Money Grabbing Court Case Victory for NCR
When consumers first enter into debt review they normally have a short time to get all their ducks in a row. The later in the month they enter the process the more likely it becomes that challenges may arise which could make their first month of debt review very complicated. For example, something called “Set Off”.
What is Set Off?
Set off has been described by many as “Money Grabbing” by banks of money from one account to settle a debt in another account. So, if you owe money on a loan, the bank can perhaps take money from your savings account and move it across to your loan account. Suddenly the consumer might not be able to go buy food because their savings account is empty or missing a lot of money that was “grabbed” and moved around. Many consumers don’t even realise that they may have signed a contract that allows for this in the past. Alternatively, this behaviour was considered permissible under common law.
‘This can even derail the entire debt review process because the consumer’s own bank gets all the money and leaves none for all their other credit providers’
For those entering debt review and ready to pay their debts back via debt review they might get a nasty surprise when the end of the month rolls around and the bank simply moves money from their accounts around instead of waiting for the consumer to pay their PDA and the PDA to send the right amount back. This can even derail the entire debt review process because the consumer’s own bank gets all the money and leaves none for all their other credit providers.
‘The NCR recently took the matter to court and asked for a ruling in regard to a Standard Bank account where some “money grabbing” or ‘set off’ happened’
The NCR recently took the matter to court and asked for a ruling in regard to a Standard Bank account where some “money grabbing” or ‘set off’ happened. The SA Human Rights Commission who are very interested int he constitution and consumer rights also asked to be involved and to provide extra info about how Set Off damaged the debt review process. Standard Bank didn’t mid the SAHRC from joining but at first asked the court not to allow them to introduce new info about why set off damages consumers rights while in debt review. The court decided to allow the SCHRC to provide new evidence and this was considered during the case.
NCA Section 90(2)n about charges (and set off in particular) was discussed a lot as was Section 124 of the Act. It seems that between Section 90 and 124 the old common law Set Off is now replaced or perhaps (it was argued) only a similar process is defined in these sections of the NCA.
The two processes are not certainly identical. Section 124 says that set off can only be done with written permission from the consumer. It also needs to be for a specific amount on a specific date. Also, the credit provider needs to let the consumer know in advance of it happening.
‘the court had to consider if this new process replaces the old common law process since the NCA does not specifically say that it does’
So, the court had to consider if this new process replaces the old common law process since the NCA does not specifically say that it does. Especially when the credit provider and consumer’s agreement does not specify which form of set-off applies – the old common law version or the new improved NCA version. These days most agreements may simply leave any reference to this out. Some, like the NCR, feel this provides a loophole through which credit providers are getting around the new form of set off.
In the end, the Court agreed with the NCR and SAHRC that this is no longer acceptable and must now stop. The court felt that because any reference to the old set off would be illegal under the new NCA it is not enough to simply leave it out of a contract these days and that this would somehow make it become legal again. This would go contrary to the purpose of the National Credit Act.
The bank stated that consumers under debt review should never have the old set off process applied to them but it seemed that testimony by Debt Counsellor Mr Paul Slot showed that this commonly has been happening and negatively affecting consumers. This helped the court rule that the old form of Set Off is now dead for any types of contracts and credit that fall under the National Credit Act.
it is declared that, in light of sections 90(2)(n) and 124 of the National Credit Act 34 of 2005, the common law right to set-off is not applicable in respect of credit agreements which are subject to the National Credit Act.
Download the Ruling HERE