What Might The NCA Amendments Bring?
Section 103(5) sets a limit on what a credit can charge a consumer once their debt goes into default (the consumer misses or short pays an expected repayment). The Section says that all fees, charges (including legal collections charges) and interest can only ever take the debt to double what it is on the day the payment is missed/due. This limits the account from run away interest and fee shenanigans.
‘Section 103(5) sets a limit on what a credit can charge a consumer once their debt goes into default’
Many credit providers have tried to deliberately misunderstand this section due to the fact that they have, in the past, been able to collect so much more than double the debt from troubled consumers. For years credit providers have done their best to ignore these limits and exclude them from calculations done with regard to debt.
Now it appears that the coming amendments might be yet another opportunity for the DTI and NCR to provide further hopefully unmistakable clarity on the issue.
Debt Relief Through Regulation
The Portfolio Committee on Trade and Industry would also like to see the DTI Minister receive the ability to from time to time issue regulations which will allow for debt relief in some form or another to certain groups of people:
The NCA should make provision for the prescription of debt relief measures to alleviate household over-indebtedness. The Minister should be empowered to prescribe debt relief measures, from time to time, through regulations. The circumstances to consider for debt relief for a particular sector or section of the community may include but not limited to prevailing economic circumstances, from time to time. The prevailing economic conditions may include retrenchments in certain sectors due to the persisting drought or conditions in the steel, mining and poultry sectors which warrant the granting of debt relief.
Retroactive Application For Garnishee Orders?
Seldom does an amendment go back in time and change things in the past. This is because it is super tricky to do so and opens the door for future punishment of present actions though within the law. Tricky!
The Portfolio Committee has however mentioned that, with some of the proposed amendments, consideration should be given to making the amendments retroactively enforced. They mentioned this in particular to EAO (garnishee orders) that were obtained illegally or incorrectly.
Victims of unlawful Emolument Attachment Orders (EAOs) are not considered for debt relief. Such EAOs are as a result of illegal consents to jurisdiction, criminality by clerks of the courts or due to exorbitant recovery fees beyond the normal rates. The gravity of the abuse of EAOs was highlighted by the Stellenbosch Judgment, ultimately the Judiciary left it to the Legislature to intervene and grant relief.
It is proposed that, for Victims of unlawful EAOs, the NCA should prohibit the collection of funds resulting from unlawful EAOs. There should be refunds to affected consumers and a fine or penalty for the unlawful act. Where a debt is written-off, the debt should not be later collected on, as such the writing off should have the effect of completely extinguishing all obligations. Parliament should consider retrospective relief granted from the date the prohibition provisions came into effect.
Obviously, such a proposal will meet stiff opposition from those credit providers dependant on these funds and this collection method as well as from the collections industry. Already the Magistrates Court Act amendments have made it harder than ever to even obtain an EAO and now these proposed changes could go digging into past profits and collections. While Government clearly want to see the end to EAO abuse they should expect push back on the retroactive concept here.