scenario), the payment would be R4,964.66 per month (I calculated interest monthly, not daily).  Add onto this an administration fee of, say, R1,500 (as per eugene post) and the monthly installment becomes R6,464.66.  If this figure is simply seen as a payment consisting of interest and capital, and we assume said interest rate to be 6%, an amount of R902,342 could have been borrowed. 

Let me put it another way:  If I have to pay R0 admin fee, pay 6% interest calculated monthly on a 20 year bond and I can only afford to pay R6,464.66 per month, how much money can I borrow?  Answer:  R902,342.

At an admin fee of R1,500, an actual interest rate of 3.8% and a bond term of 20 years, an amount of R1,040,565 can be borrowed.  At 6% interest, R0 admin fee and a 20 year bond:  exactly the same amount.

So, maybe the illustrated (effective) 6% and the admin fee of R1,500 per month may have been used to illustrate a bond of said size, or what?

Now, getting to point 2 of zulu.  These admin fees will then form part of the repayable amount, even if the interest was 0%.

Still, this was a nice exercise and something worth noting for anyone wishing to get foreign investors interested in investing in SA through supplying loans - and simply add an admin fee to effectively bypass some Act's restrictions!  

"Slim vang sy baas", it seems. :Wink: 

Kindest possible regards

Harry

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## duncan drennan

Thanks for the analysis of this Harry!




> Still, this was a nice exercise and something worth noting for anyone wishing to get foreign investors interested in investing in SA through supplying loans - and simply add an admin fee to effectively bypass some Act's restrictions!


The only problem is that the NCA only allows an admin fee of up to R50 (as per Eugene's post earlier). *BUT, how about this*: if the borrower is a juristic person, and either the loan is a so called "large" loan agreement (e.g. mortgage bond), or the juristic person has an asset value over R1mil, then the NCA does not apply to the agreement - could the large admin fees be charged in this case, effectively giving juristic persons access to cheap money?

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## Harryf

Duncan!

That's a good point.  Admittedly, I say this warily, for lack of knowledge.  

Eugene (sh)could probably add to it and sleep on his desk again the next day!  Stuff like this usually simply intrigue me, and now I find myself getting excited about things I simply should not!

I've not had any reason to be concerned about the NCA up to now, but am glad you pointed the post out to me.  Amazing what a little knowlwdge does, eh?  Imagine a lot of it!

How does a particular four pronged saying end?  "He who knows, and knows that he knows, is wise; follow him".  Nice to see you take loose threads and tie them into a rope . . .

And so, on that topic, Duncan, where can you get us (the juristic part of us, that is) some cheap money for "large agreements" and to which you will add no more than a R1500 admin fee (just because you are kind and not because that is a limit) and not even transgress an Act?  :Wink:

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## duncan drennan

> I've not had any reason to be concerned about the NCA up to now, but am glad you pointed the post out to me.  Amazing what a little knowlwdge does, eh?  Imagine a lot of it!


Well, that is what this forum is about. Spreading the little bit of knowledge that we each have around, so that we all end up with a lot of it, and putting our heads together to tackle the questions we don't have the answers to.




> And so, on that topic, Duncan, where can you get us (the juristic part of us, that is) some cheap money for "large agreements" and to which you will add no more than a R1500 admin fee (just because you are kind and not because that is a limit) and not even transgress an Act?


Hmmmm...maybe a new line of business for me?  :Big Grin:

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## Dave A

Welcome, Harry. What a great new contribution to our shared pool of knowledge! I am pleased indeed you "took the plunge."

I think this little sequence goes a long way to explain how an effective rate of 6% could be achieved, and quite profitably too. And perhaps even finds a way round a hurdle. The significant remaining concern seems to be the payment of instalments ahead of the actual provision of the loan. 

Just to clarify one element, though:



> I understand that it is actually easy getting money into SA - but not (always) as easy getting the same out. And if the money entering SA is to be used as a LOAN to anything in SA, the interest earned on said money may not be more than a maximum of the prime lending rate of the country of origin (as per mr X, SA Reserve Bank). In some cases, exceptions may be made and the interest earned on such loans may be increased to the prime lending rate of the county of origin plus 2% points.


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

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## Eugene

Due to a number of complaints and enquiries received from the public, the National Credit Regulator (NCR) conducted an investigation on Rudco Finance (Pty) Ltd (Rudco Finance). The investigation revealed that Rudco Finance contravened a number of provisions of the National Credit Act (the Act). On 13 August 2007, the NCR issued a Compliance Notice to Rudco Finance. The full Compliance Notice can be viewed on: http://www.ncr.org.za/press_release/Rudco.pdf

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## Graeme

Game, set and match to the NCR!

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## Dave A

This could be the NCA's first coup. 

From the compliance order:



> Up to the date of this media release, the NCR had not received any response from Rudco Finance. We wish to draw the attention of consumers and agents to the fact that section 89(2)(e) of the National Credit Act determines that if Rudco Finance continue entering into credit agreements which do not adhere to the requirements of the Compliance Notice, such agreements will be unlawful.


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.

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## 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!

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## 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?

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## 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.

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## 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.
> ...


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.

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## QUINN

I stand corrected  :Smile: 

*Noose tightens on Rudco*
If Rudco doesnÃ¢â¬â¢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?

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## 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.

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## 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?

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## QUINN

Debbie did you use to be with Saambou Bank?

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## Debbiedle

Yup, had my bond with them.

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## 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?  :EEK!:

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## Karenwhe

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

http://www.moneyweb.co.za/mw/view/mw...4345&sn=Detail

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

Hope this helps.

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## 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.

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## 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.

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## Skulk

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.

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## anakin

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.

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