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Monday, 22 January 2018
NCR Declaratory Judgment

The long-awaited High Court declaratory Order sought by the National Credit Regulator, attempting to resolve numerous problems arising from the vagueness of the National Credit Act, particularly relating to the process of debt counselling applications and debt relief, was handed down on 21st August 2009.

A copy of the judgment can be found at the Southern African Legal Information Institute website.

The Court granted 11 Orders regarding the interpretation of the National Credit Act, 10 relating to over indebtedness and debt review practical procedures and one relating to the charging of interest on credit agreements that are in default.


A very brief cursory overview and summary of some of the issues covered in the Orders are as follows :

  1. The Magistrate Court has jurisdiction to hear debt re-arrangement applications;
  2. The applications are to be brought by the debt counsellor as a statutory functionary;
  3. The procedure of the debt re-arrangement applications are governed by the rules of the Magistrates  Court;
  4. The jurisdiction of the Magistrates Court to hear debt re-arrangement applications is not limited to R100 000.00;
  5. The applications are to be brought in the Magistrates Court which has jurisdiction over the consumer concerned;
  6. The normal provisions relating to costs in the Magistrates Court are applicable to debt re-arrangement applications but it must be borne in mind that the debt counsellor is acting as a statutory functionary;
  7. Service of documents in terms of debt re-arrangement applications are to be in accordance with the Magistrates Court rules relating to service, but with the agreement of the affected parties, may be by way of fax or email;
  8. A debt counsellor who refers a matter to the Magistrate’s Court for a debt re-arrangement application has a duty to assist the Court and should be available and able to render such assistance by way of furnishing evidence or making submissions as to his or her proposal or to answer any queries raised by the Court;
  9. The NCA has expanded the legal doctrine of in duplum (which specifies  that the interest charged can never exceed the principal debt), with regard to credit agreements as define in the NCA, to include in addition to interest various costs specified in Sections 101(1)(b) - (g) . The court interpreted Section 103(5) to mean:
  • the amount contemplated in sections101(1)(b) to (g) which accrue while the consumer is in default may not exceed, in aggregate, the unpaid balance of the principal debt when the default occurred;
  • once the total charges referred to in section 101(1)(b) to (g) equal the amount of the unpaid balance, no further charges may be levied;
  • once the total charges referred to in section 101(1)(b) to (g) equal the amount of the unpaid balance, payments made by a consumer thereafter during a period of default do not have the effect of permitting the credit provider to charge further interest while such default persists.

It is submitted that while not all of the legal reasoning of the Court was flawless, the Court took a fairly practical approach and the decision has brought a degree of certainty to some of the issues in which the NCA had failed to give proper guidance on.

It will be interesting to see the reaction of the parties to the application which included not only the National Credit Regulator but also the major four banks, the Credit Providers Association, a debt counselor and others.

 

 

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