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Chapter 12 - Consumer LawPROBLEM 1: Minor entering into a contractSizwe 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. What does the law say?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? What can he do?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. PROBLEM 2: Breaking a promiseJimmy 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. What does the law say?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. What can they do?There is nothing that Thabo can do to force Jimmy to sell him the land. PROBLEM 3: Breach of contractSarjid agrees to repair Veronica’s house for R2 000. Veronica pays Sarjid a deposit of R500. Sarjid does not do the repairs. What does the law say?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? What can she do?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 R12 000). PROBLEM 4: Something goes wrong with goods you have boughtSimon 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? What does the law say?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. What can he do?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. 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.
PROBLEM 5: Helping a person assess their financial situation and drawing up a budgetThe 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 The client’s story Credit information checklist: Name of credit provider (organisation/ person to be paid): Amount of initial loan: Period of loan: Total amount still owing: Number of payments still to be made: Contact details of the credit provider: 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 Total monthly income: R Must Pay Each Month (expenses): 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. PROBLEM 6: Helping a person who has a problem with repaying debtThe 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. He has received two phone calls demanding payment and a letter of demand. 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 Legal consequences of defaulting on debt obligations 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 When was the contract signed – before or after the the NCA came into effect on 1 June 2007? Did the credit provider follow the correct processes in dealing with your client? See Protection when making a loan application) Do you think there may have been any reckless credit granting? See Reckless lending Did the credit provider send your client a written notice (letter of demand) and did yout client respond in any way? See Legal consequences of defaulting on legal obligations Have legal procedures been instituted against your client? Were all legal processes followed correctly? Was your client refused credit? 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. (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. (d) If legal action has been taken against Mandla, check if legal procedures have been properly followed and advise him how to respond. (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 (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. You can also refer Mandla to the Legal Aid South Africa (LASA) for appropriate legal support. PROBLEM 7: Helping a person who has problem with getting creditThe 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? Have they had any difficulty getting information from the bureau? 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 -
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. PROBLEM 8: Granting credit recklesslyThe 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 and a 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’. 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. PROBLEM 9: Going to a debt counselorThe problem Ms Siswe, a single parent, works as a domestic worker earning R1500 a month. Every month she also gets R400 for maintenance from the father of her two children making her total income R1 900 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 to approach the credit providers to try to reach a debt agreements with them. She does this but the creditors do not want to do this – so the debt counselor arranges to go to court. 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 pays the agreed amount of 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. PROBLEM 10: Repossession of goods with a valid court orderThe 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 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 proceedingsagainst a consumer -
If a consumer ignores a written notice/letter of demand, an agend of the creditor wil be sent to the cnosumer’s home or workplace to ask them to sign either a Secdtion 57 or section 58 document. Alternatively, the creditor get the Sheriff of the court to go to Mr Mbuli’s house to serve a summons to pay the debt or to appear in court. A summons is an order of the court and should never be ignored.
If Mr Mbuli signs the section 57 document and then defaults on his payments (in other words, he doesn’t stick to the agreement), or he signs the Section 58 or ignores the summons, then the credit provider is allowed to get a court order to repossess goods. A sheriff of the courtbrings 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. See Warrant of execution against the consumer’s property 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. See Legal consequences of defaulting on debt obligations. 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. 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. PROBLEM 11: Repossession of goods with a court orderMrs 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. What does the law say?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. PROBLEM 12: How to respond to a summonsMr 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. 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 try and make an arrangement with the shop’s lawyer to pay off the debt. You can help him do this or get the help of an attorney. 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 PROBLEM 13: Repossessed goods are sold for less than the amount still owing on the goodsFaried 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. What does the law say?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. What can you do?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). PROBLEM 14: Getting a civil judgment in a criminal caseTommy says he represents a company which builds and sells houses. Tommy sells John 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 has been in court on a number of fraud charges in the Regional Magistrate's Court. John wants to know what he can do. What does the law say?John cannot take his claim to the Small Claims Court because the amount is too big. He can make a civil claim against Tommy 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 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. If he follows certain procedures and if Tommy 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. What can he do?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 is found guilty of fraud, the magistrate will not only sentence Tommy 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:
Try to find out whether criminal charges have been finalised before filing an affidavit with the public prosecutor. If the police are still investigating, then it may be a long time before the case is heard and you get your money back. PROBLEM 15: Being robbed at an ATM machineMore 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. What can you do?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:
Card-swoppingA 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.
Vandalising ATM machinesCriminals 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.
Telephone call from a false bank officialYou 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. Never confirm your bank or ATM card details over the telephone
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