By Barbara Whittle

The Law Society of South Africa (LSSA) supported a number of amendments proposed by the draft National Credit Amendment Bill 2013 in its submissions to the Department of Trade and Industry in July 2013. However, the LSSA also pointed out a number of flaws in the Bill.

The LSSA pointed out that the grounds that render an applicant not to be a fit and proper person to be a debt counsellor should be listed. The LSSA agreed that a person may not be registered as a debt counsellor if he or she is an unrehabilitated insolvent. However, the LSSA noted that it was not clear why a rehabilitated insolvent may not be registered as a credit provider and this should be reconsidered.

In terms of s 40(4) of the National Credit Act 34 of 2005 (the Act) a credit agreement concluded by an unregistered credit provider is void and receives the same far-reaching treatment as that meted out to other unlawful agreements provided for in s 89 of the Act. Therefore, this cannot be a one-sided decision and a registrant must have the right to be heard before such a decision is taken. The LSSA was not in support of the amendment.

The LSSA pointed out that, in terms of the current s 83 of the Act, it was not clear on whom the onus of proof of reckless lending rested. The LSSA suggested that s 83 should be amended to provide for this. In terms of the s 83A proposed in the Bill, a consumer would be able to approach the tribunal with an application to declare a credit agreement as reckless. However, according to the LSSA, the procedure and administrative processes of such an application should be clarified in the Bill.

The LSSA expressed concern that the tribunal would not be as accessible to consumers as magistrates’ courts, which are easily accessible throughout the country. The LSSA added that the proposed addition of s 83A may create uncertainty as regards the appropriate forum. The consumer would, for instance, be entitled to approach the tribunal while the matter was already in court. The possibility of ‘forum shopping’ could also not be excluded.

The LSSA stressed that s 83A was unnecessary as there are currently sufficient provisions and processes for consumers to approach the courts for relief.

As regards unlawful credit agreements, the LSSA pointed out that, in the matter of National Credit Regulator v Opperman and Others 2013 (2) SA 1 (CC), the entire s 89(5)(c) of the Act was declared unconstitutional and invalid. The LSSA suggested that consideration should be given to appropriate penalties in respect of unlawful credit agreements.

On the procedures preceding debt-enforcement, the LSSA was of the view that there should be personal delivery of s 129 notices. It added that s 129(3) should not be deleted, as it contains a form of protection to the consumer. The deletion of the subsection would be to the detriment of the consumer.

The proposed subs (1A) in the draft Bill was not supported by the LSSA, which expressed concern that, should debt counsellors be entitled to make use of agents for administrative tasks only, a position might arise where debt counsellors and credit providers would not be allowed to make use of the services of attorneys to represent them in court. This would be unacceptable.

The LSSA raised its concern about s 8A, which states: ‘A debtor who has applied for a debt review must not be regarded as having committed an act of insolvency’ as being too widely drafted. ‘Surely it is only the application for debt review that should not be used as establishing an act of insolvency on the part of the debtor? If there are other facts that establish an act of insolvency, they can be used. The case law is clear that an application for or an order of debt rearrangement under the Act does not bar an application for sequestration. The phrase should therefore read: “An application for debt review or order granted in terms thereof shall not be regarded as an act of insolvency”.’

Compiled by Barbara Whittle, communications manager, Law Society of South Africa, barbara@lssa.org.za

This article was first published in De Rebus in 2013 (Sept) DR 13.