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Court Says Creditors Must Play Fair When You Fall Into Arrears

Nobody plans to run into financial problems and fall behind on their debt repayments.

But life happens and with unplanned changes or events, it is easy to fall behind on what you owe on your house or car.

For many South Africans, what happens next can feel like a nightmare filled with phone calls, legal letters, and the looming threat of losing assets.

A recent court case in the Western Cape High Court may have just flipped the SA collections process on its head. The court essentially ruled that credit providers do not have free rein to bully or steamroll consumers. They are required to act fairly, and that includes working with you to make a plan when you fall behind on payments.

What Normally Happens When You Default

When a borrower misses one or more payments, the account goes into “default’’.

This triggers a whole, well-oiled, well-established debt collections process which has been refined over time to pressure you to pay (or to take the asset back if you have a car or bond).

The credit provider usually begins by trying to contact the consumer, normally via phone calls, email or maybe even post. Collections agents will try and pressure you into paying with scary statements and warnings. They know that if they keep the pressure up, you will probably cave and prioritise their payments over something else.

If the account remains unpaid, the credit provider may decide to take legal steps. So, this is when things go to the attorneys. But before they can go to court, they are legally required, under the National Credit Act (NCA), to send you what is called a Section 129 notice.

This notice is meant to inform you that your account is in arrears. and to offer you options to resolve the debt without going to court. The NCA specifically encourages negotiation and alternative dispute resolution at this stage, or reaching out a Debt Counsellor if your debt situation is serious.

Such arrangements could include debt review or some sort of catch-up payment arrangement, or another form of settlement like giving the asset back to be sold off. The idea is that both parties talk and find a solution, instead of clogging up the courts with unnecessary legal action.

But not all credit providers take this part of the process seriously. They often see it as a quick step to be ticked before they head to court.

The Curious Case of Ford Credit vs Van der Merwe

In a recent case before the Western Cape High Court, a borrower named Mr CP van der Merwe fell behind on his car repayments by quite a significant amount (over R112 000) on a 2015 Ford Ranger financed through FFS Finance, trading as Ford Credit.

The credit provider reached out through all the usual methods and tried to pressure Mr van der Merwe into making a payment. Unfortunately, he was not able to catch up. So, Ford Credit sent him this Section 129 notice mentioned above.

They then demanded that he pay 50% of the arrears immediately, and the rest over three months.

The amounts were so big and unrealistic that Mr Van der Merwe said he could not afford to pay that. Importantly, he said that he was willing to work out another plan and made suggestions.

The credit provider was not interested in any other options. They rejected his offer, proceeded to cancel the credit agreement, and immediately went to court to ask for the car to be repossessed (with plans to sell it on auction and collect anything owed from the consumer over the next 30 years).

This has been pretty standard collections behaviour in the past.

What happened next surprised the credit providers attorneys.

A One-Sided Proposal Is Not a Negotiation

In a shock move, Judge Daniel Thulare, of the Western Cape High Court, ruled that the credit provider had not made a real attempt to reach a fair solution.

They only offered their own rigid proposal, with no explanation for why any other proposal from the consumer offer was refused.

The court said this was not meaningful engagement—it was coercion, not collaboration.

The judge pointed out that the National Credit Act was created to protect consumers from exactly this kind of power imbalance. A demand for an unrealistic large lump-sum payment from someone, who is already in financial distress, is simply unreasonable.

As a result, the court dismissed the repossession application, stating that Van der Merwe had not been given a fair opportunity to catch up on his arrears.

Section 129: More Than Just a Legal Form

One of the key lessons from the judgment is that Section 129 notices are not just a quick legal paperwork checkbox to tick off.

They are really meant to open the door to communication, not shut it. A credit provider has a real duty to consider the consumer’s circumstances, listen to any repayment proposal, and genuinely try to avoid going to court.

One consumer law expert says that getting: “a Section 129 notice is the start of the process, not the end.”

As a result, credit providers and their collections agents and attorneys are going to have to rethink how they handle such Section 129 negotiations.

Rather than simply making demands about the arrears, credit providers may have to seriously start to look at options like restructuring the credit term or accepting proposals from their clients. Not just bullying people with unrealistic demands.

What This Means for You

If you fall behind on a loan, don’t panic.

At the same time, don’t ignore the problem. If you receive a Section 129 notice, it is the final chance to negotiate, ask questions, and propose some sort of realistic solution.

If you are overwhelmed, you can turn to a financial expert like an NCR registered Debt Counsellor to look at your complete debt situation.

If a credit provider refuses to consider your actual situation or demands more than you can realistically afford, you now have an amazing court ruling to defend you against any unfair legal collections’ attempts.

This court case really shakes up the collections industry, and helps to protect consumers.