Property Auctioned for Debt? You have rights to fair treatment!

Property Auctioned for Debt? You have rights to fair treatment!

Joe was diagnosed with heart disease and had to reduce his working hours, with the resultant effect that his monthly income decreased. As a result, Joe tried to negotiate with his bank to try and save the house he had bought just a few years ago, the said house having been purchased in terms of a credit agreement, concluded with a bank. However, the property was subsequently auctioned by the bank and the auction price did not cover the outstanding debt due to the bank.

Joe knows that reasonably he could have expected a shortfall on the bond after it was auctioned. He wanted to do the right thing and pay the shortfall. However, his efforts to determine the details of the shortfall were in vain as the bank in question failed to provide this information. Hence, Joe was shocked when three months after the property was auctioned, he found an account listed on his credit report, that he did not open. He did not recognise the account number. The account listing was in respect of the property that had been auctioned by the bank. When he made further enquiries with the bank, he was advised that the account listing is a ‘debt recovery account’ in respect of the shortfall that arose when the property was auctioned. Further, the shortfall amount appeared to be the same amount as the initial bond amount.

In terms of our law, namely the National Credit Act 34 of 2005, the ‘debt recovery account’ listing on Joe’s credit reports can simply be removed on the basis that Joe did in fact not open the said account. The onus would then be on the bank to prove otherwise.

Regarding the shortfall amount and the extent of Joe’s liability regarding same, Joe would be entitled to the following information, in terms of section 131, read with section 127(5)(b) of the National Credit Act 34 of 2005:
1. The settlement value of the agreement immediately before the sale;
2. The gross amount realised on the sale;
3. The net proceeds of the sale after deducting the credit provider’s permitted default charges and,
4. The amount credited or debited to the consumer’s account.

Any credit provider that sells property, as a result of the consumer’s financial inability to honour the repayment obligations in terms of a credit agreement, or where the property is sold by the credit provider pursuant to the consumer’s voluntary surrender of the property, must provide the consumer with the abovementioned detail and information. This enables the consumer to determine whether the property was sold as soon as practicable for the best price reasonably obtainable.

Further, where this information is not provided or the information provided indicates that the property may not have been sold for the best price, reasonably obtainable, the consumer can may apply to the National Consumer Tribunal to review the disputed sale. If the National Consumer Tribunal is not satisfied that the credit provider sold the goods as soon as reasonably practicable or for the best price reasonably obtainable, the National Consumer Tribunal can order that the credit provider pays the consumer an additional amount exceeding the net proceeds of the sale.

Dereliction and Relegation of Debt Counsellor’s Duties may prove costly for Debt Counsellors…

Dereliction and Relegation of Debt Counsellor’s Duties may prove costly for Debt Counsellors…

In December 2016, three people were ordered to pay R180 000.00 in fines for failing to comply with debt counselling regulations. The fines were imposed by the National Consumer Tribunal (the “NCT”) after it was discovered that the guilty parties had been operating a debt counselling business, but had done so in contravention of compliance with the National Credit Act 34 of 2005 (the “NCA”). [National Credit Regulator v Joy Victoria Minnies, Mark Minnies & Nadeem Williams(NCT/21258/2015/57(1)]
One of the charges included failing to timeously refer debt review matters to court to obtain an order for the debt review arrangement. It is common that debt counsellors do not obtain court orders for their clients, even though they must apply to court within 60 business days of the debt review application being accepted. The adherence to this timeframe is especially important for the consumer as credit providers can terminate the debt review process and take legal action against the consumer if the consumer is in default under a credit agreement that is being reviewed in terms of the debt review process, at any time at least 60 business days after the date on which the consumer applied for debt review (Section 86(10)).
In addition, the National Credit Regulator’s guidelines on fees for debt counselling state:“If a Debt Counsellor fails to submit proposals to Credit Providers or refer the matter to a Tribunal or a Magistrate Court within 60 business days from date of the debt review application the Debt Counsellor has to refund 100% of the fee paid by the consumer (excluding the application fee).”

Other charges included engaging in the services of a debt counsellor without being registered as a debt counsellor and also where registered, allowing other non-registered persons to perform debt counselling duties under the registrant’s NCR debt counselling profile.

The NCT became aware of the above transgressions after a consumer lodged a complaint because her creditors took judgment against her, despite her application to undergo debt review. Her paperwork was bungled by the debt counsellor and the consumer lost the legal protection against her creditors. As a result, she lost her house. The NCT also ruled that the consumer may institute civil damages against the debt counsellor.

BACKGROUND

In terms of section 57(1) of the National Credit Act 34 of 2005, the National Credit Regulator (NCR) applied to the National Consumer Tribunal (NCT) for the deregistration of two debt counsellors, namely the First Respondent, Joy Victoria Minnies, and the Third Respondent, Nadeem Williams.

The NCR’s allegations against the First Respondent, and NCT findings were as follows:

  1. Contravention of section 44(2) of the NCA, that is, engaging in the services of a debt counsellor without being registered at the time the debt counselling services were proffered. The NCT held that the NCA envisages a debt counsellor being actively involved and participating in every aspect of the debt review process. Simple administrative duties such as the receiving and filing of a document need not necessarily be performed by a debt counsellor. However, a debt counsellor must be actively involved in the entire process as a consumer expects to be assisted and advised by a registered debt counsellor throughout the process.
  2. Contravention of section 86(4)(b) read with Regulation 24(5) of the NCA, that is, failing to retain proof of the transmission of the Form 17.1. The Form 17.1 is the notification that the debt counsellor must send to the credit providers and credit bureau in which the latter are notified of the consumer’s debt review application;
  3. Contravention of section 86(7)(c) of the NCA, that is, failing to refer debt review matters to court. In terms of the NCA, the debt counsellor has 60 days within which to finalise the debt review process or the credit provides can terminate the process and take legal action in terms of section 86(10) of the NCA.

The NCR’s initial allegation against the Third Respondent was based on contravention of section 44(2). The NCR later clarified this allegation by stating that the Third Respondent was in fact guilty of allowing other parties to use his signature, name and registration number to process debt review applications. This allegation was upheld as it was noted that no debt counsellor may simply provide his electronic signature, name and registration number to be utilized without him or her being personally involved in every material step of that specific debt review application.

CONCLUSION

This case clearly reinforces the following debt counsellors’ obligations and duties:
  • To timeously lodge and apply to court for a court order or to the NCT for a consent order, once the consumer’s debt review application is successful;
  • To discharge his or her debt counselling tasks and not delegate such tasks to persons not registered to provide debt counselling services;
  • To not allow non-registered persons to use his or her NCR debt counselling registration number or status to assist consumers.