NON-PARTICIPATION, TERMINATIONS AND UNREASONABLE COUNTER-OFFERS
DebtSafe is committed to providing debt counselling services in terms of the National Credit Act that will result in responsible debt re-arrangement as per the requirements of the Act and the latest High Court decisions.
Recent developments in the debt counselling industry has led to a change in behavior by certain creditors. Our proposals are not being considered, let alone commented on and we find that certain creditors’ participation is limited to a letter of termination in terms of Section 86(10) at the end of the 60 day period.
This is surely not the intention of the Act as amplified by the Court. I wish to point you to the purpose of the Act which includes … “to provide for debt reorganisation in cases of over-indebtedness”.
It should be brought to your attention that the Supreme Court of Appeal’s decision in Firstrand Bank vs Collet was not limited to the right of the creditor to terminate the review in the event of an unreasonable proposal. The court also emphasised the fact that the parties should participate and negotiate in good faith during the process and that all parties should adhere to all reasonable requests by the debt counsellor.
I further wish to quote the following:
Section 86(5)(b): “A consumer who applies to a debt counsellor, and each credit provider … must participate in good faith in the review and in any negotiations designed to result in responsible debt re-arrangement.”
We find that the above requirements are not adhered to by certain creditors. Creditors do not participate in a constructive manner and when they participate by sending us a counter-offer (conveniently only after they have terminated the review), they demand an unrealistic minimum installment for the circumstances of the consumer. In certain cases the counter-offer is based on a standard percentage and clearly indicates the fact that the consumer’s over-indebtedness and individual strained circumstances were ignored.
We wish to inform you of the DebtSafe modus operandi when a creditor acts in the above manner after being presented with a reasonable offer and the creditor does not wish to participate in good faith:
- Upon termination, the creditor will be approached with a final request for a reasonable counter-offer/solution within a 10 working day period.
- If we are ignored (as is presently the case in many instances) or the counter-offer is not realistic under the circumstances and/or the creditor refuses to further negotiate in good faith, we will keep the account included on the payment plan of the consumer and maintain payments via the PDA on the specific account. Debtsafe will ensure that the offer made to the creditor will be the best offer under the circumstances bearing in mind that the consumer is over-indebted. We will also certify the offer as reasonable under the circumstances.
- The matter will be handed over to our attorneys with the following instructions:
- Exclude the terminated account for purposes of the court application when the creditor opposes the application on the basis that they have lawfully terminated the review.
- Assist the consumer in the defense of the summons and simultaneously lodge an application in terms of Section 86(11) and/or Section 85 of the NCA for reinstatement and/or re-arrangement of the credit agreement.
- Apply for a penalizing costs order against the creditor due to non-participation and a mala fide termination.
- Lodge a complaint with the NDMA and/or the Credit Ombudsman for further investigation.
We believe that “bona fide participation” includes the following actions by a creditor:
- To consider the installment offer by the debt counsellor and respond to it timeously and in detail (considering the individual circumstances of the consumer);
- To negotiate in good faith throughout the process bearing in mind the over-indebtedness of the consumer and the individual strained circumstances of every applicant;
- Not to consistently harass and threaten the consumer during the period of review;
- To consider the payment plan as a whole including the budget and affordability of the consumer and the fact that the consumer might also have other creditors to pay;
- To treat termination as a last resort and, if termination is considered, to notify the consumer and the debt counsellor of their intention to terminate. This notification should include specific reasons for the termination. Unfortunately, standard letters will not be deemed as bona fide but rather as an indication of the fact that the termination is part of a mass and/or blanket termination and that there was no reasonable consideration of the circumstances at hand.
DebtSafe has implemented certain measures to monitor creditor participation and actions closely throughout the process and will make available such information to any court or institution with an interest in the review.
DebtSafe, therefore, invites every creditor to actively participate in the restructuring of our consumer’s debt review applications. Our staff is committed to cooperate in this regard.
Further note that we are not protecting consumer’s who do not make regular payments in terms of their payment plans. We act as independent functionaries of Court and will not advance the case of any party over that of the others. We are rather committed to promote the creditor-debtor relationship to the benefit of both parties and not to harm the creditors or their interests. We further request that you contact us immediately with regard to any default in payments and /or any other specific issues surrounding an application.
We trust the above approach will simplify the process in that we will reach a consensus concerning debt review matters prior to a litigation process.
Thanking you in advance
Hein Du Plessis