What are the rights of the creditor?

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Western Cape Provincial Manager, Karam Singh, has said that 19 million consumers are currently credit-active. 50% of consumers are listed as having impaired credit records and being three months or more in arrears.

Recovering this debt is a challenging task, especially for credit providers and debt collectors. Just as consumers have debt collection rights, so too do creditors and collectors. Tracey Swart, Director of Sales and Customer Relationships at the Blake Group, offers her views on the rights of creditors and debt collectors.

Amendments made to the NCA

The National Credit Act (NCA) amendments affect prescribed debt. If the consumer has not acknowledged their debt for more than three years, either in writing or verbally, the debt is prescribed. As a creditor, you need to receive acknowledgement of debt or payments within that three year period, otherwise you may not be able to claim repayments.

Amendments made to the NCA mean that affordability assessments are far stricter. For example, as a creditor you are required by the act to request three months of pay slips and bank statements before you are able to grant a loan to a consumer. Additionally, creditors are also required to calculate an applicant's discretionary income, established debts and maintenance obligations. This process needs to be followed as it assists the creditor in making the decision of whether or not the consumer can afford a loan.

Understand the Debt Collection Act

The National Debt Collection Act 114 of 1998 stipulates that a creditor's debt collector needs to be registered with the Council for Debt Collectors. This is necessary in order to provide transparency in the debt collection process.

In Section 15 of the Act, it states that debt collectors cannot use force or lay threats against a debtor. A debt collector is prohibited from using intimidation against the consumer, making fraudulent and misleading representations such as fraudulent legal documents. Importantly, a debt collector may not misrepresent themselves and misconstrue their identity when interacting with a debtor.

If a debt collector is convicted of an offence relating to violence, intimidation and extortion, this contravenes the Council's Code of Conduct. A debt collector may not spread false information related to the consumer and threaten the consumer's creditworthiness. Any violations of the Code of Conduct have serious ramifications for debt collectors.

Complaints

It is simple for a debtor to lodge a complaint with the Council for Debt Collectors. Section 15 of the Debt Collection Act covers this, and consumers are well within their rights to take action. Ultimately, if the Council for Debt Collectors finds the debt collector guilty of misconduct, prohibitions such as suspensions, fines, reimbursement and criminal prosecution may occur.

Be pre-emptive with debt collections

It is recommended that credit providers develop a comprehensive strategy that ensures effective collection relative to the cost. The collections strategy could be accelerated in light of changing legislation.

Credit providers must ensure that all documentation relative to the debt is correct and housed in a manner that is easily retrieved. Consistency and persistency in making contact and requesting repayment is paramount.