South African largest banks including Nedbank, Absa, FirstRand and Standard Bank could be facing a R60 billion claim related to their conduct in attaching and selling the home of defaulting customers at prices below market value, reports Moneyweb.

Advocate Douglas Shaw has filed an application for direct access at the Constitutional Court on behalf of 219 people. About 100 000 homes have been repossessed by banks and sold in execution since 1994. It is estimated that 10% of these homes were sold for close to market value, with 90% of them sold below prevailing market values.

South African banks reportedly sell property five times more frequently than the international norm and in some instances, for only 50% of market value. It has also been argued that going through the primary courts would be inappropriate, as the case was brought by people who were exceptionally poor.

READ MORE: This is where young professionals are buying homes

The court papers list Nedbank, Absa, FirstRand, Standard Bank, Changing Tides 17 – a trustee of the SA Home Loans Guarantee Trust – Investec, the National Credit Regulator, the South African Human Rights Commission, the Rules Board, the Minister of Justice and constitutional development as respondents.

Advocate Shaw told Moneyweb that there were about 219 people in this case whose houses have been sold in execution – repossessed by the bank and sold for a small percentage of the value.

“Now, on average, the banks sell these properties for 50% of their value sometimes, which is terrible because in other countries 90%-95% is normal. But, even worse, in some of these transactions, the banks have sold the properties for R100 or R1 000, which happens nowhere else in the world,” he said.

READ MORE: Increase in South Africans selling their homes to emigrate

Shaw’s papers reveal the average house price in today’s money is about R1 million and the average discount that properties have been sold for appears to be around 50% of market price. Thus, the damage done to these 100 000 people is R50 billion.

The maximum damages that could be awarded if every person affected since 1994 joined the claim would be R60 billion, equivalent to around a year’s income generated by the big four banks. The papers reportedly refer to one case in which a bank attached and sold as property thought to have been financed by a R300 000 loan, when the actual loan amount was only R30 000.

The applicants also want the court to order that no debt shall be reclaimable from a creditor when a property is sold for less than the value of the bond.

Representatives from FNB and Standard Bank have told Moneyweb allegations would be reviewed and addressed once tabled before a court.

Source: Moneyweb