Concern over amendments to Debt Collectors Act

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According to Peter Rafferty, CEO at FutureSoft, developers of a debt collection management system, the most noticeable changes relate to the requirement that lawyers and their employees will need to register as Debt Collectors in terms of the Debt Collectors Act.

This relates to lawyers who collect debt for reward. Currently, lawyers are subject to the Attorneys Act and do not have to comply with the Debt Collectors Act.

Rafferty said that this sort of consolidation has been a long time coming and will affect the legal profession. However, he believes that law firms who are able to adapt will limit the effects of the Bill on their practices.

"The Bill creates some uncertainty and leaves a number of vital questions unanswered. An interesting side effect of the Bill, should it be promulgated in its current form, is the impact it has on Section 103 of the National Credit Act. This section is loosely deemed to be replacement for the common law In Duplum Rule, which limits the interest and administrative and collection fees that may accrue to a debtor's account after the moment of default.

"Where the National Credit Act has gone a long way to revamp and enhance the old In Duplum Rule, many lawyers and collections specialists have continued to apply the rule in its original - and less limiting - form, as certain types of debt have been excluded from the workings of the National Credit Act.

"The proposed Debt Collectors Amendment Bill changes this, as it provides that lawyers and debt collectors will be guilty of improper conduct should they charge collection and other specified costs that exceed the unpaid balance of the principal debt at the time of default. This is similar, though slightly different, to the provisions of the NCA."

Rafferty explains that this has two very clear effects on current methods of calculation:

1. All types of debt (not only those governed by the National Credit Act) will be subject to this rule;
   
2. The Bill excludes reference to interest as being a part of the calculation. Section 103 of the NCA limits the collection and administrative fees, together with interest and a few other items, to the unpaid balance of the principal debt at the time of default. This sub-section of the Bill, however, strangely excludes reference to interest.
   

Law firms and other interested parties are able to comment on the Bill until 30 November 2015. A copy of the Bill can be downloaded from http://www.justice.gov.za.