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The Latest Debtfree DIGI

Wednesday, June 22, 2011

DC comment on recent 129 Ruling

As a debt counsellor, I was recently harshly humbled to realise how naïve I was to believe that the National Credit Act would be true to its stated aim, viz. to protect over-indebted consumers and “provide for debt-reorganisation in cases of over-indebtedness”. Instead, some of the finest legal minds in the Supreme Court have made it a relatively simple process for credit providers to have credit agreements excluded from the debt review process, thereby keeping over-indebted consumers firmly at their mercy.

My naivete was such that I actually believed that Section 129 of the NCA, read in conjunction with Section 130, ensured that consumers would receive fair warning that credit providers intended to take legal action, and would also be advised to see a debt counsellor in order to remedy the situation before the intended legal action was taken. But no, these fine legal minds have ruled that no matter how consumers respond to their warning (even if they take the helpful advice offered and see a debt counsellor within the prescribed period), that debt counsellor is not allowed to help them, as legal action is deemed to have started as soon as that Section 129 letter was sent. Makes it a bit difficult to reorganise debt in cases of over-indebtedness, doesn’t it?

How do we as debt counsellors respond to this ruling? For me, throwing my hands up in despair and closing my business is not an option. That leaves a few approaches :

• Firstly, check whether the Section 129 letter has been sent as per the prescribed methods allowed by the Act for service of documents i.e. registered mail or delivery by sheriff (Section 168 of the NCA). If not, there’s no proof that it was ever sent, never mind received by the consumer, so the relevant credit agreement can’t legitimately be excluded from debt review.

• If it was legitimately sent, I would still list the credit agreement on the Form 17.1 and send it to the credit provider in question. Why not let them just confirm that it is indeed excluded? If they send a Certificate of Balance stating that it’s included, isn’t it a bit unfair to later oppose proposals on the basis that it’s excluded?

• If, after all that, they confirm that the credit agreement is excluded, include it in proposals anyway. It’s still up to the credit provider to oppose its inclusion in court.

• Should the credit provider oppose in court, discuss with your attorneys whether they’re prepared to bring a Section 85 application immediately, requesting the magistrate that the credit agreement be handed over to a debt counsellor and therefore included in the application. Obviously it would be advisable to ensure that proposed repayment of this debt is reasonable i.e. that it’s being paid within a reasonable term, at the original interest rate as agreed between the consumer and the credit provider.

• Finally, should all of these measures fail and the credit agreement must be excluded, provision must be made in the client’s budget for them to make an arrangement for repayment. The amount will obviously depend on the size of the outstanding debt.

After thinking my way through this process, I’m even more confused as to whether the South African legal system actually intends us as debt counsellors to help over-indebted consumers. Despite that, I look back at all the consumers we have helped, houses and cars we have saved, and credit providers who are receiving payments that they otherwise most likely would not have received, and I will do my best to press on and keep providing that service (no matter how hard the Supreme Court makes it).

Submitted by DC.

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