ENFORCEMENT OF A CREDIT AGREEMENT WHERE THE CONSUMER HAS APPLIED FOR DEBT REVIEW IN TERMS OF THE NATIONAL CREDIT ACT 34 OF 2005 First Rand Bank v Smith (unreported case number 24208/08 (WLD))

Section 86 of the National Credit Act 34 of 2005 (NCA) provides for the debt relief mechanism envisaged in section 3(g) of the Act by affording the overindebted consumer the opportunity to apply to a debt counsellor for a review of the credit agreements to which he or she is a party and eventually to be declared over-indebted by the court. The effectiveness of the debt review process obviously depends on a positive working relationship between all role players, namely the over-indebted consumer, credit providers and debt counsellor, but also on the extent in which the legislator has succeeded to regulate all aspects of the said process properly. According to a recent newspaper report more than 58 000 consumers have applied for debt review in terms of section 86. However, hardly any of these cases have managed to proceed through our courts. Apart from the lack of co-operation between the said role players, it iscommonly accepted that legislative gaps contribute to the ineffectiveness of the debt counselling process. In First Rand Bank v Smith (unreported case no 24208/08 (WLD)) the court, however, indicated a lacuna in the Act which, it is submitted, was not in actual factpresent in the Act.

CONSUMER PROTECTION LEGISLATION AND PRIVATE INTERNATIONAL LAW

Although South African private international law is primarily based on bilateral and multilateral reference rules, the legislator in recent consumer protection legislation rather employs unilateral conflict rules by the identification of rules of immediate application and in the form of scope rules. The relevant provisions in the Electronic Communications and Transactions Act 25 of 2002, the National Credit Act 34 of 2005 and the Consumer Protection Act 68 of 2008 are discussed, together with the role that the traditional conflict rules still play. A new rule of private international law for consumer contracts is proposed; in this regard the principle of preferential treatmentwill play a role in the context of alternative reference rules.

WHY THE NEED FOR CONSUMER PROTECTION LEGISLATION? A LOOK AT SOME OF THE REASONS BEHIND THE PROMULGATION OF THE NATIONAL CREDIT ACT AND THE CONSUMER PROTECTION ACT

Two statutes focusing on consumer protection have been introduced recently: the Consumer Protection Act due to come into effect in October 2010 and the National Credit Act. There are many who criticize this legislation, arguing that this will overburden the economy and will lead to significant costs for business. In this article I examine some of the reasons why the Department of Trade and Industry deemed it necessary to introduce consumer protection legislation. I conclude by arguing that despite the increased costs for business, the legislation is necessary in order to prevent the exploitation of consumers by business that presently exists in South Africa. I do not, however, seek to answer the question whether this legislation will achieve its lofty aims. This, only time will tell. However, many acknowledge that the introduction of the National Credit Act shielded South Africa from some of the worst excesses of the global recession of 2008/2009. It is hoped that the Consumer Protection Act will likewise change the way many in South Africa do business.

TERMINATION OF DEBT REVIEW IN TERMS OF SECTION 86(10) OF THE NATIONAL CREDIT ACT AND THE RIGHT OF A CREDIT PROVIDER TO ENFORCE ITS CLAIM Standard Bank of South Africa Ltd v Kruger (unreported case number 45438/09 (GSJ)) and Standard Bank of South Africa L

One of the purposes of the National Credit Act 34 of 2005 (NCA) is to protect consumers by inter alia providing mechanisms for resolving overindebtedness. Section 86 of the NCA provides for such measure in that it allows a consumer to apply to a debt counsellor to conduct a debt review of the credit agreements to which he is a party and to be declared over-indebted. One of the first steps in the debt review process is therefore, a determination by the debt counsellor whether the consumer is over-indebted, likely to become over-indebted, or not over-indebted at all. Where the debt counsellor concludes that the consumer is indeed over-indebted, section 86(7)(c) requires of the debt counsellor to issue a proposal recommending that the Magistrate’s Court make an appropriate order to declare one or more of the consumer’s credit agreements to be reckless credit (if applicable) and/or to re-arrange or restructure theconsumer’s obligations. In terms of section 86(8)(b) the debt counsellor is also obliged to refer the recommendation to the Magistrate’s Court for a hearing under section 87. In Standard Bank of South Africa Ltd v Kruger (unreported case number 45438/09 (GSJ)) and Standard Bank of South Africa Ltd v Pretorius (unreported case number 39057/09 (GSJ)) the court (Kathree-Setiloane AJ)had to interpret section 86(10) of the Act which provides as follows: “If a consumer is in default under a credit agreement that is being reviewed in terms of this section, the credit provider in respect of that credit agreement may give notice to terminate the review in the prescribed manner to – (a) the consumer; (b) the debt counsellor; and (c) the National Credit Regulator, at any time at least 60 business days after the date on which the consumer applied for debt review.” The court had to determine whether the credit provider in casu was entitled to terminate the debt review in terms of section 86(10) and thereafter to proceed with the enforcement of the credit agreements in circumstances where the debt counsellor had referred the debt review matter to the Magistrate’s Court for a hearing in terms of section 87 of the Act. In what follows, the facts and decision in Kruger and Pretorius will be analysed and commented on. In addition, relevant provisions of the Act pertaining to the termination of debt review proceedings and the credit provider’s right to enforce its claim will also be interpreted and commented on. Regarding the credit provider’s right to enforce its claim the position where the debt review process is still pending whilst the matter has not been referred to the Magistrate’s Court for determination yet, will be distinguished from the position where the matter has indeed been referred to the Magistrate’s Court.

A SHORT DISCUSSION ON THE EFFECTS OF THE IN DUPLUM RULE UPON COMMENCEMENT OF LITIGATION AND AFTER JUDGMENT: A VIEW BOTH “INSIDE” AND “OUTSIDE” THE NATIONAL CREDIT ACT

It has repeatedly been confirmed by the courts that the in duplum rule forms part of South African law, and more recently section 103(5) of the National Credit Act 34 of 2005 (hereinafter “the Act”) has concretized the rule into statutory form. This note examines the effects of the in duplum rule once the litigation process has been initiated by the creditor and the implications of the rule after judgment is granted against the debtor. Preceding such discussion, however, one needs first to consider whether South Africa still has a common-law in duplum rule, or whether the statutory in duplum rule has ousted the “old” rule in toto (for ease of reference andpracticality the rule as developed by the courts shall be referred to as the “common law rule” and the rule as set out in s 103(5) of the Act shall be referred to as the “statutory rule”). It is submitted that while the statutory rule has superseded the common law rule in terms of all credit agreements that fall within the jurisdiction or ambit of the Act there are those credit agreements that are not regulated by the Act and it is those credit agreements where the (“old”) common-law rule shall apply and regulate the interest component collectable by the creditor vis-a-vis the debtor. Thus the two rules must now operate together; both rules applying to different sectors of society; at least society whilst it wears its consumer cap. The codified in duplum rule as will be seen below – affects only natural persons and the juristic entity, as defined by the Act, remains to be protected by the common-law rule. Furthermore, the common-law rule will be applicable to those credit agreements which fall outside the auspices of the Act.

DEBT COUNSELLING V DEBT ENFORCEMENT: SOME PROCEDURAL QUESTIONS ANSWERED BMW Financial Services (SA) (Pty) Ltd v Donkin 2009 6 SA 63 (KZD)

The National Credit Act 34 of 2005 (hereinafter the “NCA” or “Act”) is an innovative but challenging piece of legislation. It provides for various novel approaches to debt enforcement in respect of credit agreements and has introduced debt-relief measures in respect of over-indebtedness and reckless credit that are new to South African consumer credit legislation. It is thus inevitable that in applying the provisions of the Act various issues will arise that will require interpretation and, therefore, intense scrutiny. In the recent judgment of BMW Financial Services (SA) (Pty) Ltd v Donkin, Wallis J was required to scrutinize various aspects relating to debt review and debt enforcement in order to decide the consumer’s fate as influenced by the NCA (66; and see also s 130(1)(a)).

DO SEQUESTRATION PROCEEDINGS FALL WITHIN THE OVERALL AMBIT OF “ANY PROCEEDINGS” AS STIPULATED IN SECTION 130(3) OF THE NATIONAL CREDIT ACT 34 OF 2005?* Naidoo v Absa Bank Limited [2010] 4 All SA 496 (SCA)

Naidoo v Absa Bank Limited is one of the few cases by a court in which the interface between the insolvency law and the National Credit Act 34 of 2005 arose since the commencement of the latter in 2006. Other cases highlighting this interface include Investec Bank Ltd v Mutemeri (2010 (1) SA 265 (GSJ)) and Ex Parte Ford (2009 (3) SA 376 (WCC). The enactment of the National Credit Act has had significantconsequences for the scope of remedies available to both debtors and creditors in terms of the insolvency law. The National Credit Act did not change the Insolvency Act 24 of 1936 dramatically. Section 84 of the Insolvency Act, which deals with goods delivered in terms of an instalment agreement to a debtor whose estate became subsequently sequestrated, was one section which was changed by the National Credit Act. However, the National Credit Act is now dealing exclusively with certain debts and the enforcement of those debts. These are debts arising out of credit agreements and therefore excluding the application of insolvency law when dealing with such debts. Section 4 of the National Credit Act determines when the Act is applicable. The National Credit Act provides sophisticated measures during a situation when consumers who are parties to credit agreements, which are not exempted from the application of the National Credit Act, are unable to pay their debts. These measures include debt reviewing, the declaration of a credit agreement as reckless credit and debt restructuring (see s 86(7) of the National Credit Act for the recommendations which a debt counsellor maymake after reviewing a consumer’s debts). In all other instances, normal civil remedies such as a garnishee order, sale in execution, an order for payment in instalments and the measures of the insolvency law are still means of redress available to a creditor. It issubmitted that this will not be the only time in South Africa where a possible overlap of remedies available under both insolvency law and under the National Credit Act will be adjudicated. Future motions will either try to enforce the application of the insolvency law or question its application, arguing for the application of the more specialized National Credit Act as seen in Naidoo v Absa Bank Limited.

SECTION 86(10) OF THE NATIONAL CREDIT ACT 34 OF 2005 Firstrand Bank v Raheman (5345/2010) [2012] ZAKZDHC 3 (10 February 2012)

The purpose of the National Credit Act 34 of 2005 (hereinafter “the Act”) is not only to protect the interests of consumers but to regulate the interests of credit providers as well. There have been a number of views expressed by our courts in dealing with the debt-review process. The debt-review process is found in Part D of Chapter 4 of the Act. The Act makes provision for a consumer who is over-indebted or where he or she is experiencing financial strain to have his or her affairs rearranged by a debt counsellor. Thequestion as to when a creditor may interrupt these affairs is discussed in the case of Firstrand Bank v Raheman (supra).

Perspectives on the Disclosure of the Location of Goods in terms of Section 97 of the National Credit Act 34 of 2005

This article considers the provisions of section 97 of the National Credit Act 34 of 2005 (NCA), which are vitally important to credit providers and consumers alike and which entrench the obligation of a credit consumer who is subject to the Act to disclose to the credit provider the location of the goods financed under a credit agreement. Against a backdrop of similar provisions in the NCA’s predecessors (the Hire-Purchase Act 36 of 1942 and the Credit Agreements Act 75 of 1980), the article seeks to evaluate what changes, if any, the NCA has brought in this context and to make appropriate recommendations relating to the scope and application of section 97 of the NCA. The discussion of the disclosure measures in the NCA and its predecessors is preceded by a brief overview of the Acts’ fields of application insofar as the latter are relevant to the disclosure provisions. We conclude that the legislature needs to intervene and amend section 97 of the NCA (and regulation 34, which must be read with section 97), failing which these provisions will be a very limited tool in the hands of the credit provider to keep track of the goods that serve as security and their effectiveness will be greatly diminished.

I ‘Notice’ You ‘Noticing’ Me: A Critical Analysis of the Section 129 Notice of the National Credit Act, and Recomendations for the Implementation of a ‘Specialised’ Foreclosure Notice

Section 129 of the National Credit Act provides that a creditor may not commence any legal proceedings to enforce a credit agreement before first issuing a section 129(1)(a) notice to the debtor. Thus, in a foreclosure context, should a mortgagee wish to enforce a mortgage agreement, he must first comply with section 129(1) and deliver a section 129 notice to the mortgagor. Should this not be done, any ensuing foreclosure proceedings could potentially be excipiable. Accordingly, section 129 has been described as the gateway to litigation and compliance with this section is paramount for debt enforcement. Unfortunately, section 129 has been the subject of much criticism and uncertainty due to its ambiguous wording and the resulting interpretation. Much of the uncertainty relates to the way in which the notice must be delivered and the contents of the notice. With specific regard to foreclosure proceedings, section 129 fails to alert the debtor about his rights and remedies and fails to notify the debtor of the full consequences of foreclosure. Consequently, the section has been amended several times. Unfortunately, the amendments have not resolved all the loopholes in section 129, and some of these amendments have created more uncertainty and ambiguity. Case law has, however, provided some direction as to the interpretation of section 129. Despite the amendments and case law developments, uncertainty still exists, and clarity is urgently required in relation to the interpretation and application of section 129 during foreclosure proceedings. It is accordingly suggested that certainty can only be achieved by implementing a specialised ‘foreclosure notice’.