The wheels (of justice) turn. Just too slowly for Rudco.

“E.s.” commented on my earlier post:
Too Good To Be True
about the ridiculous proposition for turning lead into gold
(offering fixed rates home loans in the South African Rand at 6% interest). The interesting
thing here is that since Rudco’s initial plans were announced, interest rates have ticked
up several points, and are likely to increase further in December (consensus from the
market is currently around 50bps) and quite possibly again early next year.

I’m sorry E.s., you clearly haven’t been reading the blogs and comments here and other places. To repeat the four themes:

  1. The business model is not viable therefore you should expect problems sooner or later.
  2. Rudco are in contravention rules, regulations and judgements, so you should expect problems sooner.
  3. There has been precious little evidence that Rudco actually has any of the money to either grant new loans or transfer loans from other banks.
  4. From what I’ve seen, Rudco is more in the habit of collecting money from customers rather than paying out money. There are real financial risks to prospective clients.

Lastly, when Rudco finally disappears (long overdue) staff, brokers and customers will be burnt. Even if you misguidedly think that there is no risk to you (I disagree), you should also recognise that there is no upside since this structure cannot work, and there is definite downside to others involved in the process.

If anyone thinks that the other banks, Treasury, the Reserve Bank and the FSB are going to bail out the fools who were looking for a too-good-to-be-true deal, think again. I’ve been following the comments around the web for several months now.

The first few months were characterised by a few words of warning, and many commentors saying “don’t knock Rudco” and “just because someone is looking out for the little guy doesn’t mean the big banks should try to shut him down” and similar utter nonsense. The weight of comments has now swung heavily towards complaints and hard questions.

Rudco is finished. They were finished at the start for anyone who had their eyes open.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

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  1. David Kirk, I read your comment to ES. I think E.S was right when he reasoned like he did. IF you were an expert enough it would be good to mention any form of regulation that Rudco is contravening and Ramnification thereof. If i may ask: May you please outline the Regulation That Rudco is contravening.

  2. To be honest, I want to believe that you have a personal vendetta against rudco or something david. convince me by analysing Rudco’s modus operandi. Firstly if you swith your bond from Standard bank to FNB what are you liable for upfront which is non-refundable:1registration fees,initiation fees as well as other fees like attorneys fees therefore what is wrong with Rudco following the same pattern.Can you back your assertion that rudco is just there to collect money but never paid a cent out?, What I read on the site is a normative point of view based on a personal value judgement not on a factual truth. The point is that the bond you have with nedbank is a liability,therefore if someone come and say ‘let me buy out your debt at a better repayment terms’ what are you going to say?.one thing that we must look at is that if you as a bondholder default hell will break loose but if the bank default in this case Rudco, you go home smilling.Why is treasury and other Financial services authorities quite? because there is no bomb waiting to explode.

  3. HG, you may want to check out the National Credit Regulator’s website. Prominently on their homepage is a link to a page with the following excerpt:

    The National Credit Regulator (NCR) issued a Compliance Notice to Rudco Finance Company (Pty) Ltd on 13 August 2007. They had 15 business days to object to the National Consumer Tribunal in respect of this Compliance Notice. Rudco Finance did not object to the notice within this period. The Compliance Notice therefore remains valid.
    Consumers, agents and the general public should be aware that credit agreements that are entered into in contravention of this Compliance Notice may be declared unlawful in terms of section 89 (2)(e) of the Act .

    I think the NCR has authority to talk about the regulations where Rudco is non-compliant.

    E.s. I appreciate your comments. Let me clarify the background a little which may help you to understand my perspective. I guess the first important piece of information is that I really don’t care about Rudco. I care about risk and uncertainty – identifying it, measuring it, managing it, mitigating it. But most importantly helping individuals and organisations to operate successfully in an uncertain world.

    My original posting on Rudco stated my objectives clearly – I wanted to show how the underlying business principles on which Rudco is based on are utterly flawed. The resultant comments on the post from readers of my blog (and many once-off visitors I imagine) showed the interest there is from the general public in Rudco and whether it is a good deal or not, and what the risks are. There have been some commentors who have supported Rudco, and I have approved all their comments since I tend to agree with rights like freedom of expression.

    So yes, my summary above didn’t provide the logical thought process or reasoning. That has been partially covered elsewhere in this blog (partly by some excellent contributions from readers), by Moneyweb (see beow for some interesting extracts taken from Moneyweb’s site and others. To add some fire to the debate, I have posted a few extracts below that complement the reasoning placed elsewhere, and that shows the real potential risks to potential customers of Rudco. Yes, you can lose money.

    One brief aside, the FSB and Treasury aren’t interested because Rudco poses no threat to the banking system, the finances of the country, inflation rates, market interest rates or the respect our fiat currency receives. This is quite rightly an NCR and Consumer Protection matter.

    Quotes froms where Alec Hogg and his team dig into some interesting stories, and sometimes receive some flak from it:

    “We are concerned about the clients who haven’t received their money,” says Augustyn [NCR advocate]. 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.

    NCR advocate Jan Augustyn says that he has yet to see proof that Rudco has money…

    On August 23, the NCR announced that it had found Rudco to be operating in contravention of numerous sections of the National Credit Act and its predecessor, the Usury Act.Rudco was given until October 31 to repay instalments to clients. It failed to meet this deadline.

    Moneyweb reported last month that the NCR had forwarded its files on Rudco to the National Prosecuting Authority, which is best known for its elite crime-busting squad, the Scorpions.But last week, Rudco distributed an e-mail that said it was “grateful” for the “directives” given to it by the NCR, and that it had “implemented steps required for compliance with the National Credit Act.”

    Well, given how the steps don’t appear to have been implemented, the words sound a little hollow now.

    And again, if Rudco is the Knight in Shining Armour that it purports to be, why does Moneyweb have this to say:

    Rudco CEO Rudi Visagie has repeatedly evaded Moneyweb’s questions regarding the source of its alleged funds. Until proof of this money is forthcoming, we once again urge potential Rudco clients to proceed with caution.

    There is of course no need for anyone to speak to Moneyweb. That’s their right. However, if I had to bet between shyness and nervousness, I know where I’d place my money. That’s my opinion, and I guess that’s my right too.

    The most interesting of all of these is the soon-to-come 6 December 2007 date:

    The Tribunal has extended the deadline to repay instalments to November 23. And Rudco has until December 6 to provide the regulator with an independent audit report verifying that it has made the required payments to clients and rectified its other alleged breaches of the law.

    So, in a couple days I may have more to comment about.

  4. 3RD Floor

    Tel: ( 021 ) 425-8001/8002 Fax: ( 021 ) 425-8000 P.O. BOX 1995


    We write to advise that application was issued at the High Court (Cape of Good Hope Provincial Division) for the provisional liquidation of the above company. The application has been enrolled to be heard on the 06th of December 2007 and the provisional liquidation order was granted.

    We have been requested by the attorneys representing the National Credit Regulator, who is the applicant in this application to apply for the appointment as provisional liquidators.

    We attach hereto requisition nominating Ms. M Abrahams for the appointment as liquidator.

    Kindly furnish us with the duly completed requisition for the purposes of applying to the Master of the High Court for the appointment as liquidator.

    We will keep you advised in this regard.

    Yours faithfully


  5. I’m not sure I can even understand all those sentences. If that’s a genuine letter, it’s a pretty good attempt at making English incomprehensible through legalese. Why the English language needs to be abused so badly and prevented from performing it’s core duty of communication is a mystery to me.

    I don’t want to knock the author of this letter specifically – I have no reason to believe this letter isn’t perfect by legal standards and thus wholly fit for purpose. It’s just a pity that so much effort is needed to take what should be a perfectly simple letter and turn it into a monster that lawyers seem to think is somehow better.

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