Eva Smith (Attorney) @ Lucid Living
In our article “Debt Counseling Stops Legal Action” we highlighted an arrangement concluded between the large retail banks and the National Credit Regulator (NCR), whereby the banks undertook not to proceed with legal action against clients who entered into debt review and who’s debt re-structure arrangements had not been finalized within 60 days of their application for debt review.
This voluntary arrangement may be a moot point, after a recent decision of the Western Cape High Court, which issued what may be a precedent-setting ruling that will prevent creditors from instituting legal action against you if you are under debt review, provided your debt counsellor lodges a debt re-arrangement application with a magistrate’s court within 60 days of receiving your application.
The court ruled that WesBank could not unilaterally terminate a consumer’s debt review, because his debt counsellor had lodged an application for debt review with a magistrate’s court and he was making regular payments as set out in his debt repayment plan.
Jan Augustyn, the manager of investigations and prosecutions at the NCR, says all courts in the Western Cape will have to follow the judgment.
“However, the judgment is so well written and clear that I am sure it will have a significant influence on similar cases in other provinces,” he says.
“What the judgment shows is that if consumers continue to make payments in line with their restructured debt plan, and debt counsellors fulfil their duties by submitting an application for debt review to the magistrate’s court within 60 days of receiving it, the credit provider can’t unilaterally terminate the debt review process,” Augustyn says.
Before the Western Cape judgment this week, the NCR had applied to the Johannesburg High Court for a declaratory order that would make it clear that consumers cannot be subject to legal action once they have applied for debt counselling.
“We are going to make legislative amendments to the NCA to make it clear that consumers cannot be subject to legal action once they have applied for debt counselling. However, as this process may take some time, the NCR has also applied to the Johannesburg High Court for a declaratory order on this matter,” says Peter Setou, the senior manager of education and strategy at the NCR.
“The premature enforcement of credit agreements in the High Courts also drives up the costs of litigation at the expense of those least able to afford it,” Setou says.
“The task team (appointed by the NCR to investigate the backlogs in the debt review process) found that a major obstacle to resolving debt review cases was that some credit providers terminated the debt review process and proceeded to court without first attempting to reach a settlement with the consumer through debt counsellors,” he says.
“Credit providers are increasingly terminating the debt review process even where the consumer and debt counsellor had taken all necessary steps to follow the law. This was putting the debt review process at risk” says Augustyn.
Once your application to re-arrange your debts has been lodged in court, it becomes a judicial process and you should not be prejudiced, even if it takes a number of months for the matter to be heard.
You can lose the protection afforded by the National Credit Act if a debt counsellor does not apply to a magistrate’s court within 60 days to re-arrange your debts, the court dismisses your application to re-arrange your debts, or your application is withdrawn or abandoned.
HAS YOUR DEBT REVIEW APPLICATION BEEN TERMINATED?
If you are one of the thousands of consumers who’s debt review application has been unilaterally terminated by your creditors contact LUCID Living (010 590 5618) today to find out what recourse is available to you.