Boss defends home loan 'formula'

Rudco CEO Rudi Visagie believes his "simple" business formula is a winner for consumers and has big banks and financial services brokers running scared.

The National Credit Act regulates maximum interest rates and initiation fees, but no minimums, Visagie said in defence of his six percent interest rate on home loans.

Visagie said Rudco was complying with the act by offering a maximum initiation fee of R150, plus 10 percent of the agreement in excess of R1 000, but limited to R1 140 (including VAT).

A further proviso of the act is that the initiation fee may not exceed 15 percent of the principal debt.

Rudco's "management fee" of R750 had been converted to an interest rate of 17 percent, said Visagie.

Before June 1, when the act came into force, this was how Rudco calculated a R100 000 "debt consolidation" - what the act refers to as a personal loan: Capital outlay of R100 000 (this was used to repay people's debts, Visagie stressed, and no money was paid directly to clients); 20-year (240 month) repayment period; R750 management fee.

In its Compliance Notice, the National Credit Regulator said Rudco was charging "monthly service fees ranging between R500 and R1 500 8230; which is in excess of the R50 per month" prescribed by the National Credit Act.

Visagie said the "management fee" should not be confused with a service fee, and the figure of R750 was built into people's monthly repayments. So, on a R100 000 loan, clients were expected to pay R4&bsp;16.67 each month, plus a R750 "management fee", for a total of R1 166.66 per month.

This, said Visagie, was compared to "thousands" that some were paying on credit cards.

• This article was originally published on page 3 of The Cape Times on September 17, 2007