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IntroductionWhat is a contract?
The law of contract and consumers' rights
Ways of selling and buying
Buying on credit and credit agreementsThe National Credit Act (No 34 of 2005) (NCA)
Owing money and being in debt
Debt counseling
Legal proceedings
Default judgement
Getting credit: contracting with a credit provider
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Refusing to give credit
Debt collectors
Other methods of recovering debt Friendly societies
Buying clubsInsurance
Microlending and Microlenders
Problems
Checklist
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You can buy sweets or cooldrinks at a cafe, catch a bus to school or pay someone to come and fix your leaking drain pipes. When you do these things, you are a CONSUMER. A consumer is therefore someone who buys goods or services from someone else. Consumer law is all about contracts. When a seller agrees to sell something, and a consumer agrees to pay for goods and services, they have entered into a contract. If there is an argument between the seller and the buyer, the law will decide what should be done.
This chapter deals with the law of contract, what a contract means and the rights and duties of people who enter into contracts. Contracts include credit agreements and contracts with microlenders.
A contract is an agreement between two (or more) people where one person offers to do something and another person accepts that offer. So, when a seller agrees to sell and a buyer agrees to pay for goods and services, they have entered into a contract. For example, a shop-owner offers to sell a jersey for a particular price. A person agrees to pay the price that the shop-owner is asking and pays for the jersey. There is now a contract between the person buying the jersey and the shop-owner.
It is important to understand how a contract is made and how it can affect the rights of the buyer or the seller.
According to the Children’s Act (No 38 of 2005) which came into effect on 1 July 2007, a minor is someone under the age of 18 years. A minor who enters into a contract without the consent of the parents or guardian does not have to keep to the contract. But, if the minor says he or she is older than 18, then the person who entered into the contract with the minor can sue for damages.
See Problem 1: Minor entering into a contract.
Both men and women must say what their marital status is when they fill in forms. (See The rules of civil marriage.)
Married people who are married in community of property have joint administration of the things the couple own. To protect each spouse, the other partner's written permission is necessary for big things like buying or selling a house, signing credit agreements or withdrawing money from accounts in the other spouse's name.
In a marriage out of community of property, the husband controls his own separate estate and the wife controls hers.
Before 1 November 1984 the husband had the marital power in some marriages. This meant the wife could not sign contracts without her husband's consent. In 1993 the Fourth General Amendment Act was passed, which did away with marital power of a husband over his wife.
Contracts can be written or spoken. Many contracts need not be in writing, for example, daily activities like buying food in a shop, using public transport and going to the movies. Other contracts must be in writing or the courts will not enforce them. Examples are sale of land, long leases (more than 10 years), credit agreements, marriage contracts and contracts of apprenticeship.
However, it is usually better to have a contract written down. This is because it can be difficult for parties to prove the terms of a verbal agreement if there is a disagreement later on. If you are going to be a party to a verbal agreement – it is safer to have a third party present that can help to support your claim if there is ever any disagreement
Breaking a contract is called breach of contract. A breach of contract happens when one person does not do what she or he promised to do in the contract. The other person can then choose to end the contract. For example, a seller agrees with a buyer that the seller will deliver goods on a certain day. On that day the goods don't arrive. The delay was not the buyer's fault. This means that the seller 'breached the contract'.
There is also a breach of a contract if a person says or does something which makes it clear that they will not carry out their part of the contract. For example, a person promises to sell something to you and then sells it to another person.
There is also a breach if a part of the contract takes place, but something else in the contract is not carried out. For example, a customer orders certain goods and when they arrive it is clear that the goods are of a poor quality. The seller broke the contract because he or she sent poor quality goods instead of the good quality ones agreed on.
See Problem 2: Breaking a promise.
The law will help the innocent person if there is a breach of contract.
These are the legal options:
Specific performance means the court orders the guilty person to do what was promised. For example, the court orders a builder to finish building a house.
Sometimes the court will not order specific performance. This will happen if:
If the court orders the guilty person to carry out the contract, then the person must do this. If the person does not do what the court orders, he or she will be in 'contempt of court'. The person could get a fine or a prison sentence.
You can get an interdict from the court against a person who broke a contract with you. An interdict is a court order which prevents the guilty person from doing something or orders the guilty person to do something.
Instead of cancelling the contract, the innocent person can decide to sue the other person for damages. This means you can claim money if you lost out in any way because the contract was broken.
One person can cancel a contract if the other person has not carried out an important part of the contract. Once the contract is cancelled nobody has to carry it out. The innocent person can also sue for damages.
See Problem 3: Breach of contract.
A contract ends when:
The common law, as well as certain statute laws, protects consumers.
The common law says that if you buy something which has a fault at the time that you buy it and neither you nor the seller know about the fault, then you can get your money back from the seller, or pay less, depending on how bad the fault is.
If someone sells you something knowing that it has a fault and doesn't tell you about it, you can claim for damages.
Statute law also protects consumers. For example, the National Credit Act (No 34 of 2005) provides guidelines for people who want to buy and sell on credit. There is also the Sale and Service Matters Amendment Act of 1995 as well as the Consumer Affairs Act of 1988 and the Harmful Business Practices Act of 1999.
There are a number of consumer protection agencies that can assist consumers who wish to lay a complaint.
The government has set up Provincial Consumer Affairs Offices countrywide to provide consumers with protection, information and advice. You can approach a Consumers Affairs Office to intervene in disputes over contracts, quality of products or services. They can be contacted at:
National Government Consumer Affairs office
Department of Trade and Industry
Tel: 9861 843 384
Provincial Consumer Affairs offices: See Resources for contact details.
The following are important bodies that can also be contacted in connection with consumer complaints:
South African National Consumers Union (SANCU): Web: www.sancu.co.za |
012-428 7122 |
| Black Housewive’s League: | 011-336 5431 |
National Consumer Forum: Web: www.ncf.org.za | 011-313 3237 |
Consumer courts have the power to demand the end to unfair business practices that abuse the rights of consumers and to award costs against a person found guilty of such unfair business practices.
Cases will be heard by a 5-member panel headed by a chairperson with legal training.
The court does not have the power to impose fines. However if the court is disobeyed, criminal charges may be laid and could result in a fine of R200 000 or a sentence of five years' imprisonment, or both.
The court may also appoint a curator to take over the running of a business in order to pay back what is owing to consumers who have lost money.
There will be a Consumer Protector appointed in each province who will investigate cases referred to the Consumer Court. The Consumer Protector will decide which cases go to the Consumer Court.
The Consumer Court has the right to search premises, seize documents, summons individuals to court and demand to see documents.
The consumer will not have to pay much to use the court.
People try to sell their goods in various ways. Many of these ways are honest because people sell things that other people need and want. But in other cases dishonest people use all sorts of tricks to make consumers buy things they don't really want or need. Examples of these include fake contests where sellers pretend that consumers have won a free gift but they have to buy something expensive in order to get the free gift.
Misrepresentation
False and misleading advertisements is a crime because it can confuse or mislead consumers. Misrepresentation breaks one of the requirements of a valid contract. This is called an unfair business practice under the Consumer Affairs (Unfair Business Practice Act (No 71 of 1998).
The law protects people who pay to have their things repaired or serviced. So, if the repairer does the work badly, or loses, damages or steals your possession, then the law protects you. If the repairer carries out any repairs without your permission, then you usually only have to pay for the cost of materials and not the labour.
If you don't pay for repairs done to your goods, the shop or seller can keep the goods until you agree to pay.
When people need to buy expensive things like furniture, they often do not have enough money to pay cash. They can then decide to buy the expensive things on credit.
See Buying on credit and credit agreements.
When people need to buy expensive things like furniture, they often do not have enough money to pay cash. They can then decide to buy the expensive things on account or on credit where they pay over a period of time or at a later date. When doing this they make a debt for themselves.
When people buy on credit they do this through a credit provider. Credit providers are organisations or people that lend money - such as banks and microlenders - or that sell goods on credit, such as shops.
The National Credit Act (No 34 of 2005) (NCA) which came into effect on 1 June 2007, recognizes that there are times when people need to borrow money in order to buy certain things. In other words, they need to get credit from credit providers.
The NCA provides a framework for every type of credit transaction, including microloans, homeloans, bank overdrafts and furniture finance. The NCA impacts on consumers, credit bureaus and credit providers - ranging from microlenders to banks.
The NCA introduces new rights for consumers, as well as measures that allow consumers to make informed decisions before buying goods and services on credit. It also places a greater responsibility on credit providers to refuse to give consumers credit if they cannot afford it. It will also regulate the way credit bureaus do business.
The NCA replaces the Usury Act (which governs moneylending transactions), the Credit Agreements Act (which has governed instalment sale or "hire purchase" agreements) and the Exemption Notice to the Usury Act, in terms of which microlenders have been making loans and which has exempted the microlenders from the interest rate limit placed on banks.
A new regulator, called the National Credit Regulator has also been established in terms of the NCA. This body will be responsible for enforcing the terms and provisions of the NCA. The new regulator will also educate consumers about their rights.
The NCA aims to create a fair non-discriminatory environment in which people borrow and lend money while at the same time guarding against people being given a loan when they cannot afford to pay it back.
The NCA refers to people who borrow as consumers and says that they should be assisted and protected in the following ways. They should be
Debt management is when a person is able to control the amount of debt they make so that the monthly repayments are affordable.
The purposes of the NCA are:
‘to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers, by:
Why people get into debt
People borrow money for a variety of reasons, including paying for regular monthly expenses – like rent and transport, emergencies – like illness or death, occasional big expenses – like school fees and car maintenance, to buy furniture or a car or other big, expensive items, to start a small business or to pay back existing debts.
When a person wants to borrow money it is important for them to understand that buying on credit costs more than paying cash. The amount that a person ends up repaying includes:
If a person is considering buying on credit they must find out:
The quicker a person pays off the debt, the lower the extra finance charges will be. The longer it takes to pay off, the more the goods end up costing.
People get into difficulty paying back the money they have borrowed for all kinds of reasons. When someone does not make the monthly payment they agreed to
when signing a contract, this is called defaulting. If a person is having trouble paying back their debts you can help them to plan and manage their finances better; and/or plan to pay off their debts.
See Problem 5: Helping a person assess their financial situation and drawing up a budget.
The consumer has the responsibility to inform the credit provider if they are unable to meet monthly repayments.
The consumer has the right to go to their credit provider to make new arrangements or payments – although the credit provider does not have to agree to the consumer’s proposed arrangements.
Difficulties with paying debts
People who are finding it difficult to pay their debts to a credit provider should approach the credit provider to try and arrange to pay their remaining instalments in an easier way. If the credit provider prefers to deal with a debt counselor (in terms of the NCA) the person will have to go to a registered debt counselor.
The debt counselor will do a debt review and, if they find the person over-indebted (in other words, the person has too much debt that they cannot afford to repay), they may be able to get legal relief from the court so that the person can pay off the debt in a manageable way.
Important things to remember when a person borrows money:
When a consumer defaults on their payments, the first thing the credit provider will do is send a written notice. This is sometimes known as a letter of demand. In the written notice, the credit provider must:
The credit provider may not begin any legal proceedings -
the NCA as any person who assists in the resolution of credit disputes through conciliation, mediation or arbitration. They must be approved by both the
consumer and the credit provider, however. Unlike a debt counselor, they do not have the right to make a recommendation to the court to declare someone over-indebted in order for their debt to be rescheduled by court order.
If a person receives a written notice from the credit provider he or she should not ignore this. They should talk with their credit providers to arrange to pay their unpaid instalments or to see if it is possible to make payments in a more manageable way. The person should also apply for a debt review from a registered debt counselor if:
Being over-indebted
A person will be regarded as over-indebted in terms of the NCA if, at the time that an assessment of their debt is made, they are unable to pay the instalments-
Only the court can declare a person legally ‘over-indebted’. The court will usually do this on the recommendation of a registered debt counselor. If the debt counselor does not believe a person is over-indebted, she or he must reject the person’s application to have the debt rescheduled.
If the debt counselor assesses that the person is over-indebted, she or he can reach an agreement with the credit providers to whom the person owes money. She or he can also propose to the court to -
In addition, she or he can propose that the court assesses whether any of the credit agreements have been reckless.
Credit agreements that have been granted recklessly
Under the NCA, credit providers have a responsibility to make sure that a consumer can afford to pay back the new debt. Credit may have been granted ‘recklessly’, if:
1. The credit provider did not do all of the following before offering credit:
or
2. The credit provider did the assessment and even though the outcome of the assessment was that the consumer could not afford to pay back the debt and would become over-indebted, still granted credit;
or
3. It was clear that the consumer did not understand the costs involved in the agreement.
In order for the credit provider to make a complete assessment, the consumer is expected to give this information to the credit provider so they can cross-chec this with the credit bureaus or other sources.
Only the court can declare a situation of ‘reckless lending’ which is usually done on the assessment and recommendation of a registered debt counselor. The court will only act in a case of reckless lending if the consumer has been declared over-indebted.
The court may suspend or re-arrange a credit agreement (whether recklessly granted or not). In addition, where the client is over-indebted and the credit has been granted recklessly, the court may choose to cancel the debt.
Example
Peter is a teacher. He wants to take out a loan to buy himself a good computer to install at his home. However Peter already has five other loans that he is repaying out of his monthly salary. Without checking Peter’s personal income record as well as his credit rating, the computer shop agrees to let him have the computer on credit.
According to the NCA, credit providers have a responsibility to make sure that a consumer can afford to pay back the new debt, otherwise the credit will have been granted ‘recklessly. In this case it would appear that the credit was granted ‘recklessly’.
In the following cases a credit provider does not have to check the ability of the borrower to pay back debt when making these kinds of loans:
What is Debt counseling?
The idea of debt counseling is to give people an opportunity to pay back the money they owe through an agreed, legal process, rather than wait until there are more serious consequences - like being called to court or having their goods repossessed. Debt counseling can also assist a consumer if credit has been granted to them recklessly.
Debt counselors are trained and registered by the National Credit Regulator to assist consumers who may have become over-indebted as a result of entering into credit agreements.
Debt counseling may only be done by people who are formally trained and registered by the National Credit Regulator.
What the debt counselor will do
The debt counselor will conduct a debt review which means they look at the consumer’s total income and expenses (including their debts repayments) to determine whether or how the consumer is able to repay the debts. They will charge a fee for the service.
The debt counselor will inform the credit providers and all registered credit bureaus (within five working days) that this review is taking place, and must -
When a consumer is under debt counseling
When a consumer is under debt counseling, the following must happen:
When a consumer has paid all their debts
When a consumer has paid all their debts the debt counselor must give the consumer a debt clearance certificate which states that the consumer has paid off all debts owing. The consumer should take the certificate to the credit bureaus. The credit bureaus should take the person’s name and information off their lists of people who are subject to debt review/debt counseling.
Example
Tomsina works as a counter assistant earning R2 400 a month. She comes to see you as she is unable to pay all her debts every month and has received a written notice from a clothing store to say she is behind with her payments. She says she is also behind with repaying a microlender, a furniture dealer and the clothing store where she has an account.
When you make a list of her expenses which amount to R2 800 per month, it is clear that Tomsina is over-indebted and will be unable to pay her monthly debts.
Tomsina applies to a registered debt counselor to have her debt reviewed. The debt counselor does a debt review by assessing her debts and her income. Tomsina gives the debt counselor a copy of her budget and list of debts.
The debt counselor agrees that Tomsina is over-indebted according to the NCA, and makes calculations of new repayments that she can afford. The debt counselor first approaches the credit providers to try to reach informal debt rearrangement agreements with them. She does this, and while the microlender and the clothing store agree to new terms, the furniture dealer does not want to do this – so the debt counselor arranges to go to court. The court declares Tomsina over-indebted and orders that the debt be restructured.
Tomsina is told that she may not borrow any more money until this debt has been paid off. She understands that the credit bureaus will have a record of her financial situation on their records until she has paid off her debts. Every month, she gives the debt counselor the agreed amount of money and the debt counselor pays this money to her credit providers.
After Tomsina has paid all her debts she will receive a debt clearance certificate from the debt counselor to prove that she has finished paying all her debts. As she doesn’t want her negative listing to remain on the record of the credit bureaus, she applies to have this information removed from the credit bureaus records.
A credit provider may only begin legal proceedings against a consumer -
The credit provider may not begin legal proceedings
To begin legal proceedings, the credit provider can either
A consent to judgement is a legal document that may be signed by the consumer if they accept that a judgement (court order) will be made against them to ensure payments. If a person signs a consent to judgement it means that they admit that they have defaulted, and they either –
A consent to judgement must refer to a court near to where your client lives or works. There is no problem with a person signing a consent to judgement if they are definitely in default. In this case, it may be a cheaper option for them as it will avoid expensive legal processes.
However, if the person believes they have not defaulted (for example if they feel there has been a mistake on the account) they should not sign the consent to judgement.
If the person ignores the written notice/ letter of demand, a messenger of the court is likely to come to their house to serve a summons to appear in court. A summons is an order of the court and should never be ignored.
If a consumer gets a summons, they have five working days to respond by -
Once a summons has been issued, the consumer may no longer apply for a debt review with a debt counselor. He or she should consult a lawyer if intending going to court. If the person intends to defend themselves, they will need to make a plea. This means the person either admits guilt or explains why they are not responsible for the debt. (If the person needs legal assistance, give them contact details of a law clinic or of a lawyer who may work for reduced fees.)
Court orders
If a consumer is given a court order make sure that it is a valid court order. If the person thinks that there is a reasonable defence with respect to the original debt (in other words, the credit provider was wrong in some way and should not have started legal proceedings), advise the person to get a lawyer to represent them in court.
Default judgement
If the consumer ignores a summons to appear in court about their debt, then a default judgement by the court will be made and the person will be ordered to pay the money owing. This can get very expensive as the person will now have to pay the money they owe plus the interest that has been added to it, plus the legal costs of the court order. These legal costs could include the sheriff’s and the attorney’s fees.
Being placed ‘under administration orders’
If the person is unable to pay the amount they are ordered to pay by a court, they may apply to the magistrate’s court to make an order - known in the Magistrate’s Court Act (1944) as an administration order. This is intended to deal with a debtor who has few assets, a low income and financial difficulties that they cannot manage.
The administration order will specify
The administration order will appoint an administrator to collect the person’s money each month and to pay the debts as stated in the order. They will charge a fee for doing this. For as long as the person is ‘under administration orders’, no creditor may attempt to get money or property directly from the person and he or she is not allowed to incur any other debts without telling the administrator or they would be breaking the law.
Emolument attachment order
An emolument attachment order is a court order which is given to the consumer’s employer, instructing them to deduct from their employee’s salary the money that they owe and give it straight to a credit provider. On top of this, the employer may deduct a 5% administrative fee. The consumer will see the deductions on their pay slip.
The court must not order deductions that are so large that your client is not able to look after themselves or their dependents. If the consumer believes this is the case, he or she should appeal to the court to amend the order.
Garnishee order
A garnishee order is when the court orders people who owe the consumer money, to pay the credit provider who is owed money, instead of the consumer. A garnishee order also allows the credit provider to take money that the consumer expects to receive from, for example, an inheritance.
Warrant for repossession
If there is a default judgement against a consumer and they have no money to pay the debt (plus all the additional amounts), then the credit provider is allowed to get a court order to repossess goods. That is, they can get permission from the court to sell some of the consumer’s possessions to raise the money that is owed to them. When the possessions are sold to pay the creditor, they are often sold at a lower price than they are worth – and the consumer is still responsible for paying any money that is still owing. A sheriff of the court brings the court order to the consumer’s home. Then she or he will visit for the first time to make a list of the consumer’s possessions. At this stage the consumer should identify possessions that are not yet fully paid for, or which do not belong to them, as these cannot be taken away.
The second time the sheriff comes, s/he will take possessions away. They will first take things that are easy to move (like furniture and appliances). But then they are allowed to take possession of the consumer’s house or even the land they own.
The sheriff is the only person who can remove possessions and must have a court order to do this. In addition he or she must get the consumer’s permission to enter their house or flat and should not come in the middle of the night or when the consumer is not at home.
Example
Solly’s goods are repossessed. Solly does not pay his furniture account and the shop that he has bought from gets a default judgment against him for R2 600. Solly ignores the written notice that he receives from the shop’s lawyer.
While Solly is at work the sheriff of the court goes to his house with a Warrant of Execution and removes his furniture and fridge.
Solly goes to an advice office for advice. The paralegal he speaks to explains that the court had a right to issue a summons. However, the sheriff had acted improperly because of the following:
The paralegal advised Mr Mbuli to consult a lawyer and recommended someone who helps the advice office with this kind of case.
Getting credit: contracting with a credit provider
Responsibilities of credit providers
There are different places where consumers can go to borrow money (get credit), for example banks, microlenders and shops. The National Credit Regulator’s website lists all registered credit providers. The National Credit Regulator (NCR) is an institution introduced by the National Credit Act (NCA) to ensure that credit providers, debt counselors and credit bureaus comply with the NCA. The NCR will also help consumers with understanding their contracts and will support consumers if they have problems with credit providers.
When dealing with consumers, credit providers are required to:
Credit providers may not:
Credit providers have the right to refuse to enter into a credit agreement with consumers but must provide reasons.
Rights and responsibilities of consumers
If a consumer signs a consent to judgement, they have agreed that the credit provider can take them to court if they do not pay their instalments. They will also have to pay all the credit provider’s legal costs. Consumers are responsible by law for repaying money once they have signed a contract for credit.
Consumers have the following rights:
Understanding the contract or credit agreement
When consumers agree to repay money that they have borrowed, they enter into a credit agreement. This means that the consumer signs a contract that clearly states the conditions for borrowing that money - including administrative costs and interest. It is important therefore, that when entering into such an agreement, they carefully read through and thoroughly understand the document before accepting it by signing it.
When entering into a credit agreement, the consumer should remember the following:
Types of loan and credit agreements
In addition to the standard loans such as purchases on credit, mortgage agreements and pawn transactions, the NCA has introduced new types of credit agreements, which are covered by the Act.
Not all loan agreements are credit agreements. The NCA says that the following are not ‘credit agreements’ and are therefore not covered by the Act:
Paying back the debt
The repayments made by a consumer are first used to pay the costs of the credit (the administrative fees and the interest) that the credit provider charges for lending the consumer the money. Only after these have been paid do instalments begin to pay back the actual amount borrowed – known as the principal amount. As interest is added to the outstanding balance on a regular basis (for instance monthly), the consumer may take a long time to start paying back the principal amount, even if they are paying their instalments every month.
Calculating interest
Interest can only be charged on the amount a consumer borrows, including the interest they have not yet paid. Interest cannot be charged on a deposit, nor can interest be charged when there is no debt – in other words when someone pays the whole amount straight away.
The NCA wants to ensure that the amounts charged for lending money are fair and that the same is charged everywhere. It has therefore set strict guidelines for credit providers to follow when charging costs and interest, and has specified the formulae to be used and the maximum allowable interest rate for each
Sometimes people battle to borrow the money they need, as no-one will lend it to them. When they think they are being treated unfairly or do not understand why they are being refused a loan, they may come to an advice office for help.
Credit providers are not obliged to give credit to anyone. A credit provider has the right to refuse credit as long as the reasons are not based on discrimination.
Your client has the right, on request, to be informed in writing of the reasons for credit being refused, and to be told whether negative credit bureau reports played a role. If the client does not know, contact the credit provider to find out.
Credit providers may refuse to lend money -
If you think the credit provider has acted within their rights, and you believe your client can afford more credit, you may have to simply advise your client to apply elsewhere for credit.
Querying a decision not to grant credit
You should query the credit provider’s decision not to grant credit if your client believes the reasons to be incorrect or unfair. The following may be instances of this.
• Your client has strong evidence that the refusal to give them credit was based on social prejudice (like age, sexual preference, religion, ‘race’, gender etc).
This can be difficult to prove, but can be important to confront in instances where there is a good case. If you think the credit provider discriminated on these grounds, report the credit provider to the National Credit Regulator or to an Equality Court.
• Your client believes the decision was based on an incorrect assessment of their ability to pay.
In this case it might be helpful to the client for you to assess their financial situation with them. Use the client record sheets Debt Information, Household expenses to assist in budgeting and Budget (record sheets 3 - 5) as it is really important to have a complete record of both what they earn and what they spend.
If the client’s regular expenses are more than their income, a credit provider would have been correct to assess your client as over-indebted, and was right not to give them any credit. If, however, it seems that your client could easily manage the debt, it would be worth approaching the credit provider to reconsider their decision.
• Your client feels they have been incorrectly or unfairly listed at the credit bureaus.
In this case you should advise your client to apply to the credit bureaus to check and change their records.
The role of credit bureaus
When a consumer takes out their first loan with a credit provider, they have to complete a form that asks for their consumer credit information. This includes their credit history, financial history, education, employment and career, and identity details. This information and the details of the loan are given to a credit bureau. Any credit provider that the consumer approaches for a loan or credit has the right to ask the credit bureau for information about the consumer. Consumer credit information can be given to credit bureaus by credit providers - or by consumers or the courts. Credit bureaus must make sure the information is accurate. Any person has the right to challenge the accuracy of any information and unless evidence is provided, inaccurate information must be removed from the records of the credit bureaus.
A registered credit bureau must do the following:
Consumers have the responsibility to check whether their credit history is recorded correctly by the credit bureau. They have the right to request a free copy of their credit record once every year in their birthday month.
What to do if a consumer is negatively listed at the credit bureau
A consumer can be negatively listed when he/she takes a loan and does not pay the instalments on time and the credit provider gets a court judgement against them. This information is given to the credit bureaus who keep it on record for up to five years.
A consumer will also be listed when they are under administration with a debt counsellor or other agent who is helping them manage their debts. When your client is listed at the credit bureaus, they are unable to be given any further credit as it is illegal for anyone to do so.
Once your client has paid off their debts, the debt counsellor will give them a debt clearance certificate. It is your client’s responsibility to submit this to the credit bureaus so that they can remove the information from their records.
If a consumer feels he or she has been incorrectly or unfairly negatively listed by a credit bureau, they can declare a dispute with the credit bureau and provide proof of payment from the credit provider.
After this the bureau has 20 working days to investigate the information, during which time the information is flagged as disputed.
After the investigation, the bureau will make a decision to keep or remove the disputed information.
If the consumer is not satisfied with the results from these processes they can contact the institutions that deal with these kinds of issues. These are:
See Resources for contact details of these institutions.
Debt collectors may be used by credit providers to recover debts from consumers. Debt collectors are regulated by the Debt Collector’s Act (No 114 of 1998) which provides for the exercise of control over debt collectors and legalizes the recovery of fees or remuneration by registered debt collectors. The overall goal of the Act is to monitor the conduct and professionalism of debt collectors and promote a culture of good governance within the profession. This will contribute to protecting consumers as well as creditors. The Council for Debt Collectors exercises control over debt collectors.
Debt collectors are allowed to charge for letters and notices that they send out to people. These costs usually have to be paid for by the debtor (person who owes the money). Debt-collectors are not allowed to issue a summons- this can only be issued by a court. .
In order to get a consumer to pay his or her debt, a debt-collector may get the consumer to sign a form, called an Admission of Liability. If the consumer signs this form, it means they agree that the money is now owed to the debt-collecting agency and NOT to the shop.
By signing this form the consumer also agrees to pay all the extra administrative charges of the debt-collecting agency. The original amount that was owed to the shop will now increase because of these add-on charges.
If the consumer signs this form and then refuses to pay the agency, the debt-collector can refer the debt to their lawyers. The consumer will then have to pay to the lawyers the original debt, the debt-collector's fee and the lawyer's costs. The consequences of signing such a form are therefore very serious.
If a consumer is finding it difficult to repay the debt, it is preferable for them to contact a debt counsellor who will work with the consumer and the credit provider to try and reach an agreement on how the debt should be repaid. This gives the consumer an opportunity to pay back the money through an agreed legal process, rather than wait until there are more serious consequences - like being called to court or having their goods repossessed.
The following are important provisions in the Debt Collector’s Act:
For more information on the Council for Debt Collectors and a list of registered debt-collectors, go their website: www.debtcol-council.co.za.
Where people use unlawful methods like intimidation and harassment, illegal repossession of goods that were not bought under a credit agreement, repossession of goods without a court order or use threats to have people arrested and put in prison, then they can be reported to the police. Threats of violence against anyone are regarded as assaults. Entering someone’s property without their consent is trespass or housebreaking if they open a door or window to enter a house.
See Problem 16: Getting a civil judgment in a criminal case.
Friendly societies are governed in terms of the Friendly Societies Act (No 25 of 1956). A friendly society, also sometimes called a benefit society, is an association which does not have profit as an objective. It invites people to become members of the association. A member pays to belong to the association and in return the association provides benefits, relief or maintenance to its members by:
In other words, benefits could be claimed for sickness, retirement, education, birth of a baby, funeral and medical expenses, unemployment and even financial loans.
To get the benefits promised, the person pays to become a member of the association and also pays a certain amount each month.
Friendly societies must be registered with the Registrar of Friendly Societies. A friendly or benefit society which is not properly registered can be criminally charged.
Where members have suffered losses as a result of fraudulent behaviour on the part of a friendly society, they can bring a private civil action for damages against the society. If a friendly society acts fraudulently towards its members it can also be criminally charged.
It is always important to check whether a friendly society is registered in terms of the Friendly Society Act before signing on as a member. Ask to see their Registration Certificate. Also read the association’s rules and agreement very carefully before signing.
See Problem 14: Misunderstanding the benefits of a friendly society.
One way of buying something expensive without using credit is by forming a buying club. A number of families, say about ten, can start a buying co-operative together. Every month each family gives the co-operative a certain amount of money, for example R100. This money is put together and every month one family gets a turn to have all the money. Ten families giving R100 a month makes R1000 a month.
In this way every family gets a chance to buy something expensive about once a year without having to pay all the extra costs of credit - there are no finance charges or repossessions.
Insurance is the financial protection that people get when they pay a certain amount of money every month to an insurance company. Then if something is lost or stolen, the insurance company pays the person – also called a claimant - out.
Remember, if a person who is insured does not lose anything, or if their property never gets stolen, or if they never claim from the insurance company, then they cannot claim back the money that has been paid to the insurance company.
There are many different kinds of insurance. It is useful to get a salesperson from a reputable and well-established insurance company to explain what the options are and what would be best for your requirements. Ask the following questions:
ASSURANCE is different from INSURANCE because it is to do with life instead of possessions. Life assurance is a monthly amount paid by someone so that when they die, a certain amount of money will be paid over to the family.
It is not a good idea for someone to cash in their life assurance while they are still alive. If they do this, then the amount that they will be paid will be very small compared to what they contributed every month. The longer the policy continues, the more money will be paid out.
Short-term assurance is a policy that can be taken out over a certain period of time (for example, 10 years). If something happens to the policy-holder during that time, then the insurance company pays a set amount to his or her family. But if the person does not die within that time, then at the end of the time of the policy, the contract with the insurance company is over and the policy-holder CANNOT get any of the money back.
Every person who buys a vehicle should make sure that it is insured. People who take out insurance have to pay the insurance company a certain amount of money each year. Insurance companies provide compensation when people are injured or property is damaged.
Insurance companies protecting people against injuries may give cover for medical bills, lost wages, pain and suffering and disfigurement (where a person's body becomes deformed).
If the insured person dies, an insurance company may pay medical and funeral expenses and compensate the people whom the dead person was supporting. Most motor accident insurance policies provide compensation for injury and death.
The Road Accident Fund automatically covers third party insurance. This does not cover damage to the person’s property (including your car).
Comprehensive insurance is not compulsory but it will cover a person if their vehicle is damaged in a motor accident. Comprehensive insurance gives all the benefits of balance of third party (in other words those costs that are not covered by a third party claim), fire and theft insurance as well as cover against damage to the vehicle no matter how the damage to the car was caused.
This kind of insurance is money that a person pays to the insurance company every month so that at the end of a specific period of time the policy-holder can be paid out a lump sum of money. Examples of this insurance are Endowment Policies.
A retirement annuity is money that a person pays to the insurance company which cannot by law be touched until they stop working due to old age (55 years minimum). The amount that is paid out becomes the person’s pension. They can only take a third in a cash lump sum. The rest is used to pay a monthly pension.
Microlending is an agreement between two people in terms of which one person agrees to lend money to another person. The person who is lending the money (the lender) will usually charge an extra amount called interest that is added onto the main loan. This is the lender’s fee for lending the money.
Registration of microlenders
In terms of the National Credit Act (NCA), all microlenders (as credit providers), must be registered with the National Credit Regulator. The NCA controls the amount of interest that microlenders can charge on money that has been borrowed by a consumer and all aspects of microlending.
See Getting credit: contracting with a credit provider.
Remember the following when making a loan from a microlender:
The contract/loan agreement with a microlender
A microlending agreement is drawn up when a lender offers to lend a consumer money and the consumer agrees to accept the terms of the repayment. When the consumer signs the contract he or she is agreeing to pay back the money and the interest according to the terms in the contract.
The consumer should always keep a copy of the contract and all the forms that have been signed. The contract must include the following information and details:
Any amount that is deducted from the loan amount reduces the principal debt.
Sizwe is 17 years old. Without telling them that he is under 18, he agrees to buy a music system on credit for R2 000 from Flash Music. He agrees to pay the money over a year. His father does not know that he has bought the music system. Sizwe runs into financial trouble and cannot pay back his monthly account for the music system. Flash Music decides to claim the remaining money from Sizwe’s father because Sizwe is a minor.
Sizwe is a minor, so he is not bound by the contract. Flash Music cannot sue Sizwe or his father for the debt.
Sizwe does not have to pay the remaining money that he owes. But he cannot keep the music system.
See Can a minor enter into a contract?
If Sizwe wants to keep the music system, he must pay the R2 000. If he wants to cancel the contract, he must return the music system and then also get back anything which he has already paid.
Jimmy offers to sell Thabo a piece of land for R50 000. Thabo sends Jimmy a letter offering to pay him R50 000 for the piece of land. But when Thabo next sees Jimmy he finds out that Jimmy has sold the land to someone else for R55 000. Thabo is upset with Jimmy and says he broke the contract between them.
Thabo sent an offer to Jimmy to buy his land but Jimmy has not accepted his offer. A contract for the sale of land must be in writing.
See Written and spoken contracts.
Until there is a written offer and a written acceptance of that offer, there is no contract.
In this case there was no legally binding contract between Jimimy and Thabo.
There is nothing that Thabo can do to force Jimmy to sell him the land.
Sarjid agrees to repair Veronica’s house for R2 000. Veronica pays Sarjid a deposit of R500. Sarjid does not do the repairs.
Veronica can cancel the contract because Sarjid's breach is serious. She can also claim back the R500 deposit which she paid. She can also claim damages for any loss she suffers because of Sarjid's failure to repair the house, for example, if it starts to rain. Because Sarjid has not repaired the leaky roof, the rain damages Veronica's new carpet. The damage to this carpet costs her R500 to repair. She can claim this amount from Sarjid as damages.
Veronica can also try and get a court order for specific performance instead of cancelling the contract. In other words she can ask the court to make Sarjid repair her house.
See What happens if a contract is broken?
Veronica should approach a lawyer to help her try and decide on the best approach.
If she wishes to claim for damages, she could sue Sarjid through the Small Claims Court (for amounts up to R7 000).
Simon buys a TV set from a shop. As soon as he gets home, he finds that the TV set isn't working. What can he do?
The law says that if you buy something which has a fault at the time that you buy it, and neither you nor the seller know about it, then you can get your money back, or pay less.
See The law of contract and consumers’ rights.
Simon must contact the seller immediately and give the seller all the necessary information, such as the sales receipt, the date that he bought the TV set and a description of what is wrong with the goods. Simon should keep the original documents for himself and give the seller copies.
If the seller refuses to help, send them a letter with the demands. Keep a copy.
If the seller still refuses to help, try contacting any trading affiliation that the store might be registered to (e.g. Furniture Traders Association), before going to the manufacturer.
If that does not work – send a letter to the manufacturer of the product or the headquarters of the chain store. Tell them what has happened and send copies of important documents, describing what is wrong with the TV and what Simon wants done. Simon should keep the originals of the documents for himself. If Simon is still not satisfied, get help from one of the consumer protection agencies and organisations like the Consumer Protector or the Provincial Consumer Affairs offices
See Consumer protection agencies and organisations.
If you cannot settle the problem in any of these ways then Simon can take the case to court. Simon should only go to court as a last resort because it can be an expensive process and it can take a long time.
The problem
Thabiso wants to buy a car on credit but does not know whether she will be able to afford to pay the monthly debt. She already has a number of other debts that she is paying off every month and she wants to know whether she can reschedule these debts so that she can pay less each month but over a longer period of time. She has already received a Written notice from a credit provider claiming that her monthly payments are irregular and she owes them money. She comes to you for advice on how to deal with her debt.
What can you do?
The following steps explain the process of helping Thabiso manage her debt, including working out her expenses and a budget.
Step 1: Explain what can and cannot be done to help the client
Explain what you can and cannot do to help Thabiso You can:
You cannot:
Tell her that some credit providers choose only to work with debt counsellors, and may not want to talk with you.
Step 2: Record information about the client
Write down the following information regarding Thabiso’ s debt and credit:
Client’s Information
Make as many copies of the next page as you need.
Surname:
First name:
ID No:
Address:
Telephone (home and work):
Cell:
Paralegal’s name:
Start date:
The client’s story
Use a blank page to record the main points of the client’s story. Ask the client to tell you why they have come to the advice office.
Credit information checklist:
(Complete details for each individual debt)
Name of credit provider (organisation/ person to be paid):
Amount of initial loan:
Period of loan:
Total amount still owing:
Amount to be paid monthly:
Number of payments still to be made:
Contact details of the credit provider:
Department/ person to be contacted:
Postal address
Phone:
Fax:
E-mail:
Step 3: Draw up a monthly income and expenditure budget
Before offering to help the client draw up a monthly income and expenditure budget, check that they are willing to do this. This contains personal information that people may or may not be too willing to share.
Received Each Month (income): R
R
R
R
Total monthly income: R
Must Pay Each Month (expenses):
Rent
Electricity
Phone
Airtime
Transport
Groceries
Toiletries
Clothes and shoes
School expenses
Support of family members
Debt instalments
Donation to church, mosque or synagogue
Burial society or funeral policy
Insurance
Cigarettes
Alcohol
Sweets, cool drinks and other snacks
School fees
Religious festivals e.g. Christmas/Eid
Birthdays
Weddings
Initiations
Funerals
Travel to visit family
Total expenses: R
Income less expenses = R
Is the income more or less than the expenses?
Step 4: Dealing with the queries
If the problem is related to dealing with your client’s debt queries, see Problem 6: Helping a person who has a problem with repaying debt.
If the problem is related to dealing with your client’s credit queries, see Problem 7: Helping a person who has a problem with getting credit.
Based on the budget you have drawn up and the debt your client has already,
you may need to advise your client as to whether you believe they are eligible for credit,
and whether it would be wise for them to borrow money. This would take into account all their expenses and debts and whether they would be able to pay their debts.
Summarise what the main issues are and what your plan of action is.
Write down the steps you have taken to deal with the problem and all actions taken.
The problem
Mandla has borrowed money from a microlender to buy furniture and also to pay off the new section he has added onto his house. For the past two months he has not been able to pay his monthly instalment due to other unexpected expenses. The bank has sent him letters demanding payment. He comes to you for help.
What does the law say?
The National Credit Act defines the steps that must be taken to deal with this problem.
See Owing money and being in debt.
What can he do?
The following steps can be used to guide you in the way you would deal with Mandla’s problem.
Step 1: Follow steps 1, 2 and 3 in Problem 5: Helping a client assess their financial situation – drawing up a budget.
These steps cover:
Step 2: Assess the credit provider’s actions
Check the following information regarding your client’s credit providers:
Did the credit provider follow the correct processes in dealing with your client?
If no - give details (attach a separate page if necessary):
Do you think there may have been any reckless credit granting?
If yes- give details (attach a separate page if necessary):
Did the credit provider send your client a written notice (letter of demand)?
Did your client respond in any way?
If yes, - give details (attach a separate page if necessary).
Have legal procedures been instituted against your client?
Give details (attach a separate page if necessary):
Were all legal processes followed correctly?
If no, give details (attach a separate page if necessary):
Was your client refused credit?
Give details (attach a separate page if necessary):
Step 3: Deal with the problem
(a) From the information you have gathered in the previous steps, you will now have to assess how serious Mandla’s situation is. See Owing money and being in debt.
(b) If you think that Mandla is over-indebted or that a credit provider may have been reckless in granting credit then Mandla will need to see a registered debt counselor.
If you are not registered as a debt counselor, you must refer your client to someone who is registered.
(c) If Mandla has received a written notice (letter of demand) from the credit provider, check if proper procedures have been followed. It is very important for Mandla to respond to a written notice. It is still not too late for him to see a debt counselor.
See Receiving a written notice.
(d) If legal action has been taken against Mandla, check if legal procedures have been properly followed and advise him how to respond.
See Legal proceedings.
See Summons to court.
See Consent to judgment.
(e) If Mandla has been treated unfairly or unlawfully in any way, ask him for permission in writing to report this to a suitable institution. Summons to court
See Consumer protection agencies and organisations.
(f) If there have been no faults in the process, discuss with Mandla what the possible solutions could be to his situation. Your advice will be important in helping him to exercise his rights and to think of constructive ways of finding solutions.
The problem
Sharon wants to buy a second hand car but needs to borrow money from a credit provider in order to pay for it. She goes to a microlender who says her name has been listed with a credit bureau so they will not give her the loan. Sharon does not know anything about this listing and thinks it is unfair that they will not give her the loan.
What does the law say?
The National Credit Act defines the steps that must be taken to deal with this problem.
What can you do?
These steps cover:
Step 2: Assessing the credit bureau’s actions
Check whether the correct processes were followed by the credit bureau and record the following details:
Which credit bureau is your client listed at?
Contact name and details:
Is the bureau registered?
Is the information correct?
Are they holding information that they should not have?
Please give details:
Have they had any difficulty getting information from the bureau?
It yes, please give details:
Step 3: Dealing with the problem
Sharon has the right to know the reasons for being refused credit and has been told that this is because her name is negatively listed with a credit bureau.
Remember that credit providers may refuse to lend money -
See Reasons for refusing credit.
Given that the reasons given to Sharon for the microlender refusing to give her credit, you should now follow up with the credit provider and the relevant credit bureau.
The problem
Ms Adams has just finished her studies to become a teacher and still has some student loans to pay. In order to get a good job she wants to make a favourable impression during her interviews, so she wants to buy some smart new clothes. She goes to the clothing store and asks them if she can open an account. The customer service department gives her a form to fill in which asks for her personal details as well as how much she earns. She explains that she does not have a job yet. However, the customer service department tells her not to worry as she will be sure to get a job within the month and then will be able to pay the monthly instalments.
Even though Ms Adams knows she will have no money if she does not get a job, she decides to take a small loan from the store and opens the account. She buys clothes for R1 000.
After three months, Ms Adams still does not have a job. She now has her study loan, clothing account and a micro-loan to pay and she is very worried. She goes to an advice office to see what she can do.
What does the law say?
Under the National Credit Act, credit providers have a responsibility to make sure that a consumer can afford to pay back the new debt. If not, then credit may have been granted ‘recklessly’.
See Credit agreements that have been granted recklessly.
What can you do?
You believe that Ms Adams was granted credit recklessly because she had clearly explained to the store that she did not yet have a job. You explain what this means to her and give her the name of a registered debt counselor to contact..
See Problem 9: Going to a debt counselor.
The problem
Ms Siswe, a single parent, works as a domestic worker earning R900 a month. Every month she also gets R200 for maintenance from the father of her two children making her total income R1 100 per month. Ms Siswe’s expenses are R1 660 per month. She comes to see you as she is unable to pay all her debts on time. She is particularly worried as she has just received a written notice from a clothing store to say she is behind with her payments.
What does the law say?
When consumers are unable to fulfil their repayment obligations, the NCA describes them as being ‘over-indebted’. In such cases, they should apply to a debt counselor to have the debt reviewed. The alternative to this is either to approach the credit provider to try and make an alternative repayment arrangement or for the credit provider to take legal action.
What can you do?
1. Make a list of her debts and draw up a budget with her (See Problem 5: Helping a person assess their financial situation and drawing up a budget, Steps 1 – 3.)
2. Ms Siswe is clearly over-indebted. Discuss her options:
Give her the details of a local reputable registered debt counselor. Ms Siswe must make an appointment to see her.
3. Applying to the debt counselor
At the debt counselor Ms Siswe explains her situation. The debt counselor does a debt review by asking about all her debts and her income – which she then assesses. Ms Siswe gives the counselor a copy of her budget and list of debts.
The debt counselor agrees that Ms Siswe is over-indebted according to the Act, and makes calculations of new repayments that Ms Siswe can afford.
The debt counselor agrees to approach the credit providers to try to reach informal debt rearrangement agreements with them. She does this, and while the microlender and the clothing store agree to new terms, the furniture dealer does not want to do this – so the debt counselor arranges to go to court.
The court declares Ms Sizwe over-indebted and orders that the debt be restructured.
Ms Sizwe is told that she may not borrow any more money until this debt has been paid off. She understands that the credit bureaus will have a record of her financial situation on their records until she has paid off her debts. Every month, she gives the debt counselor the agreed amount of money and the debt counselor pays this money to her credit providers.
After Ms Siswe has paid all her debts she receives a debt clearance certificate from the debt counselor to prove that she has finished paying all her debts. As she doesn’t want her negative listing to remain on the record of the credit bureaus, she follows the debt counselor’s advice and applies to have this information removed from the credit bureaus’ records.
The problem
Mr Mbuli bought a set of pots for R3 000 from Kitchen Essentials. The agreement was that Mr Mbuli would make monthly payments of R600 over six months. After two months of making the payments, Mr Mbuli was retrenched as a security guard where he had been working for three years. Mr Mbuli was now unable to make the monthly payments for the pots. Although he still owed R2 000, he did not report his retrenchment to Kitchen Essentials.
After failing to make his payment, Mr Mbuli received a written notice/ letter of demand from Nkosi Debt Collectors - but he ignored the letter. The Sheriff of the court came to Mr Mbuli’s house with a summons issued by the court in the middle of the night – to make sure that he was home - and removed goods from his property. They also took goods belonging to Mr Mbuli’s tenant. Mr Mbuli comes to the advice office for assistance.
What does the law say?
A credit provider may only begin legal proceedings against a consumer -
If a consumer ignores a written notice/letter of demand, a messenger of the court may come to their house to serve a summons to appear in court. A summons is an order of the court and should never be ignored.
If a consumer gets a summons, they have five working days to respond by -
If there is a default judgment against a consumer and they have no money to pay the debt, then the credit provider is allowed to get a court order to repossess goods. A sheriff of the court brings the court order to the consumer’s home. The sheriff of the court can take and sell as much property as is necessary to pay off the debt. The first time the sheriff of the court visits is for purposes of making a list of the consumer’s possessions.
The second time the sheriff comes, s/he will take possessions away. The sheriff is the only person who can remove possessions and must have a court order to do this. In addition he or she must get the consumer’s permission to enter their house or flat and should not come in the middle of the night or when the consumer is not at home.
What can you do?
Check with Mr Mbuli that he received the letter of demand and that 10 working days have passed since it was delivered and also that he has been in default for at least 20 working days.
If Mr Mbuli confirms that he did receive the letter of demand but ignored it, explain that the court therefore had a right to issue a summons. However, the sheriff had acted improperly because of the following:
Advise Mr Mbuli to consult a lawyer and recommend someone who is an expert in this kind of case.
Mrs Arendse says that two men arrived at her house on the weekend and took her lounge suite away. They said her husband had not paid for the lounge suite and they had come to collect it. They said she should pay the full outstanding amount on Monday if she still wants the furniture. Mrs Arendse says she thought that the lounge suite was paid for by her husband. Her husband is away.
A shop can only repossess goods in a lawful way, that is:
This is what the shop should have done:
Once the shop has the court order, only the Sheriff of the Court can go to the house to repossess the goods. They must show this court order before they can enter the house and repossess the goods. Therefore the shop did not repossess the Arendse's lounge suite in a lawful way.
What can they do?
The shop used unlawful ways to repossess the goods. They did not get a court order to repossess the goods and the people who entered the Arendse's house did not have a right to do this.
So Mrs Arendse can go to the Magistrate's Court to get a spoliation order to have the goods returned to her immediately. She will need to get a lawyer to advise and help her.
But the Arendses must immediately pay the outstanding instalments, or negotiate with the shop or contact a debt counsellor about paying the instalments. Otherwise the shop can follow the steps above to get a court order to repossess the goods.
See Problem 10: Repossession of goods with a valid court order.
Mr Johannes receives a summons from Prep Stores saying that he owes them R1200 and that he has not paid his account with them for four months.
What does the law say?
Mr Johannes is under contract to pay Prep Stores every month and he has an obligation to pay his monthly instalments as per the contract. He must respond to the summons immediately. There is no time to delay if a person receives a summons and it should never be ignored.
After Mr Johannes receives the summons, he has five working days to respond in order to -
Once a summons has been issued, Mr Johannes may no longer apply for a debt review with a debt counselor. He should consult a lawyer if he intends to go to court.
If Mr Johannes ignores a summons to appear in court about their debt, then a default judgment by the court will be made and he will be ordered to pay the money owing. This will include the outstanding debt plus the interest that has been added to it, plus the legal costs of the court order.
If Mr Johannes is unable to pay the amount he can apply to the court to make an administration order.
See Being placed under administration orders.
What can you do?
If Mr Johannes agrees that he owes Prep Stores (the credit provider) but he cannot afford to pay the outstanding amount explain that he needs to consult with an attorney who will try and make an arrangement with the shop’s lawyer to pay off the debt.
If Mr Johannes has agreed to pay a certain amount to the lawyer, then this amount must be paid at the lawyer's office - if that is the agreement. If he forgets to pay a single instalment, then the creditor can take him to court. If Mr Johannes is taken to court, he will have to pay the other side's legal costs. This can be very expensive.
If Mr Johannes denies that he owes the money, then he should inform the court that he intends defending himself. He can do this by contacting a lawyer to act on his behalf or he can go to the court by himself and fill in a form which tells the court and the other side that he wants to defend the case. This form is on the back of the summons and is called a Notice of Intention to Defend. Ask the Clerk of the Court how to fill this form in. He will be informed when he has to appear in court. He will have to go to court and explain to the court why he doesn't think that he owes the shop the money. The court will then make a decision
Faried buys a second-hand car under a credit agreement for R60 000. He pays off R10 000 but then stops paying his instalments.
The seller gets a court order to repossess the car. After repossessing the car it is sold at a public auction for R45 000.
So far the seller has received R10 000 from Faried plus R45 000 from the auction. This is a total of R55 000. Originally Faried owed R60 000 for the car. So Faried still owes the seller R5 000 for the car (R60 000 – R55 000 = R5 000).
The seller claims the R5 000 from Faried but Faried refuses to pay because he says that he has already paid R10 000 for the car and it has been repossessed.
The law says that Faried still owes the BALANCE of R5 000 that he has not paid. It does not matter that the seller has repossessed the car and kept the money from the auction. The seller must not lose out because Faried has not paid his account.
Faried must pay the R5 000 back to the seller. You can help him to try and negotiate with the seller so that he can pay the amount of R5 000 off in instalments (small amounts paid every week or month).
Mr Abrahams says the BB Benefit Society told him that if he joined their society they would help him pay to build his house in the future. He says they told him to give them R500 as a deposit on his house. He paid the R500 and a fee of R50 every month for a year after that.
When Mr Abrahams decided to build his house he asked the society for the money towards his deposit. They refused to give it to him. They said they didn't know what he was talking about. They said that they only agreed to give him advice on how to buy a house, how to raise a loan to pay for the house, and so on.
Mr Abrahams is furious. He says he would never have paid anyone R500 plus all the monthly payments just for advice. The money he gave for the deposit was money that he had saved for his house.
Mr Abrahams signed an agreement with BB Benefit Society. The Agreement says quite clearly that the society will help with giving their members advice on how to buy a house. It does not say anything about helping people to finance the buying of their houses. So, Mr Abrahams has no right to claim any financial benefits from the benefit society.
If the salesperson lied to Mr Abrahams about the benefits which he would get from the society and he is able to prove this, then he might have a civil claim for damages against the society.
Mr Abrahams must first check whether the BB Benefit Society is properly registered as a friendly society.
Mr Abrahams must go and see a lawyer or a public interest firm like the Legal Resources Centre for advice.
Bob gets his Christmas bonus and decides to buy a lounge suite on credit for R6000. He pays the deposit of R400 to the shop and signs the Credit Agreement. According to the Agreement, he must pay the shop R250 every month for the next two years. After two months Bob decides that he cannot afford to keep paying the instalments for the lounge suite. He goes to the shop and tells them that he wants to cancel the Agreement that he signed with them. They tell him that he cannot cancel the agreement.
Bob cannot cancel the Agreement or contract that he signed with the shop. This Agreement is a contract which is binding on him. If Bob refuses to pay his instalments, he is in breach of the contract and the shop can take him to court.
Bob can ask the shop to repossess the lounge suite. This means that he will lose the deposit he paid and he will have to keep paying the instalments unless they sell it and get back all the money that he agreed to pay them in the first place when he signed the Agreement.
See Problem 13: Repossessed goods sold for less than the amount still owing.
Tommy Biggs says he represents a company which builds and sells houses. Tommy sells John Clark a new house and John pays him a deposit of R20 000. Two months later John has heard nothing from Tommy and the house has still not been transferred to John's name. A friend then tells John that Tommy Biggs has been in court on a number of fraud charges in the Regional Magistrate's Court. John wants to know what he can do.
John cannot take his claim to the Small Claims Court because the amount is too big. He can make a civil claim against Tommy Biggs in the ordinary magistrate’s court. But there is another way to recover the money rather than through a civil claim which can be expensive and can take a lot of time.
Tommy Biggs is guilty of fraud so John can lay a criminal charge of fraud against him. Section 300 of the Criminal Procedure Act says that a magistrate can make a civil judgment in a criminal case. This means that John can use the criminal court to help him get his money back from Tommy Biggs. If he follows certain procedures and if Tommy Biggs is found guilty of fraud in the criminal case then John will be able to recover his money after the criminal case.
See Criminal and civil actions.
John must sign an affidavit before a Commissioner of Oaths. The affidavit must say how he 'lost' the R20 000. He must then hand his affidavit to the public prosecutor who is dealing with the case. The public prosecutor will then attach the affidavit to the criminal record. If Tommy Biggs is found guilty of fraud, the magistrate will not only sentence Tommy Biggs but also order him to pay back the R20 000 to John Clark.
Be careful of the following points when you advise anyone to take these steps:
More and more people are being cheated and robbed when they draw money from a bank ATM machine using their bank cards. ATM fraud is becoming more and more common.
Your PIN is the code you type in which allows you to use your bank account at an ATM. It is a secret code and no-one can use your bank card without having this PIN number. Criminals trick you to get your card and your PIN number, and then they can use your bank card to draw money from your bank account.
If your card has been stolen or lost, take the following steps:
Here are some of the different ways that you can be tricked when you are drawing money from an ATM machine and what you could do to prevent this happening.
Remember:
A thief watches you typing in your PIN. The thief distracts you after you have drawn the money, for example, by asking you for help. While you are distracted, another thief takes your card and slips a different card into the machine. You then leave the machine and put the wrong card in your pocket. The thieves have got your card and your secret PIN.
Criminals put matchsticks or other things into the ATM card slot. You insert your card, and maybe you key in your PIN. A criminal watches to see your PIN. The matches make your card get stuck - so you think your card has been swallowed by the ATM.
The person behind you offers to make a call for you on their cell phone, saying they've got the bank's lost card number. But the call goes through to an accomplice pretending to be a bank employee. This criminal says he needs your PIN number in order to cancel the card. You then leave thinking you have cancelled your card. The thieves then take out your card from the machine with a small tool, and they have got your PIN.
You get a telephone call from a so-called bank official. He explains that the bank needs to transfer your money to an account which will be safe, and he gives a good reason for this. He asks you to confirm your ID and account number. Then your money gets transferred out of your account, never to be seen again.
Acknowledgements: The contents of this chapter, in particular the sections on the National Credit Act are drawn from the Black Sash publication: Debit and Credit: A reference guide for paralegals. This guide can be used by social workers, trade union representatives, paralegals, NGOs and anyone who gives advice to vulnerable people on debit and credit. The publication can be freely downloaded from the following website: www.blacksash.org.za.