Question:
I have read about a company called "Total Investment Solutions" who claim that they guarantee a home loan fixed at six percent with an initial cost of R5700 and a monthly admin fee of R57. Is it legal? Where do they source the money from?

Answer:
Total Investment solutions are one of the agents for Rudco, the mortgage Lenders who are currently under investigation by the Scorpions and the National Credit Regulator. Rudco have been forced to pay back money that they took from clients.

I suggest you stay well clear as experts believe that Rudco will cease to exist in the near future. It is unclear where Rudco gets its money from and there has been much speculation about this. Some agents have divulged that they source cheap money overseas, but this carries huge currency risk.

Others have said that Rudco uses a micro-loan company which cross-subsidises the mortgage loans, which is an illegal practice. While it would be great to have a loan at six percent, common sense will tell you that this is not possible. If one could really get money so cheaply everyone would be borrowing at six percent and investing it at 10 percent at a bank, making a quick four percent profit.

The NCR (National Credit Regulator) has referred the Rudco case to both the National Prosecuting Authority and the National Consumer Tribunal. They were instructed to pay back clients by 22 November.

Rudco has been informed that they have to give regular reports to the NCR on how the repayment to 1800 clients is progressing. Rudco were informed in August that the fact that they had taken monthly service fees and loan repayments from clients who applied for its debt consolidation loans, before advancing these loans, had made them contravene the NCA rules and the Usury Act.