The following amendments to the National Credit Act 34 of 2005 were published in the Government Gazette on 19 May 2014. These amendments place consumers in a much more favourable position to effectively address their debt in a secure environment.
| AMENDMENT OF THE NCA | EFFECT ON CONSUMER |
| Section 129 Notice: The delivery hereof has been an issue in the past | During 2012 the Court ruled that once a Section 129 Notice was issued to a consumer this account is not eligible for inclusion in a debt review application. This led to great confusion and frustration in the industry as this notice states that the consumer has 10 business days to consult with a debt counsellor or make arrangements on the account. Now it has been clarified that when a consumer receives a Section 129 Notice the consumer has 10 business days to apply for Debt Review and that account will be included in Debt Review. |
| Termination of Debt Review | Prior to the amendment credit providers could terminate debt review application should no Court Order be granted within 60 business days from inception. This resulted in credit providers opposing court applications in order to postpone applications past the prescribed date and subsequently terminate same. Now no termination or legal action may be enforced as long as the matter has been placed on the Court roll within 60 business days after application. |
| Terminated matters | Should a Credit Provider terminate the Debt Review application, the consumer may now approach the Magistrates Court to request reinstatement of the debt review. |
| Affordability Assessments | Credit Providers are required to implement prescribed Affordability Assessments to new debt application. This would result in consumers having to provide more detailed information when applying for credit and these applications would be assessed more strenuously. This is a twofold amendment. Yes, consumers will enjoy increased protection against reckless lending, but some consumers rely on these deficient affordability assessment procedures of some creditors in order to gain quick access to unsecured credit. I presume the vote hereon depends on the consumer’s strategy at the time. |
| Service standards of Debt Counsellors | This is a great benefit to our industry and especially consumers. Very often you hear or read about consumers who have been defrauded by DC’s or consumer assets being repossessed due to DC incompetence or mistakes. Improved training of DC’s would ensure a more defined service and additional protection for consumers. DC’s use of agents are also restricted which ensures that professionals attend to Debt Review applications. |
| Registrations of Payment Distribution Agents | Consumers can verify that the PDA used by their DC is registered. |
| Clearance Certificate | Once short term debt is settled in full and the consumer is up to date with Home loan payments, a clearance certificate may be issued. Consumers used to enter and exit the debt review process as they wish until the Rougier vs. Nedbank judgement was passed. This judgement stated that consumers could no longer withdraw from the debt review process as the NCA did not provide for this action. This rendered that consumers would remain in debt review until both long and short term credit agreements were paid in full including bonds. Fortunately the amendments clarify this issue for consumers. |
| Prescribed debt | Credit providers used to sell “bad debt books” to collection agents who would subsequently initiate collection procedures on these bad debts. According to Prescription Act 68 of 1969 debt prescribes after three years in case the creditor fails to contact the debtor or collect on the account within the prescribed three years. In many cases the prescribed debt was reactivated by collection agents by persuading the debtor to pay a small installment on the debt which then resuscitates the debt. The amendment in the Act prohibits sale and collection of prescribed debt. |
For more information regarding these amendments or any queries relating to debt review please contact our office on 041 365 4139.
