Adv Randolph Samuel @ Lucid Living
An unsavoury practise, developed by credit providers, to obtain judgment against unsuspecting consumers may be at an end.
It is standard practise for a letter of demand or summons, issued by a creditor, to include a consent to judgment provision. Skilfully drafted, the consent clause is hidden in the detail unbeknown to most consumers, who erroneously believe they are only acknowledging the debt, by signing the document.
Once the creditor obtains a signed consent to judgment, they can approach court and obtain judgment in their favour. By consenting to the judgment, you effectively give up the right to contest the application.
The judgment grants the creditor the right to recover the debt. If you fail to make payments in accordance with the judgment, the creditor can:
- Institute further legal action to repossess your movable and then immovable assets; or
- Obtain a garnishee order, instructing your employer to deduct money from your salary.
The implications of consenting to judgment are far-reaching and limit your legal options to protect yourself. As a result, consumers were being prejudiced.
The Legal Position
Peter Setou at the National Credit Regulator (NCR) said that they welcomed the judgment (considering Section 58 of the Magistrates Courts Act) by the North Gauteng High Court as a major step forward in the interpretation of consumer protection legislation.
Section 58 (consent to judgment proceedings) is used by credit providers to obtain quick and cost-effective judgment against consumers who are in default on their credit agreements. The crux of the NCR’s contention was that Section 58 proceedings prevented consumers being afforded adequate protection under the provisions of the NCA.
The effect of the judgment is that the provisions of the NCA are applicable and must be taken into account, in Section 58 proceedings.
When considering a Section 58 application, the clerk must now assess whether:
- The letter of demand complies with the NCA;
- There is a reasonable possibility that the underlying credit agreement involved the extension of reckless of credit;
- There are any allegations that the consumer is over-indebted;
- The computation of debt was not in accordance with the NCA, for example if it is above the minimum prescribed rate of interest;
- the credit provider is properly registered in terms of the NCA; and
- The consumer fully understood their rights when giving consent to judgment.
“If the clerk has reason to suspect any of the above, he must refer the matter to a Magistrate for interrogation,” says Setou. “The Magistrate can then call for evidence and decide whether judgment may be granted or not.”
What This Means Moving Forward
If you are in default on your credit repayments, the credit provider must first inform you of the options available to you, such as debt counseling, before you sign any document wherein you consent to judgment.
In practice, when creditors require you to sign a consent to judgment they will have to include a provision in the document that states that, despite you being informed by the creditor of other legal options available to you under the NCA, you still choose to consent to judgment.
As a result of the judgment, a credit provider is compelled to inform you of your legal alternatives and options, before requesting you to sign a consent to judgment. This means that you are empowered to make an informed decision, in your best interests.
“The major thrust of this judgment is that it obliges clerks of the court and Magistrates to carefully consider the provision of the NCA before consent orders are granted. The result thereof is that consumers’ rights will be better protected”, concluded Setou.