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09 Jan 2012

Constitutional Court To Consider National Credit Act

Legal, National Credit Act (NCA) No Comments

Eva Smith (Attorney) @ Lucid Living

A man who failed to set aside a default judgment after he could not honour the terms of his credit agreement with a bank has brought a challenge in the Constitutional Court, asking it to interpret a section in the National Credit Act (NCA) dealing with the serving of notice on a defaulter.

While the bank sent the notice by registered post to the defaulter, he did not receive it. The question when the matter was heard in the high court was whether the mere sending of the notice by the bank to the defaulter constituted compliance with the provisions of the NCA.

Section 129 of the NCA sets out steps which the credit provider should take if a consumer defaults on repayment under a credit agreement. These include notifying the consumer of the default, and proposing the consumer refer the credit agreement to a debt counsellor for the parties to resolve any dispute or agree on a plan to bring the payments up to date. The section also states the credit provider may not commence any legal proceedings to enforce the agreement before first giving notice to the consumer.

The high court found that it was not a requirement that the notice sent by the credit provider should come to the attention of the consumer. But the defaulter argued that the exercise of the consumer’s rights triggered by receipt of the notice, such as referring the credit agreement to a debt counsellor, would be of no effect if the consumer did not receive the notice.

Mashilo Sebola approached the South Gauteng High Court this year to rescind a default judgment granted against him in favour of Standard Bank in September 2009.

Mr Sebola and Ms Sebola conceded that they had failed to comply with their obligations in terms of the agreement in that they failed to make payments. The only defence they persisted with was that the bank had failed to comply with the debt enforcement procedures provided for in sections 129 and 130 of the NCA.

There was no dispute that the bank had sent the requisite notice by registered post to the address chosen as the address of service by Mr Sebola and Ms Sebola. But for reasons beyond the control of Mr and Ms Sebola, it was not received.

In a ruling refusing the rescission of the judgment in August this year, Judge Phillip Boruchowitz said the question at issue had been authoritatively settled. He said in a judgment passed by the Supreme Court of Appeal last year, the court held that it was sufficient to establish compliance if there was delivery of the notice in the manner chosen by the consumer, and that actual receipt was the consumer’s responsibility. Judge Boruchowitz said the high court could not depart from the decision of the Supreme Court of Appeal and was bound by it.

In his application to the Constitutional Court, Mr Sebola said he was aggrieved by the outcome and reasoning of the high court and disagreed with the findings of the Supreme Court of Appeal related to the matter.

The chief justice has set down the matter for hearing in February 2012.

We are eagerly awaiting the outcome of this decision, as it will have dramatic implications on the manner in which creditors proceed with enforcement action. If the Constitutional Court does find in favor of the applicant, it will certainly strengthen the “consumer rights” dimension of the NCA.

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