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Understanding Debt Law

Understanding Debt Law

Once consumers have overspent and cannot afford to pay back the monies, ugly little ‘additional costs’ begin creeping their way into an already unhealthy negative number, such as interest, fees, and charges. What the ‘In Duplum rule’ does is protects consumers and essentially caps the interest figure once it reaches the same amount as the actual money that is owed.

DebtSafe MD, Hein du Plessis, explains how this works. “If, for instance, you have purchased something for R5000 on credit and, for whatever reason, you miss payments which in turn pushes up the interest owing, once that interest figure reaches R5000, the ‘In Duplum rule’ comes into effect. You will then only need to pay back the original loan amount plus the capped interest (in this example R5000) relative charges or fees.

Although the rule is available to all consumers in default (non-payment) of a credit agreement – as in, haven’t paid the amount they legally said they would – those consumers not under the debt review process run the risk that the credit provider either enforces the agreement or places the consumer on terms to cure the default (non-payment) and as such, loses the benefit of the rule to avoid enforcement by the creditor itself.

Du Plessis advices: “Credit agreements will mostly contain a clause in which the full outstanding amount becomes due and payable immediately in the event of non-payment. Once a re-arrangement order that is obtained through a debt review court order has been arranged, the non-payment will continue to exist, but the credit provider cannot enforce the agreement as long as payments are made in terms of the debt review court order.”

A great mechanism

The ‘In Duplum rule’ is a great mechanism to limit repayments (depending on the type of debt, the interest rate and the balance outstanding of course) on very expensive short term loans with high-interest rates such as personal loans, credit cards etc. This would also benefit the homeowner in that, depending on the circumstances, a consumer could potentially be out of debt three to four years earlier than initially planned.

The common law ‘In Duplum rule’ has been part of our law for over 100 years and the National Credit Act introduced the statutory ‘In Duplum rule’ in 2007. The former deals only with interest and provides that outstanding interest can never be more than the original capital amount. Costs levies and fees are charged in addition to the interest and are not capped. Once a payment is made having the effect that the interest is reduced below the original capital amount, interest commences to run again until the maximum is reached. In contradiction, the statutory ‘In Duplum rule’ provides for the outstanding balance on date of default and not the original capital sum as benchmark, sets the requirement of default throughout, and includes not only interest, but also levies, costs, fees and charges. The last aspect is that in terms of the statutory rule, as long as the default exists, interest does not commence to run again nor can further charges be added once the maximum is reached.

Especially over the holiday season, be wise about what you are spending and try to avoid this years’ festive season hangover.