Can Knox make a margin call on a bullion-backed loan?

What a margin call is

The term comes from investment and securities lending, where a lender requires the borrower to restore a minimum gap, or margin, between the value of the security and the debt. In a bullion-backed loan, a similar provision may allow the credit provider to act if the gold or silver price falls far enough that the security no longer comfortably covers what is owed.

How such a provision generally works

Where an agreement includes this kind of provision, it usually sets out:

• the valuation basis used to measure the security during the loan
• the level at which the provision is triggered
• how and when you are notified
• your options, such as adding coins or bars, making a part repayment or settling the loan
• the time you have to respond
• what follows if you do not respond, including any steps towards selling the security

Some agreements contain no such provision and rely on the advance rate and the end-of-term repayment instead.

What depends on Knox policy

Whether Knox's bullion-backed loans include any price-related provision, and how it works, is set by Knox's credit policy and the credit agreement. Knox Precious Metals (Pty) Ltd is a registered credit provider, NCR registration number NCRCP21466. Any steps on default, including the sale of security, must follow the agreement and the law. If a payment is missed, Knox sends a written default notice giving you time to pay. If the arrears are not paid within that period, the loan ends and Knox may sell the pledged goods without a court order. The proceeds settle what you owe: any surplus is paid back to you, and you are not liable for any shortfall. Default interest is charged at the same rate as the loan. Repayment and part-payment options are also set out in the agreement. Repayments are collected by debit order on the dates in your repayment schedule. You can pay more than the instalment, or settle in full, at any time, and you receive a monthly statement by email.

What to do next

Ask Knox to point you to any price-related clause in the quotation or agreement and to explain it in plain language. Keep your contact details up to date so that any notice reaches you. If you believe a notice or step was not handled in line with the agreement, raise it through the complaints process. Complaints can be sent in writing to compliance@knox.co.za or raised by calling 011 646 1919, and Knox asks that you contact it first so it can try to resolve the matter.