Pursuant to the implementation of the National Credit Amendment Act (NCAA), the credit industry was faced with interpretation and implementation challenges of Section 71. The credit industry through various platforms including the Credit Industry Forum (CIF) approached the National Credit Regulator (NCR) to provide the requisite clarity.
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1. All accounts must be paid in full:
If a consumer’s financial circ*mstances have improved and he or she is now able to meet the repayments ordinarily due to creditors, then the consumer’s debt review process can be terminated. To have the consumer listed as being under debt review and hence over-indebted would be unjust and in breach of the spirit of the National Credit Act, as he or she is factually not over-indebted anymore as, he or she is able to pay his or her creditors directly without the need for debt review. (see reportable judgment ofThizwilondi Ananuas Magadze and Adcap and Others;Soyaphi Green Ndlovu and Bernice Koekemoer and Others[2016] ZAGPPHC 1115. In the aforesaid judgment, Judge AJ Neukircher delivered a combined judgment as the applications sought were virtually mirror images of each other, other than specifics pertaining to each applicant. The applicants, not being entitled to a clearance certificate, as per section 71, sought to terminate the debt review process and be declared no longer over-indebted. The question as to whether a court order, declaring the applicants no longer over-indebted has the same effect as a clearance certificate, as detailed above, was considered. The learned judge pointed out that section 88(1) does not have a similar proviso to section 71(5) which is the expunging of the credit bureau records. However, it was held that to “grant an order that falls short of failing to expunge the consumer’s credit recordin totowould effectively mean that section 71 would carry more weight than an order issued out by the High Court and that situation would be untenable”. The NCA is “geared towards the protection of the consumer, and where relevant, the fiscal rehabilitation of the consumer”. (see Nicky Campbell’s further discussion in Chapter 6 – Consumer’s Rights & Credit Provider’s Obligations, in“A Guide to the National Credit Act”, [Lexis Nexis], 2008,byJW Scholtz(Author),Jannie Otto(Author),E Van Zyl(Author),Corlia Van Heerden(Author),Nicky Campbell(Author)
2. Debt Review must and can be cancelled by the consumer or by the debt counsellor
In the case ofRougier v Nedbank, 27333/2010 (South Gauteng High Court), the court held that any act by a debt counsellor to terminate or withdraw debt review is beyond the statutory powers of a debt counsellor as espoused in the Act, and therefore the conduct is prohibited.
This decision led to the issuance of the NCR’s Withdrawal from Debt Review Guidelines on 25 February 2016. Prior to this date, consumers could request the issuance of a Form 17.4 from their debt counsellor, or the debt counsellor would issue the Form 17.4 of their own accord. The issuance of the Form 17.4 did result in the voluntary cancellation of the debt review process by the consumer or the debt counsellor.
- As a result of theRougier v Nedbankdecision, the Form 17.4 has been replaced by the Form 17.W. This form only caters for termination of debt review under the following circ*mstances:
- The consumer has withdrawn from the debt review process prior to issuance of Form 17.2 and the credit bureaus have been updated accordingly via the NCR Debt Help System.
- The debt counsellor has suspended provision of service due to non-cooperation by the consumer. The debt counsellor remains the debt counsellor on record.
- The consumer has obtained a court order to rescind the debt review order. Credit bureaus have been updated via the NCR Debt Help System.
- The consumer has obtained a court order declaring the consumer no longer over-indebted. Credit bureaus have been updated via the NCR Debt Help System.
Only points a, c and d would result in the termination of the debt review process and the removal of the debt review signifier from the consumer’s credit reports. Thus, once the Form 17.2 has been issued and it is detailed that a consumer’s debt review application has been accepted, this shall be noted on the consumer’s credit report. Unless all the accounts are paid up or the consumer becomes entitled to a clearance certificate, the only way to terminate the debt review process, according to the NCR’s Withdrawal from Debt Review Guidelines, is to apply to court for either the rescission of the debt review order if one was obtained, or for a determination that the consumer is no longer over-indebted.
3. No court order was issued therefore I do not need to apply to court to cancel
As per point 2 above,and as further detailed in the National Credit Regulator’s Removal from Debt Review Guidelines, the termination of the debt review process is only possible if the consumer applies to court to rescind the debt review order if one was obtained, or for a determination that the consumer is no longer over-indebted. These are the only two circ*mstances in which a Form 17.W can be issued that results in the removal of the debt review signifier from the consumer’s credit report. If the consumer has paid up all the accounts that are under debt review then neither of the two cicrumstances shall be applicable as the consumer would be entitled to a clearance certificate that would be issued by the debt counsellor once all debt included in the debt review process is paid up, or all such debt is paid up and there is only an outstanding home loan account that is up to date and the consumer is able to revert to the original monthly bond repayment amount.
4. I can cancel debt review without an attorney
It is permissible for a consumer to represent him or herself at court. However, the formalities of making an application are best understood by an attorney and mistakes in the application can result in the dismissal of the application or postponements that can readily be avoided occuring. As such, a consumer can employ the services of an attorney to attend to the court application to terminate the debt review process and to ensure that once the court application is granted, the cosnumer’s credit information is accordingly updated with the credit bureaux and National Credit Regulator to reflect that the consumer is no longer under debt review.
5. The consumer must attend court to terminate debt review
The consumer does not have to be present at court. The consumer must facilitate the process where required, typically by providing required information and documentation.
6. Termination can be done in less than 2 months
Realistically, the debt review cancellation process can never take less than 2 months. Firstly, the court application must be prepared and a court date must be obtained. The court date is never likely to be less than 2 weeks away, as the court application must be served on the debt counsellor and the creditors. Furthermore, the allocation of a court date depends on the case load that the court has before it already. Thereafter, once the court order is obtained, the debt review signifier must be removed from the consumer’s credit reports and from the NCR’s database. This takes a minimum of 20 business days as per the National Credit Act 34 of 2005.
7. I can cancel debt review and continue to pay the reduced instalment
The application to terminate debt review depends on the consumer’s ability to show he or she is no longer over-indebted. If the consumer cannot afford to increase the debt review repayment amounts, preferably to the amounts that they were paying before commencing with the debt review process, it is highly unlikely that the application shall succeed unless the creditors have indicated acceptance of such reduced payments.
8. Once Debt Review is terminated, creditors cannot take legal action to recover debts
Section 88 (3), provides that a creditor may not take legal action to enforce a credit agreement if the consumer has already applied for debt review and the application has been accepted and the consumer has been declared over-indebted. This provision only applies while the consumer is under debt review. As soon as the consumer’s debt review is terminated, creditors have the right to take legal action to enforce a credit agreement that was previously subject to debt review, typically calling upon the consumer to settle any arrears that may have accumulated on the account and reverting to the original initial contractual repayment amount.
The following are frequently asked questions about the cancellation of debt review.
Q: I want to remove my name under debt review but have not finished paying my debt. Is it possible?
Yes, this can be done if your debt review was made an order of court and the court order is subsequently rescinded OR an application is made to court to have you declared “not over-indebted.”
Q: I have paid up all my accounts that were under debt review but my credit report still reflects the debt review status. What must I do to remove the debt review status from my credit report?
A: Request a clearance certificate from your debt counsellor and submit it to the credit bureau. The credit bureau will then remove the debt review status from your credit report. In terms of the new National Credit Amendment Act 14 of 2014 which became effective on the 13th of March 2015, the clearance certificate can also be provided where there is an outstanding mortgage agreement or any other large credit agreement which reflect no arrears and are up to date and all the small credit agreements have been paid up.
Q: Please advice on how exiting the debt review prematurely will affect my credit record & do you think I can qualify to get credit finance immediately after exiting debt review?
A: Once the debt review process is terminated the debt review status will be removed from your credit report thereby improving your creditworthiness. We also advise that you get your latest credit reports and check whether any of your credit reports contain negative information other than the debt review status as any other negative information can affect your credit application even once the debt review status has been removed from your credit report. After all, whether you will be able to obtain finance after the removal of the debt review status depends upon the general state of your credit report.
Q: My debt review was a consent order that was confirmed by the National Consumer Tribunal. Can this be set aside?
A: Besides the powers given in the National Credit Act 34 of 2005 to the Magistrate’s Court to grant a court order confirming the reduced payment arrangements with the consumer, the said Act also gives the National Consumer Tribunal the power to grant a consent order confirming the resolution or reduced payment arrangements. Where a consent order has been granted, it is important to note that in terms of section 165 of the National Credit Act, an order granted by the National Consumer Tribunal can only be rescinded or varied in any one of the following instances:
- Where the order was erroneously sought or granted in the absence of a party affected by it;
- Where the order contains an ambiguity, or an obvious error or omission, but only to the extent of correcting that ambiguity, error or omission;
- Where the order was made or granted as a result of a mistake common to the parties to the proceedings.
