National Credit Act 34 of 2005

- Featured article by LAWYERS-ONLINE.CO.ZA - April 2019

The law surrounding Debt Counselling

Debt has become a serious problem in South Africa over the past few years. It is not just restricted to low income and over - spending, other causes include the cost of living and fluctuating interest rates. People are now turning to credit providers and credit cards to stay afloat and meet their monthly obligations.

As a result, the National Credit Act No. 34 of 2005 was introduced. This Act came into effect on the 1st July 2007. The effect of this Act is that debt counsellors are now able to help people to be able to cope w ith their financial difficulties and find an achievable solution to indebtedness. The Act was established under the National Credit Regulator. The NCR is tasked with protecting both the consumer and the creditor .

Because of the National Credit Act, consumers can now apply for a payment schedule that meets their budget by, seeking out a registered debt counsellor who will negotiate with their creditors on their behalf and establish a fair payment plan. The Act stipulates that consumers should be referred to debt counsellors before any legal action is taken against them for failing to make regular debt payments.

Section 86 of the NCA deals with the process of Debt Review. A consumer may apply to a debt counsellor in the prescribed manner and form to have the consumer declared over - indebted. An application in terms of this section may not be made in respect of, and does not apply to, a particular credit agreement if, at the time of that application, the credit provider under that credit agreement has proceeded to take the steps contemplated in section 129 to enforce that agreement. A debt counsellor may require the consumer to pay an application fee, not exceeding the prescribed amount, before accepting an applic ation and may not require or accept a fee from a credit provider in respect of an application in terms of this section.

On receipt of an application, a debt counsellor must provide the consumer with proof of receipt of the application; all credit providers that are listed in the application; and every registered credit bureau must be notified in the prescribed manner and form . A consumer who applies to a debt counsellor must comply with any reasonable requests by the debt counsellor to facilitate the evaluation of the consumer’s state of indebtedness and the prospects for responsible debt re-arrangement; and participate in good faith in the review and in any negotiation s designed to result in responsible debt re-arrangement.

Section 86 of the NCA deals with the process of Debt Review. A consumer may apply to a debt counsellor in the prescribed manner and form to have the consumer declared over - indebted. An application in terms of this section may not be made in respect of, and does not apply to, a particular credit agreement if, at the time of that application, the credit provider under that credit agreement has proceeded to take the steps contemplated in section 129 to enforce that agreement. A debt counsellor may require the consumer to pay an application fee, not exceeding the prescribed amount, before accepting an applic ation and may not require or accept a fee from a credit provider in respect of an application in terms of this section. On receipt of an application, a debt counsellor must provide the consumer with proof of receipt of the application; all credit providers that are listed in the application; and every registered credit bureau must be notified in the prescribed manner and form. A consumer who applies to a debt counsellor must comply with any reasonable requests by the debt counsellor to facilitate the evaluation of the consumer’s state of indebtedness and the prospects for responsible debt re-arrangement; and participate in good faith in the review and in any negotiation s designed to result in responsible debt re-arrangement.

A debt counsellor who has accepted an application in terms of this section must determine in the prescribed manner and within the prescribed time whether the consumer appears to be over - indebted; and if the consumer seeks a declaration of reckless credit, whether any of the consumer’s credit agreements appear to be reckless.

If, as a result of an assessment conducted the consumer is not over - indebted, the debt counsellor must reject the application, even if the debt counsellor has concluded that a particular credit agreement was reckless at the time it was entered into; the consumer is not over - indebted, but is never theless experiencing, or likely to experience, difficulty satisfying all the consumer’s obligations under credit agreements in a timely manner, the debt counsellor may recommend that the consumer and the respective credit providers voluntarily consider and agree on a plan of debt re-arrangement; or the consumer is over - indebted, the debt counsellor may issue a proposal recommending that the Magistrate’s Court make either or both of the following orders: that one or more of the consumer’s credit agreements be declared to be reckless credit, if the debt counsellor has concluded that those that one or more of the consumer’s obligations be re-arranged by counsellor reasonably concludes that agreements appear to be reckless; and extending the period of the agreement and reducing the amount of each payment due accordingly; postponing during a specified period the dates on which payments are due under the agreement; extending the period of the agreement and postponing during a specified period the dates on which payments are due under the agreement; or recalculating the consumer’s obligations because of contraven tion.

If a debt counsellor makes a recommendation and the consumer and each credit provider concerned accept that proposal, the debt counsellor must record the proposal in the form of an order, and if it is consented to by the consumer and each credit provider concerned, file it as a consent order in terms of section 138; or if the above does not apply, the debt counsellor must refer the matter to the Magistrate’s Court with the recommendation.

If a debt counsellor rejects an application, the consumer, with leave of the Magistrate’s Court, may apply directly to the Magistrate’s Court.

Date: 25th June 2013
Legislation: National Credit Act, 34 of 2005