Terminations Webinar Highlights
Highlights From the Consumer Friend Terminations Webinar
This week Consumer Friend hosted a webinar with Mr Timmy VD Grijp of the National Credit Regulator (NCR) about NCA Section 86(10). This section talks about when credit providers want to sidestep the debt review process or get out of the debt review process and start new legal action. It differs slightly from NCA Section 88(3) which was also discussed at the webinar (see below).
Timmy gave some legal background on consumer and credit provider rights from during Roman times and then related this to how collections work today. He then delved into the sections of the National Credit Act (NCA) that deal with debt review and when credit providers want to try to duck out of the debt review.
He discussed why the credit provider might want to do so and the steps they have to take. He also spoke about what Debt Counsellors and consumers can do about that situation.
NCA Section 86(10)
The purpose of NCA Section 86(10) was to provide credit providers with a way to avoid an account in debt review, that is not being paid, getting “stuck” in legal limbo. Without this section, a consumer could simply enter debt review but never pay anything and the credit provider could never do anything about that account. To prevent that situation this Section says that a credit provider can try to end their participation in a debt review if the matter has not been sent to court. If it is before the court then they would have to make use of that particular legal forum to deal with the account.
‘The purpose of NCA Section 86(10) was to provide credit providers with a way to avoid an account…getting “stuck” in legal limbo’
If the matter has not yet been sent to court after being in the debt review process for 60 days then they could send a notice and say: we are not going to be dealing with this account through our debt review department anymore and our legal department (or usual collections department) will try to collect.
Normally, this would result in them sending a few scary messages, making some collections phone calls and eventually taking the matter to court.
This would not actually change the debt review status of the consumer and the court that hears the matter would have the chance to decide if the account should be included back into the debt review again (in terms of NCA Section 86(11).
An important point was made that the credit provider would have to legally notify 3 parties of such a move for it to even begin to be legal, namely the NCR, the Consumer and the Debt Counsellor involved.
NCA Section 86(11)
If a credit provider tries to duck out of a debt review using NCA Section 86(10) and they later decide to pursue legal action on that account, then the consumer will be notified and can make a defence at court based on NCA Section 86(11). This is the section of the Act that enables a Magistrate or Judge to tell the credit provider that they don’t want to waste time in their court when the matter is already being dealt with by another court in the debt review application. Why have 2 lots of legal work for the same account? So, the Magistrate can order the credit providers to send the account back to their debt review department internally.
‘If a credit provider tries to duck out of a debt review… then the consumer will be notified and can make a defence at court based on NCA Section 86(11)’
Interestingly, this portion of the Act also allows the judge or Magistrate the ability to make rulings about how this should be done and who should pay for what. The usual approach is to ask the court to make the credit provider pay for all the legal fees that it takes to defend such unnecessary matters that basically waste everyones’ time.
Section 86(11) defences are normally successful if the consumer has been making payments toward the debt or has caught up any past missed payments along the way. If the consumer has simply stopped paying their debts then the court (and Debt Counsellor involved) will not see any benefit of putting the account back into debt review.
‘If the consumer has simply stopped paying their debts then the court …will not see any benefit of putting the account back into debt review’
The challenge with the 86(11) defence approach is that the court may decide not to make the credit provider pay for all the resultant legal fees. This can leave the consumer with a big legal bill. And no ruling (even one in favour of the consumer) can remove the stress and extra work that is created, though the court could penalise them and make a credit provider pay for that.
But what happens if the debt review court order was granted a long time ago and the credit provider wants to or needs to try to collect funds on the account because they are not being paid?
NCA Section 88(3)
NCA Section 88.3 has a similar purpose and covers the situation where a court order for debt review or debt restructuring already exists and the consumer stops paying. The credit provider then has the right to start new legal action to collect. They are not ‘stuck’ in the situation where the consumer isn’t paying and they are not allowed to try to do anything to collect.
Mr Vd Grijp reminded Debt Counsellors at the webinar that, though many credit providers will notify the Debt Counsellor that they are starting new legal action and moving the account out of their debt review department this is not actually a requirement of the law. They could simply follow the normal legal process of serving papers on the consumer without telling the NCR or Debt Counsellor. Those steps would only be necessary under Section 86(10).
If this happens then the consumer could simply follow the usual legal process and try to defend the matter. The defence would normally be done by showing that they have been making payments as per the agreement or court order for debt review. Once again, if the consumer has missed payments or stopped paying the court is unlikely to be impressed and help the consumer. They will likely rule in favour of the credit provider.
Hundreds of Debt Counsellors
Some questions were then discussed at the end of the webinar about how to deal with issuing clearance certificates where a credit provider has jumped out of the debt review (through section 86(10) and where the credit bureau is asking for proof the account is paid up. This can create a traffic jam as the Debt Counsellor tries to explain to the credit bureaus that the account is not under debt review even though it was originally included.
Much like the NCR’s webinars about NCA Section 68, once again hundreds of Debt Counsellors attended and were very grateful to both Consumer Friend for organising and the NCR for attending and speaking.