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Debt collection from a legal point of view

By: Tshinetise S.J Director: Mphaphuli Mudzunga Tshinetise Attorneys Inc.

pridenews-logoDebt collectors are governed by the National Debt Collectors Act 114 of 1998. One of the most important
aspects of Act is the establishment of the Council for Debt Collectors.

The main objective of the Council is to exercise control in the manner in which debt collectors do their job.
A person who wishes to practice as a debt collector and charges fees for the work must register with the National
Council for Debt Collectors. However, attorneys do not need to register with the council as they already belong to
a professional body – the law society that regulates them.

A register of people listed as debt collectors is kept by the Council, and debt collectors are issued with a
certificate of practice.

What debt collectors may not do when collecting a debt.
When collecting debt, a debt collector may not use force or threaten to use force against a debtor or any other
person close to the debtor. He/ she may not act in an excessive or intimidating manner, he/she may
not use fraudulent or misleading representation, and a debt collector may not spread false information
concerning the creditworthiness of a debtor.

Should any of the above conduct by the debt collector arise, the consumer has the right to lodge a complaint with
the Council for Debt Collectors – who will commence an investigation.

Should the debt collector be found in contravention of the above, he or she may risk having his or her certificate
withdrawn, suspended pending a fulfillment of a condition which may be imposed on him or her by the Council,
fined, or ordered by to reimburse any person who the Council is satisfied has been prejudiced by the conduct of
such debt collector.

What may be recovered when collecting a debt?
It is important to know that debt collectors may only recover from the consumer the capital amount
of debt and interest legally due and payable thereon, as well as necessary expenses such as admin fees and
fees prescribed by the Minister in the Government Gazette.

Is it possible to negotiate for lower instalments?
If it happens that the consumer finds himself/herself in a position where he/she can no longer afford
the repayment plan, the consumer may negotiate for a lower installment.

It is important for consumers to urgently contact their creditors as soon the consumer realises that his/
her financial position has changed.

The consumer must not wait for debit orders to bounce as it results in added  interests and possible legal action
taken against the consumer.

What happens if I am over indebted? How does the law protect me?

The National Credit Regulator defines over-indebtedness as follows:
Section 79 (1) of the NCR provides that, “ a consumer is over-indebted if the preponderance of the available
information at the time a redetermination is made indicates that the particular consumer will be unable to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, having regard to the consumer financial means, prospects and obligation, and probable propensity to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party as indicated by the consumer’s history of debt repayments.”

A consumer may apply for debt counselling. This is a process whereby a debt counsellor assesses a consumer’s outstanding debt and implements a restructured debt repayment plan.

Once all the consumer’s debts are settled under the debt review process, the consumer will be issued with a clearance certificate which will also be sent to all credit providers and credit bureaus.

The advantage of a debt review process is that it protects the consumer from any legal action which could result
from the consumer’s debt.

But it also has its disadvantages, in that, while under a debt review programme, the consumer cannot
apply for any credit until all outstanding debts have been settled.

A consumer may also wish to consolidate his/her debts. This process is called debt consolidation it is a process where a company pays the consumer’s debts, which results in the consumer owing the company an amount equal to the total sum of all debts. In effect, multiple debts are combined into a single, larger piece of debt, usually with more favorable payoff terms; a lower interest rate, lower monthly payment or both.

Mphaphuli Mudzunga Tshinetise Attorneys Inc. Office no 9, 2010 Centre, site no D18, Phalaphala
Street Thohoyandou – 015 969 1018. Office no 0603 JSL Towers 6th floor 259 Pretoria Street – 012 397 3026

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