The effect of Rougier v Nedbank on the termination of Debt Review

The effect of Rougier v Nedbank

The National Credit Act 34 of 2005 essentially gives a consumer the right to apply to a debt counsellor for debt review if he is of the opinion that he is over-indebted. This right is entrenched in section 86(1) and gives a consumer an opportunity for debt rearrangement. The aforesaid cannot be deprived or limited by the debt counsellor.

In Rougier v Nedbank Ltd 27333/2010 (South Gauteng High Court) the consumer applied for debt review in terms of section 86(1) of the National Credit Act. However, the debt counsellor subsequently withdrew the consumer’s debt review application apparently due to the consumer’s lack of cooperation. The presiding judge in the aforesaid case, namely Justice Nobanda noted that in terms of section 86(6) of the National Credit Act, the debt counsellor , after accepting the consumer’s debt review application must determine:

Whether the consumer appears to be over-indebted and
If the consumer seeks a declaration of reckless credit, whether any of the consumer’s agreements appear to be reckless.

In determining the above, it was held that section 86(7) provides for only 3 possible findings which include:

The consumer is not over-indebted and the debt review application is rejected;
The consumer is not over-indebted but might experience difficulties in paying his debts and the debt counsellor recommends a voluntary debt re-arrangement plan between the consumer and the credit provider;
The consumer is over-indebted and the debt counsellor may issue a proposal to the Magistrates Court recommending certain orders to be granted.

Justice Nobanda pointed out that the debt counsellor fulfils a statutory function and thus, the above are in fact the debt cousellors statutory duties. Further, it was noted that the debt counsellor’s powers in dealing with a section 86(1) application are limited and are as set out above. In addition, the court pointed out that there is no provision in the National Credit Act that empowers the debt counsellor to “withdraw” the debt review instituted by the consumer in terms of the provisions of section 86(1) and when the debt counsellor purports to do so, the debt counsellor acts ultra vires.

The above case is significant in that it clearly defines and reiterates the provisions in the National Credit Act that deal with the consumer’s right to apply for debt review and the corresponding duties of the debt counsellor in upholding the consumer’s right. This case does not look at the consumer’s right to exit debt review or the grounds or terms thereof on which a consumer can exit or terminate the debt review process, but rather the debt counsellor’s “right” to terminate the debt review application once the consumer has applied for debt review and the debt counsellor is yet to make a finding in terms of section 86(7).