In what is seen as a ‘major victory for consumers’ a registrar in the Western Cape High Court has effectively put a stop to the practice of banks suing consumers in the High Courts for the recovery of outstanding loans.

A Moneyweb report says customers are being sued by the banks in these courts for arrears amounts as low as R6 000, and High Court judges have complained long and loud about the unnecessary traffic this brings to their courts.

The National Credit Act requires that disputes over credit agreements are brought before the Magistrate’s Courts, where the allowable legal costs are a fraction of that in the High Courts.

But that’s not happening in practice.

Banks and their lawyers are hauling cases that properly belong in the Magistrate’s Courts to the High Court where they can lump legal costs onto the consumers’ accounts, notes Moneyweb.

In one case, it says, a consumer has been lumped by the bank with a R180 000 legal bill, all over the recovery of arrears of about R20 000 (and even that is in dispute).

However, a registrar in the Western Cape High Court recently ended Standard Bank’s High Court bid to sue six customers for the recovery of vehicle loans.

The registrar noticed that in all six cases, Standard Bank’s own agreements specified the Magistrate’s Court as having jurisdiction in the event of a dispute, and referred the matter for a hearing in open court, reports Moneyweb.

Acting Judge Thulare, of the Western Cape High Court, agreed, and transferred the matters to the Magistrate’s Courts.

‘The parties agreed to protect the defendant against the unnecessary use of the more expensive forum (court), that is, the hardship of being subjected to unnecessary and expensive proceedings often far out of town,’ reads the judgment.

Stephan van der Merwe, senior attorney at the University of Stellenbosch’s Law Clinic, says this is a major victory for consumers: ‘It is encouraging to see that the registrar refused to rubber-stamp a default judgment without applying his mind to the matter, as has so often been the case in the past. One of the main reasons that we have seen such rampant abuse of debtors and consumers in this country has been as a result of unscrupulous creditors exploiting the good nature – or lack of legal knowledge – of court clerks and registrars to obtain these judgments, without proper consideration of the merits or for any due process,’ he is quoted as saying.

Full Moneyweb report