# General Business Category > Scam Alert Forum >  'R699' car deal owners in despair

## Blurock

Read this article on IOL Motoring http://www.iol.co.za/motoring/indust...ers-in-despair





> Independent Newspapers June 23 2014 at 08:50am By Wendy Knowler
> 
> Durban - To thousands of South Africans, the Drive a new car for R699 a month deal seemed like the perfect solution to their want a new car but cant afford it dilemma.
> 
> You get a new car, with a 100 percent loan from a bank, making you responsible for the full repayment amount every month, but you offset that expense by signing a second contract with Hong Kong-based Blue Lakes Trading and Promotions, in terms of which you get paid a sizeable amount every month in exchange for turning your cars back window into an in-your-face moving billboard advertisement, mostly for the scheme itself.
> 
> The Satinsky group of companies owns Drive Car Sales, the company driving the unique car ownership model throughout South Africa. Satinsky is also the management agent for Blue Lakes Trading and Promotions and operates Blue Lakes help desk in the country.


Is this still news? What, you didn't know? This has been a scam from day one. A perfect scam to exploit the stupid and seekers of short cuts.   :Slap:

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## adrianh

When things look to good to be true then they most likely are, yet lots of people fall for this sort of nonsense daily.

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## Dave A

The Blue Lakes deal was questioned here a year ago, I see. Seems not much has changed since - the income that comes in from the scheme is far from a sure thing, and if you want to pursue the matter, you would seem to need a lawyer in Hong Kong.

However, applying the principle that when things seem murky, just follow the money - 

The money being used for pay outs (even if less than expected) has to come from somewhere.
The contract talks of advertisers, and everyone seems to perceive Blue Lakes SA as the primary advertiser being referred to in the contract (as all the adverts are for the scheme).
But what are they actually promoting?

The scheme, yes. But that scheme in essence is promoting the sale of cars.
The car dealership(s) selling the cars just has to be paying Blue Lakes SA a slice of the car sale. It's the only place that the money can be coming from!
The car dealership just has to be the actual advertiser referred to.

So let's go back to the Wendy Knowler article, and particularly this quoted response from the Satinsky Group representative:



> This is the response I got from Siyanda Zuma, media liaison manager for the Satinsky group. 
> 
> “The Satinsky Group of companies consists of a number of divisions including Drive Car Sales and Just Group Africa. 
> 
> “Blue Lakes Trading & Promotions is a separate company with no ties to our company. It is based in Hong Kong and is a trading, promotions & advertising company.


Now if a company in the Satinsky Group is selling the cars, and a company in the Satinsky Group is contracted to operate the local help desk for Blue Lakes (whatever), the claim of "no ties" seems a little less than entirely truthful. What seems more likely is that there is actually a significant, mutually beneficial relationship between Blue Lakes and the Satinsky Group, and one could postulate that Blue Lakes has intentionally been positioned as the cut-out in an elaborate scheme ultimately designed to help a member of the Satinsky Group sell cars.

Of course that doesn't in itself make the scheme illegal, or a scam, or a pyramid etc. It would just help someone argue why a case might be pursued here in SA against the Satinsky Group rather than in Hong Kong against Blue Lakes - if there is a case to be answered.

The other possible angle worth exploring is the reports of folk where the instalments become patently unaffordable without the expected income. Is this (apparently unreliable) income stream perhaps influencing the affordability testing used for the granting of credit? If yes, that might open the door to folk seeking relief under the reckless credit provision of the National Credit Act.

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AndyD (24-Jun-14), flaker (25-Jun-14)

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## irneb

Unfortunately there's just so many who'd fall for these things. I actually felt the same about those cheap car-loans where there's still a 30% residual (or more) at the end. It works reasonably if nothing goes wrong, like an accident or you've driven slightly to far or haven't traded it in exactly at the optimal time.

The point is, there's no free lunches and very few cheap lunches (unless they're poisonous). My rule: if something surprises me I get VERY suspicious, if I can't see myself offering such a deal (placing myself in their shoes) then I "know" it's a scam.

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## dellatjie

http://www.fin24.com/Companies/Adver...-R699-20140703

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Dave A (03-Jul-14)

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## Dave A

From the link above -



> Clients fear they will lose their cars because they cannot afford to pay for them.  Satinsky did not provide clients with copies of their signed contracts. Satinsky made applications to the bank on behalf of the clients, raising questions of possible misrepresentation in contracts.


 :Hmmm: 

Might be worth a shot at claiming reckless credit protection, then.

And if the banks stand to lose out due to misrepresentation, they certainly should have the funds and motivation to pursue the matter with the Satinsky Group with some vigour.

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## flaker

R699pm car business falls apart: report


http://businesstech.co.za/news/gener...-apart-report/

its come to a gravely end!

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## Blurock

Expose on East Coast Radio

http://www.ecr.co.za/post/r699pm-cars-game-over/  :Batman:

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## Dave A

From that story -



> So here’s the thing. All three banks say they didn’t factor in the anticipated advertising fee from Blue Lakes when they assessed whether the applicants could afford the repayment. They say the applicants passed the affordability tests based on their earnings and expenses. End of story.
> 
> So something is not adding up. Consumer activist Simon Lapping told me that he’d spoken to people who claimed to have disclosed their monthly living expenses in an application on the Blue Lakes website, but when they saw the bank document later, the figure was quite a bit lower. Someone had altered it. In one case I’ve seen, a woman who earns a gross salary of R8000 a month, had her total monthly living expenses - rent, fuel, food, insurance - listed as R1270. She says that’s not what she declared, and it could be argued that the bank involved should have queried such a low amount.
> 
> Simon’s advice to those affected is to get copies of their loan applications and agreements from their banks in order to get to the bottom of the affordability issue, and establish whether there is a case to make for reckless lending.
>  According to the National Credit Act, if you can prove reckless lending, the lender may be forced to write off the debt.

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flaker (05-Jul-14)

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## irneb

Now I'm the first to grin when a bank is in trouble, I hate them with a passion. And according to that it's quite clear that the banks didn't do their homework on these loans. So you'd expect I'd be one of the guys saying: "Yay! the banks need to own up that they (at best) didn't check on this pyramid scam, and thus they need to foot the bill."

And I do feel for these people caught in the trap. They obviously don't have the capability to afford the "true" debt repayments. So they're in trouble at least. But what am I to do (or you or the rest of us)? It's not like we're all billionaires capable of throwing money away in pseudo altruistic nonchalance. We've got responsibilities of our own, and some of us are equally on the bread-line.

BUT...

What would that mean? It's not as if the banks would be personally harmed by this. The owners and managers wouldn't suddenly have to dish out cash from their own pockets. Nope, what a bank does is use other people's money - they never take any risk on their own part. So if this goes through expect increases in your fees, higher interest on your loans, lower interest on your savings, etc. I.e. those of us who didn't fall for this rip-off are then going to pay for those who did, not the banks, not the scammers themselves (they're already on a beach enjoying all that top-of-the-pyramid profit), but the rest of us.

Now if the law can make the owners / shareholders in those banks take personal responsibility for these bad debts, then it's only slightly better. The trouble is, there's so much intermingling and diffusion between them that the physical person(s) profiting from the "ownership" is protected by layers-on-layers of various holding companies. And these in turn could very easily then find another way of passing those losses on to the general public instead. It's how our whole financial system operates. Accountability is just a word, it has no meaning.

Yet again ... another example of why my signature must be hammered into school kids from day 1! Avoid debt like the plague! It's only beneficial if you can make a profit out of it, else you're ALWAYS worse off in the end.

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## Blurock

> Avoid debt like the plague! It's only beneficial if you can make a profit out of it, else you're ALWAYS worse off in the end.


I can not agree more. When you are in debt, you are a slave to the lender. Rather save until you can afford it.

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## irneb

OK, this might help: http://mybroadband.co.za/news/busine...le-online.html

But I won't hod my breath.

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## IanF

If this is a scam what do the scammers get out of this?
Is there commissions on finance and cars?
Do they finance a bigger capital amount?
Does anyone know?

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## Dave A

> If this is a scam what do the scammers get out of this?


The profits from car sales. And probably a slice from the finance houses too.

I'm still not convinced it can definitely be classed as a scam as yet, though. It might just be a fundamentally flawed marketing program gone wrong. One of the critical ingredients of a scam is an intention to defraud...

There are signs that a bad ending might have been foreseeable, however. For example, I'm fascinated that Wesbank wouldn't finance these deals.

And then there's the offshore cut-out, which based on the My Broadband article, looks like it wasn't part of the first iteration of the scheme and only came in later.

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## Justloadit

Maybe about selling many vehicles to people who otherwise would not get finance.

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## Dave A

Well, my curiosity about Wesbank not financing the deals has been satisfied.

R699 cars a Ponzi Scheme: Wesbank

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## irneb

The other less likely source of income is from the ads themselves. You SMS to the number written on the car, it costs you R3 per SMS. Just how much they get from that, how much their overheads for the line, and how much they pay back to the driver of the car is not clear. Obviously that would be a numbers game, it depends how many people SMS them and how many then take up the deal.

It seems they didn't make enough profits from the ad's sms payments. Thus they're now looking at avoiding having to pay back the drivers. I.e. the terms changing from how far / how long you've driven the car, rather to how many sms's received due to the stickers on the car you're driving. So they're trying to remove some of the risk involved by passing it along to the drivers. I.e. if you get (say) R1 out of each SMS then you need around 2000 people to SMS because they saw your car for each month in order for you to only pay R700 on a R2700 repayment.

See why this is untenable (at least in the long run)? And also a pyramid scheme? The more people driving around with these cars the less chance you have of someone actually SMS-ing due to seeing YOUR car. So the first few get reasonable payments, but the last guys receive nearly nothing - i.e. the very principle behind a pyramid scheme. If designed so or not is immaterial, the effect is the same, and the effect is what makes people poorer not the intention to defraud.

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## sterne.law@gmail.com

Lawyer offers to help ‘R699-a-month’ car deal victimsPort Elizabeth lawyer Duncan Heuer has offered his services to victims of the ‘R699-a-month’ car scheme debacle at no cost, saying he believes the best way forward is for the High Court to declare their contracts void, notes a report in*The Herald. This comes after thousands of motorists lured into buying new cars by an attractive offer meant to see them paying a significantly reduced monthly instalment were left fuming when the international company managing the deals cut its losses with its Hong Kong-based holding company. Heuer, of the law firm Pieterse Cary Finlaison, said the High Court could order that consumers left in the lurch be given a chance to give the vehicles back.*He says he has an advocate on board who is willing to appear on a contingency basis if there are enough people needing his help.*The report adds a Johannesburg-based consumer activist, Simon Lapping, said he had also started off an investigation into Satinsky, the SA company behind the scheme. Lapping said his investigation so far had revealed alleged fraud, including the extensive understatement of consumers’ expenses, fake relatives on application forms, and used vehicles sold as new.*Full report in The Herald

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## sterne.law@gmail.com

Consumer Affairs:*Wheels come off for ‘R699-a-month’ car deal victimsThousands of consumers have burnt their fingers in a scheme offering a new car for R699 a month, writes*Legalbrief. Now many of them face the prospect of much higher monthly instalments or risk losing their cars. Car owners who have fallen prey to the ‘R699’ finance scam need to act fast and approach their banks to see if they can reschedule their debt, Cas Coovadia, managing director of the SA Banking Association, said, according to a report on the*Fin24.com*site. It says thousands of ‘R699’ car owners have become the unwitting members of the scheme involving some 17 000 vehicles nationwide. In terms of the scheme, the Satinsky Group offered new cars for R699 a month, with a large part of an owners’ vehicle loan with the banks offset by fees earned from advertising on their new cars. But, states the report,*Satinsky announced last week that the monthly advertising fees had come to an end, resulting in many clients, who were being paid more than R1 000 a month in fees early this year, not being paid a cent. ‘This was a scam, but played out cleverly,’ said Shiraaz Mahomed, who bought a Tata through the scheme, is quoted in the report as saying. The report notes that Mahomed was paying only R1 200 a month for his car, but since the scheme folded, he now has to pay R2 700.

scandal shows no signs of abating, notes a report in*The Star*which says*the focus is now on the possibility that many consumers’ financial details were altered in order for them to pass the banks’ affordability tests. According to the report, many of the mostly low-income earners claim that they previously applied for car finance in the normal way and were declined, but when they applied to the same banks via Satinsky, supplying the same information, they were approved quickly. The report says the banks which financed these deals – Nedbank’s MFC, Absa and Standard Bank – insist that they applied the normal assessment criteria and did not take into account the advertising fees which the applicants were to earn from a third party company, Blue Lakes Trading & Promotions, in return for having their new cars plastered with advertising stickers. Ironically, notes the report, the ‘victims’ of the fee collapse are now saddled with a much larger instalment than those who bought the same car – mostly entry-level ‘cheapies’ – from a traditional dealer. They paid no deposits, the interest is relatively high, the loans are all over six years, and the purchase price of the cars was not discounted in any way.

The deal ‘had the historical traits of a true Ponzi scheme’, Wesbank chief executive Chris de Kock is quoted in a*Pretoria News Weekend*report as saying. In 2012, Wesbank declined Satinsky’s invitation to finance the cars in a deal aimed at relatively low-income earners, having investigated the company and deemed its business strategy not to be in consumers’ best interests, De Kock said, according to the report. It notes De Kock said there was no evidence of the company’s financial reserves. ‘It seemed blatantly obvious that the scheme relied on upfront profits – from car sales, and commissions on finance and insurance products – to fund its downstream obligations: the historical traits of a true Ponzi scheme.’*Satinsky Group chief executive Albert Venter denied that his business model was anything like a Ponzi scheme, and said it was not true that the business was ‘barely solvent and with little capital’, as De Kock alleged. ‘If that is so, how come we paid a substantial amount in tax last year? And how come Wesbank has accepted my personal surety for the floor plan of another dealership I am involved in?’

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## irneb

> not the scammers themselves (they're already on a beach enjoying all that top-of-the-pyramid profit)


Perhaps not ... http://businesstech.co.za/news/gener...luxury-report/

Though ...

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## Houses4Rent

It will be on Special Assignment on Sunday evening

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Dave A (20-Jul-14)

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## Dave A

Banks in firing line over R699

Banks are in the firing line as hundreds of people who bought cars under the "discounted" R699 scheme have been granted an "urgent hearing" by the Eastern Cape High Court on Tuesday.

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