Study Theme 14: Debt enforcement by repossession or judgment

Question 1

❖ S123(2) of NCA:

Answer 1

❖ If a consumer is in default under a credit agreement, the
credit provider may take the steps.

Question 2

❖ The interplay between debt enforcement and debt review

Answer 2

❖ The 2 processes can never be subsisting simultaneously:

Question 3

❖ Debt review

Answer 3

❖ S86(2) of NCA:
❖ Provides that an application for debt review cannot be made
by the consumer in respect of a particular credit agreement
if,
❖ At the time of the application, the credit provider under that
credit agreement has proceeded to take the steps
contemplated in S130 to enforce that agreement.

Question 4

❖ De Beer v Nedbank

Answer 4

❖ Is it the issuing or servicing of summons on the consumer
who is in default?
❖ Court held that the words “commence any legal
proceedings to enforce the agreement” doesn’t mean the
issuing of the summons but
❖ Means the date when the summons was brought to the
attention of the consumer being the date of service of the
summons.

Question 5

Mokhonoana case

Answer 5

❖ Court held that the commencement of legal proceedings
has a distinct effect on the rights of a consumer.
❖ S86(2) precludes a consumer from applying to a debt
counsellor to have themselves declared over-indebted after
the commencement of the legal proceedings.
❖ Therefore, there is legal uncertainty if the consumer’s ability
to apply for debt review is determined by the date of issue of
the summons.
❖ Court decided that this enforcement will not be
commenced by issue of a summons but by the service
thereof.

Question 6

❖ Debt enforcement

Answer 6

❖ S88(3) of NCA:
❖ Provides that while a consumer is subject to debt review or
a debt re-arrangement order, the credit provider may not
enforce by litigation or
❖ Other judicial process any right under the credit agreement
which is subject to debt review or the re-arrangement order
UNTIL:
➢ The consumer is in default under the credit agreement;
and
➢ The matter has been finalised, e.g. the court finds the
consumer is not over-indebted.
❖ Once the debt review has been terminated, the credit
provider can go ahead with enforcement of the credit
agreement

Question 7

Notice of Termination of debt review:

Answer 7

❖ S86(10) of NCA:
❖ Provides that if a consumer is under a credit agreement that
is being reviewed in terms of S86, the credit provider may
terminate the debt review by means of a notice.

Question 8

❖ When?

Answer 8

❖ Debt review may be terminated by the credit provider at any
time at least 60 business days after the date on which the
consumer applied for debt review.
❖ Thus, debt review may not be terminated prior to the expiry
of 60 business days after the application for debt review.
❖ A S86(10) notice may be given a long as the consumer is in
default at the time that the notice is given.

Question 9

❖ When not?

Answer 9

❖ No credit provider may terminate an application for debt
review lodged in terms of the NCA, if the application has
already been filed in a court.

Question 10

❖ How?

Answer 10

❖ The credit provider may terminate the debt review (at any
time after 60 business days) by giving notice in the
prescribed manner to the:
➢ Consumer
➢ Debt counsellor
➢ National Credit Regulator
❖ Other than the provisions of S86(10), no form has been
prescribed for the notice in terms of S86(10) to terminate a
debt review.

Question 11

❖ The delivery of the S86(10) notice:

Answer 11

❖ The method of the delivery of the notice has not been
prescribed.
❖ The consumer will be able to choose the method of delivery
of the notice in the credit agreement in accordance with the
provisions of S65(2) NCA:
➢ In person, ordinary mail, fax, email, printable web-page

Question 12

The resumption of a debt review which has been
terminated:

Answer 12

❖ S86(11) of NCA
❖ If a credit provider who has given notice to terminate a debt
review in terms of S86(10) proceeds to enforce that
agreement in terms of Part C of Chapter 6.
❖ The enforcement court hearing the matter may order that
the debt review resume on any conditions the court
considers to be just in the circumstances.
❖ Good faith e.g. the participation of the credit provider in the
debt review process is critically important to determine
whether a credit provider validly terminated a debt review
and whether such debt review may be resumed in
accordance with S86(11).
❖ A consumer should make a substantiated request for the
resumption of debt review, or a court may suo motu order
resumption of a debt review.
❖ A consumer will not be able to obtain the resumption of a
debt review after judgment had already been granted
against such a consumer.
❖ Although not specifically provided for in the NCA, a debt
review that has been resumed, may be terminated by the
credit provider again

Question 13

❖ Summary of the termination:

Answer 13

❖ A credit provider uses a S86(10) notice only if the consumer
is subject to a debt review and
❖ The credit provider wants to enforce the credit agreement
against the consumer who is in default, to terminate the
debt review which bars enforcement in terms of S88(3).
❖ Remember that debt review and debt enforcement cannot
be ongoing at the same time.
❖ The S86(10) notice is one of two possible notices which is a
prerequisite for debt enforcement.
❖ The other is the S129(1)(a) notice, which is used by the
credit provider to enforce the credit agreement where the
consumer is in default but not already subject to a debt
review

Question 14

❖ First Rand Bank v Owens

Answer 14

❖ The court held that if a S86(10) notice was used by the credit
provider to terminate debt review,
❖ The credit provider can enforce immediately, and a
S129(1)(a) notice is not required as well.
❖ If a debt review has been terminated by the credit provider, it
can be revived (a court may order that the debt review
resumes),
❖ Whereafter enforcement of the credit agreement is no
longer possible.

Question 15

Breach of contract

Answer 15

❖ Form of breach of contract usually committed by the credit
consumer is mora debitoris:
➢ By failing to pay the contractually agreed on instalments
or
➢ By not paying the full instalment as agreed on

Question 16

❖ Credit provider’s remedies:

Answer 16

❖ Claim for specific performance and damages,
❖ Cancellation, or
❖ Claim to repossess the goods and damages

Question 17

❖ Debt enforcement in terms of Part C of Chapter 6 NCA:

Answer 17

❖ Chapter is entitled “Debt enforcement by repossession or
judgment”.
❖ The NCA deals extensively with debt enforcement on a
procedural level in this chapter

Question 18

❖ Question:

Answer 18

❖ Does the phrase “enforcement” in the Act include
cancellation of the agreement and an accompanying claim
to repossess the goods,
❖ or
❖ Is only claims for specific enforcement involved?
❖ In the context of the NCA and according to case law,
“enforcement” of the credit agreement means the exercise
of any of its remedies by the credit provider, including
implementation of a lex commissoria

Question 19

❖ Two-stage approach:

Answer 19

❖ The NCA prescribes a two-stage approach to debt
enforcement by:
➢ Distinguishing between required procedures that have to
be complied with before debt enforcement can
commence and
➢ Further procedures that are dealt with as debt
procedures in court

Question 20

❖ Required procedures for debt enforcement:

Answer 20

❖ Section 129(1)(a) of NCA:
❖ If the consumer is in default under a credit agreement,
❖ The credit provider may draw the default to the notice of the
consumer in writing by means of so-called section 129(1)(a)
notice.

Question 21

❖ Content of notice:

Answer 21

❖ The credit provider must make proposals to the consumer
in the notice and the purpose of the proposals
❖ Credit provider should indicate in notice that debt
enforcement may follow:

➢** Dwenga v First Rand Bank **
➢ Sufficient information are default and consequences
❖ The notice has to mention the period within which the
consumer has to react to the notice.

Question 22

❖ Question:

Answer 22

❖ Is the s 129(1)(a) notice a prerequisite for debt
enforcement?
❖ Yes, in terms of s 129(1)(b).

Question 23

❖ S129(1)(b) of NCA:

Answer 23

❖ A credit provider may not commence any legal proceedings
to enforce the credit agreement before:
➢ First providing notice to the consumer in terms of
S129(1)(a) or S86(10), as the case may be; and
➢ Meeting the further requirements in S130.

Question 24

❖ Nedbank v The NCR

Answer 24

❖ The fact that a S129(1)(a) or 86(10) notice is required for
debt enforcement, was confirmed by the SCA in this case.
❖ NB: Remember that the credit provider uses a S86(10)
notice where the consumer is in default.
The credit provider wants to enforce the credit agreement,
and the consumer is subject to debt review, to terminate the
debt review.
❖ NB: The S129(1)(a) notice is used by the credit provider
where the consumer is in default, and they wants to enforce
the credit agreement, BUT the consumer is NOT subject to
debt review.

Question 25

❖ Which proposal must be contained in the notice and
why?

Answer 25

❖ The credit provider must propose in the notice that:
➢ The consumer refers the credit agreement (in default) to
a debt counsellor, alternative dispute resolution agent,
consumer court or ombud

Question 26

❖ Reason:

Answer 26

❖ With the intent that the parties resolve any dispute under
the agreement or
❖ Develop and agree on a plan to bring the payments under
the agreement up to date

Question 27

❖ Nedbank v The NCR :

Answer 27

❖ The aforementioned are the purposes of the proposal in the
notice and not debt review.

Question 28

❖ How must the notice be brought to the consumer’s
attention?

Answer 28

❖ S129(1)(a) of NCA:
❖ The credit provider may draw the default to the notice of the
consumer in writing.
❖ Section does not provide how the written notice must be
brought to the consumer’s attention.
❖ But remember that S129 must be read with S130.

Answer 29

❖ S130 of NCA:
❖ Refers to the delivery of the S129(1)(a) or 86(10) notice.
❖ However, the concept “delivered” is not defined in the NCA.

Question 30

❖ S129(5) of NCA:

Answer 30

❖ The notice is delivered to the consumer:
➢ By registered mail, or
➢ To an adult person at the location designated by the
consumer.

Question 31

❖ S129(6) of NCA:

Answer 31

❖ Consumer must in writing indicate the preferred manner of
delivery.
.

Question 32

❖ S129(7)(a) of NCA:

Answer 32

❖ Proof of delivery is satisfied by written confirmation by the
postal service or its authorised agent of delivery to the
relevant post office or postal agency;

Question 33

❖ S129(7)(b) of NCA:

Answer 33

❖ Proof of delivery is satisfied by the signature or identifying
mark of the recipient of the notice

Question 34

❖ Where must the notice be delivered to the consumer?

Answer 34

❖ S96(1) of NCA:
❖ Whenever a party to a credit agreement is required or
wishes to give legal notice to the other party for any purpose
in the agreement or in the NCA,
❖ The notice must be delivered at:
➢ The consumer’s address as set out in the agreement; or
➢ At the consumer’s most recent (changed) address

Question 35

❖ Change of address

Answer 35

❖ S96(2) of NCA:
❖ A party to a credit agreement may change their address by:
➢ Delivering a written notice of new address to the other
party
➢ By hand, registered mail or electronic mail (if the other
party has provided an email address)
❖ NB: Remember once again that S129(1) and S130 must be
complied with before debt enforcement can take place

Question 36

❖ Summary of S129(1)(a):

Answer 36

❖ Whenever a consumer is in default under a credit
agreement to which the [NCA] applies,
❖ Regardless of the:
➢ type of default, ➢ the type of the credit agreement and
➢ the contemplated relief sought by the credit provider,
❖ A S129(1)(a) notice must be delivered to the consumer.
❖ The delivery of a section 129(1)(a) notice is a compulsory
procedural step devised by the legislature to encourage
parties to iron out their differences before seeking court
intervention

Question 37

❖ Approaching the court:

Answer 37

❖ S130(1) of NCA:
❖ A credit provider may approach the court for an order to
enforce a credit agreement only if,
❖ At that time (the time that the summons is issued), the
consumer:
➢ Is in default
➢ Has been in default under that credit agreement for at
least 20 business days and
➢ At least 10 business days have elapsed since the credit
provider delivered the S129(1)(a) notice (or a s 86(10)
notice) to the consumer
➢ Consumer has not responded to the notice or
➢ Responded by rejecting the credit provider’s proposals in
the notice, or
➢ Has not surrendered the goods in terms of S127.

Question 38

❖ Can the periods of 20 business days and 10 business
days run concurrently?

Answer 38

❖ Two distinct periods are involved and these periods are
triggered by different occurrences or events:
➢ The 20 business days are triggered by the consumer’s
default, and
➢ The 10 business days are triggered by the delivery of the
notice.
❖ NB: Therefore, to cause the 10 business days to run within
or together with the 20 business days, the S129(1)(a) notice
must be delivered soon after breach of contract/default has
occurred

Question 39

❖ Procedures in court:

Answer 39

❖ S130(3) and (4) of NCA:
❖ The credit provider cannot approach the court to enforce
the debt under a credit agreement if the:
➢ Matter was before a debt counsellor, ADR agent, ombud
or consumer court
➢ Consumer has surrendered the goods (unless goods
have already been sold and there is a shortfall that the
consumer does not pay voluntarily)
➢ Consumer has agreed to the proposal in the S129(1)(a)
notice
➢ Consumer has complied with an agreed plan, as
contemplated in the s 129(1)(a) notice
➢ Consumer has brought the payments under the credit
agreement up to date, as contemplated in the s 129(1)(a)
notice

Question 40

❖ Non-compliance with procedures:

Answer 40

❖ S130(3) and (4) of NCA:
❖ If the S129(1)(a) procedures are not complied with, the
court must adjourn the proceedings and prescribe
appropriate procedures to be followed.
❖ If the court in any debt enforcement proceedings
determines that the credit agreement was reckless, the
reckless orders have to be made.
❖ If the court makes an attachment order with respect to
property that is the subject of a credit agreement, the
surrender of goods sale process in terms of S127 has to be
followed with regard to such property

Question 41

❖ Re-instatement of the credit agreement:

Answer 41

❖ S129(3) of NCA:
❖ A consumer may at any time before the credit provider has
cancelled the credit agreement,
❖ Remedy a default in such agreement by paying to the credit
provider all amounts that are overdue, together with the
credit provider reasonable legal costs.
❖ The credit agreement will then be re-instated.

Question 42

NCA and
Insolvency Law:

Answer 42

❖ Naidoo v Absa Bank:
❖ Sequestration proceedings do not amount to debt
enforcement proceedings in court.
❖ A S129(1)(a) notice is thus not a prerequisite for
sequestration proceedings.

Question 43

❖ Is an application for debt review an act of insolvency?

Answer 43

❖ No, the NCA Amendment Act 19 of 2014 has inserted a subs in s 8 of the Insolvency Act providing that an application for
debt review by the consumer is not an act of insolvency