On 28 March 2011, the Supreme Court of Appeal handed
down the judgment in Nedbank v National Credit Regulator
 ZASCA 35. This was an appeal against various
orders handed down by the North Gauteng High Court
in National Credit Regulator v Nedbank Ltd. and Others
2009 (6) SA 295 (GNP).
129 NOTICE (The
start of legal action, if ignored)
This is extremely important
for a consumer to know, who has arrear accounts. Always
make sure that your creditors have your
correct postal and physical address,
you can also select your email address so you can
receive any legal documentation. It is the legal right
of a creditor to use the address you chose in your
credit agreement with the creditor, if you did not
change your address, when applicable, and he can get
a judgment against you in your absence. You will not
later be able to try and defend yourself, by claiming
you did not receive the notice. So get and keep proof
of any address change.
The Supreme Court of Appeal ruled that, on a proper
interpretation of Section 86(2), a credit
agreement is excluded from debt review, where the
credit provider has given a section 129(1)(a) notice
to a defaulting consumer, prior to that consumer
applying for debt review.
If a creditor cannot proof that a Section 129 was
delivered to a consumer, prior to applying for debt
review, a creditor cannot refuse to include the account
under debt review.
1. Credit agreements, in respect whereof a Section
129(1)(a) notice has been delivered to the
consumer, i.e. in a manner as provided for in Section
65 ((a) make the document available to the consumer
through one or more of the following mechanisms- (i)
in person at the business premises of the credit provider,
or at any other location designated by the consumer
but at the consumer’s expense, or ordinary mail;(ii)
by fax;(iii) by email; or (iv) by printable web-page
and b) deliver it to the consumer in the manner chosen
by the consumer from the options made available in
terms of paragraph (a).;) of the NCA, are to be excluded
from debt review.
2. The debt counsellor can still institute voluntary
negotiations with the credit provider in order to
resolve the matter.
One of the options provided in the Section 129 notice,
is that a consumer has ten (10) days to contact
a debt counsellor. If the consumer ignore this,
it is the beginning of legal action and there is
no obligation for a creditor to include an account
under debt counselling any longer. The creditor
can proceed to get a judgment, garnish your salary
or sell your possessions.
103(5) IN DUPLUM (Prevent
creditors “to drain consumers dry”)
Always keep tabs on
your accounts, to make sure the account has not reached
In Duplum, and you are over-charged on accounts.
The court dealt with two rules in South African law,
that governs the amount repayable by a defaulting
consumer to a credit provider: The (1) common
law In Duplum and the(2) provisions
of Section 103(5) of the National Credit Act.
Both these rules have as its purpose the prevention
of extensive recovery by a credit provider from a
consumer that is in default.
Without the In Duplum Rule, the interest will continue
to accrue indefinitely, as long as the consumer does
not completely correct the default.
The SCA stated that “[t]he purpose of the rule is
to ‘ensure that debtors are not endlessly consumed
by charges and also to endure that debtors whose affairs
should not be entirely drained dry’.”
The total amount repayable is therefore
200% of the outstanding balance at time of
default, provided that enough
time has elapsed whilst the consumer is in default
to allow interest to accumulate to the maximum amount.
In terms of the common law rule ONLY interest
were used in the calculation. Furthermore,
in terms of the common law rule, when a consumer paid
an amount that did not rectify the default, but reduced
the maximum allowable repayment amount (i.e. interest
had already been charged up to the maximum amount
allowed), interest could be charged again until the
maximum amount was reached again.
Example: The account has
reached In Duplum. Now a payment is made, which reduces
the In Duplum amount. The next month, the creditor
can charge interest again, to where the account reaches
In Duplum, a payment is made to reduce the In Duplum
amount, and so a vicious circle carries on.
Section 103(5) reads
“Despite any provision of the common law, or a credit
agreement to the contrary, the amounts
contemplated in Section 101(1)(b) to (g), that accrue
during the time that a consumer is in default under
the credit agreement may not, in aggregate, exceed
the unpaid balance on the principal debt under that
credit agreement as at the time that the default occurs.”
This section of the National Credit Act did not abolish
the common law In Duplum Rule – the latter still
applies to debts that are not credit agreements,
subject to the provisions of the National Credit Act.
Section 103(5) is “not a code and embodies no more
than a specific rule applicable to specific circumstances,
that is, to credit agreements subject to the NCA.
It is thus a statutory provision with limited operation.”
Generally, the common law In Duplum
will have bearing on credit agreements
predating 1 June 2007 and all non-National Credit
Section 103(5) will apply to post 1 June
2007 matters governed by the National Credit Act.
Section 103(5) is not the same as the common
law In Duplum rule even though there are
similarities between the common law and statutory
rules – the latter incorporates only interest
to calculate the maximum extent to which interest
may be recovered by a creditor.
Section 103(5) takes all the amounts
referred to in section 101(1)(b) to (g) into account
in order to calculate the maximum amount that may
be recovered by the credit provider from a consumer
that has defaulted.
o Section 101(1)(b) to (g), refers to the following:
(b) an initiation
fee; (c) a service fee; (d) interest; (e) cost of
any credit insurance; (f ) default administration
charges; (e) collection costs.
o The sum of these amounts after the consumer has
defaulted, whether they are paid or unpaid, may
only be 100% of the outstanding amount as at default.
o Where the consumer repays an amount, but does
not completely cover the total amount due within
the original contract term, the credit provider
cannot charge fees, costs, charges and interest
up to the maximum amount repayable as was the case
with the common law In Duplum.
between the common law In Duplum and Section 103(5)
of the NCA:
Under the common law rule, arrear
and unpaid interest must first reach the equivalent
sum of the outstanding capital amount ,before the
accumulation of interest comes to an end.
Under the provisions of Section 103(5),
paid and unpaid fees, costs, charges and interest
as referred to in section 101(1)(b) to (g) may not
accumulate to more than the amount of the outstanding
principal debt under that credit agreement at the
time of default.
In terms of the common law rule,
payments by the debtor reduces the interest that has
accumulated up to the maximum allowable amount, causing
the amount owed by the debtor in respect of interest
to be less than the maximum allowable amount. Creditors
were therefore entitled to charge interest anew, until
the maximum repayable amount was reached again.
The three main differences
between common law In Duplum and Section 103 (5) are:
1. All costs of credit referred to in
Section 101(1)(b) to (g) are included
under the amounts that have limited accrual where
the common law In Duplum only allowed for
unpaid and arrear interest to accrue
to the amount of the principal debt that was outstanding
at time of default.
2. Section 103(5) does not
allow for the credit provider to charge costs, fees
or interest, where the consumer makes payment and
reduces the maximum allowable amount that may be recovered,
whilst the consumer is in default. This means that
the credit provider may not charge interest,
fees, costs and charges until the consumer has completely
rectified the default.
Under the common law In Duplum
the credit provider could charge interest
as soon as the consumer paid an amount that decreased
the maximum repayable amount.
3. Section 103(5) includes
paid and unpaid amounts whilst
the common law rule only includes
unpaid amounts to make up
the recoverable amount.
In terms of the common law rule,
the amount repayable by a consumer that has defaulted
on an agreement is the outstanding amount
as at time of default plus interest equal to the amount
of the outstanding amount at time of default.
The Supreme Court of Appeal decided that the amounts
stated in section 101(1)(b) to (g) that make up the
amount that must equal the outstanding principal debt
at time of default, include paid and unpaid amounts.