THE NATIONAL CREDIT ACT NO 34 OF 2005: STRANGER THAN FICTION?

With the full commencement of the National Credit Act on 1 June 2007, the legal fraternity was oblivious to the challenges it would be faced with in times ahead with regards to the application of the Act in practice.

Many a legal scholar has struggled with the interpretation of the Act, for the simple reason that the Act has not been written in “user- friendly” language. The legislature has left the door open, so to speak, for a misinterpretation of the Act’s provisions which will inevitably lead to an incorrect application of the Act, which in turn, will lead to many a dispute between those in the legal profession.

One of the biggest disputes or disagreements thus far, is the manner in which a Section 129 (1) notice is to be delivered to a consumer. This is the notice wherein a consumer is informed by the credit provider that he is in breach of the credit agreement and is given 10 days to respond to such notice. The Act requires that this notice be delivered to the consumer before the credit provider is entitled to approach a court to enforce the credit agreement. Section 129 provides no specific manner in which the notice referred to in this section, is to be delivered to the consumer. However, if we refer to Section 65 (1) and (2) it would seem that delivery of these notices may be done via ordinary mail, fax, email or via printable web-page. Section 168 (a) and (b) goes further to say that unless provided otherwise by the Act, a notice or document that is required by the Act to be served on a person, will be deemed to have been properly served when it has either been delivered to that person or sent by registered mail to that person’s last known address. So where do these conflicting provisions leave us?

Another difficulty is in the determination of whether and to what extent the Act is applicable to juristic persons since there is only limited application in terms of Sections 6 and 7 respectively. This has led to much confusion as the category of credit agreement (Section 4) also has a bearing on the extent to which the Act is applicable to such juristic persons.  

A point of major dispute is the application of the Act to pre- existing credit agreements. Writer has had various incidents where either the Defendant or the court itself, after institution of action based on a pre- existing credit agreement, has required that certain provisions of the Act be complied with (for instance, the Section 129 notice and Certificate of Compliance) where in actual fact this is not possible because at the time of instituting action, the Act was not yet in operation, but at the time of applying for judgment, it had come into effect. Writer’s argument is that at the time of institution of the action, compliance with the Act was not necessary as one cannot comply with something which is not yet in effect. One can also not issue a Certificate of Compliance in these circumstances stating that the Plaintiff has complied with the provisions of the Act, as there was no compliance since compliance was not possible at the time action was instituted.

Of late, writer has had many an application for default judgment, where the action rests on an oral agreement of overdraft facilities to the consumer by a Bank (credit provider), postponed sine die in the TPD, the reason being stated as “no jurisdiction in matters which fall under the jurisdiction of the Magistrate’s Court. Refer to Section 90 (2) (k) (vi) (aa) (bb) and Section 127 (8) (a) of NCA.”

The sections referred to, read as follows:

Section 90 (2) (k) (vi) (aa) (bb):

“A provision of a Credit Agreement is unlawful if it expresses on behalf of the consumer a consent to jurisdiction of the High Court, if the Magistrate’s Court has concurrent jurisdiction; or any court seated outside the area of the jurisdiction of a court having concurrent jurisdiction and in which the consumer resides or works or where the goods in question (if any) are ordinarily kept; “

Section 127 (8) (a):

“If a consumer fails to pay an amount demanded in terms of subsection 7 within 10 business days after receiving the demand notice, the credit provider may commence proceedings in terms of the Magistrate’s Court Act for judgment enforcing the credit agreement.”

With respect, the Registrar’s interpretation of these sections of the Act is incorrect due to the fact that with an oral agreement, no such expression on behalf of a consumer, as contemplated in Section 90 (2) (k) (vi) (aa) (bb), is made.  Section 127 (8) (a) furthermore refers to the surrendering of goods. In addition to this, a High Court has inherent and concurrent jurisdiction to deal with any matter even though it falls within the jurisdiction of the Magistrate’s Court. It is up to the Plaintiff and/or his legal representative (as dominus litus) to elect out of which court they wish to institute action. Should judgment be granted in their favour, they will then only be entitled to costs on the relevant Magistrate’s Court scale. This has been a standing practice rule for a long period of time and which, to date, has not yet been altered or changed. Writer stands firm in this approach to the extent that, upon recommendation, these postponed applications for default judgment have been set down on the motion court roll for hearing and argument in open court.

From the above I think it is safe to say that in essence, the legislature had good intentions, but that due to the “open ended” drafting thereof, it has left space for misinterpretations, misconstruing of the Act, and much frustration of the legal process. It is also clear that, as with the introduction of any new legislation, each matter is a case of trial and error. Test cases are always going to play a vital role in gaining insight and a better understanding of how the Act is to be applied.

At Petzer, Du Toit & Ramulifho, we have a team geared to answer and assist you with any questions relating to the National Credit Act. Please feel free to contact any one of our team members should you need any assistance.

WRITTEN BY: MICHELLE WILKEN- GLOVER
PETZER, DU TOIT & RAMULIFHO