Full Bench wrestles with debt review issue
A full Bench of the Gauteng High Court (Pretoria) has reserved judgment in a case that will determine how they deal with applications from consumers who want to get out of debt review before they have been able to pay off all their debts.
This, notes a Sunday Times report, follows a practice directive issued by Judge President Dunstan Mlambo in February.
Since then, High Courts in Gauteng have been prohibited from hearing applications from consumers seeking such orders. The directive was issued in response to two unopposed applications made in September last year. In both cases, the applicants said their financial circumstances had improved dramatically, yet neither was able to settle their debts in full. Both consumers asked the court to reverse their debt counsellors' finding that they were over-indebted and to order that they were no longer in debt review and to clear their credit reports.
Judge Brenda Neukircher ordered that the cases be heard by the full court in light of conflicting judgments on the competency of the High Courts to hear and grant relief in such cases outside of Gauteng.
The judgments in all the other jurisdictions were made in cases where consumers had engaged a debt counsellor, but the finding that they were over-indebted had never been made an order of the court.
In the matter heard last week, arguments were made by the National Credit Regulator (NCR), the Banking Association of SA (Basa), the Law Society of SA (LSSA) and debt counsellor Michelle Barnardt as friends of the court.
The applicants, represented by Stephan van der Hoven, argued that even if a consumer hasn't been declared over-indebted by a Magistrate's Court, a High Court is able to declare the consumer ‘no longer over-indebted’, notes the Sunday Times report.
According to Van der Hoven, last year alone 19 judges in Gauteng granted no fewer than 39 applications seeking similar relief. The regulator argued that the High Court should not be able to declare a consumer ‘no longer over-indebted’ in the absence of a declaration of over-indebtedness by a court.
While the National Credit Act does not dictate which court can declare a consumer over-indebted, when a magistrate has found the consumer to be over-indebted, only a magistrate can find that the consumer is no longer over-indebted, the NCR argued.
Both Basa and the LSSA argued there is a gap in the NCA as it fails to provide for situations where consumers' circumstances change materially to the extent that they are no longer over-indebted but are not able to settle all their debts. This lacuna should be brought to the attention of the legislature, the LSSA argued.
The regulator said no lacuna exists and ‘to prevent abuse’ it will issue another (non-binding) guideline with ‘strict rules’ for debt counsellors to consider when assessing a consumer's claim that he or she is no longer over-indebted.
Article disclaimer: While we have made every effort to ensure the accuracy of this article, it is not intended to provide final legal advice as facts and situations will differ from case to case, and therefore specific legal advice should be sought with a lawyer.