PARLIAMENTARY PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY
Dear Sirs/Madam
Re: SUBMISSIONS TO PARLIAMENTARY PORTFOLIO COMMITTEE OF TRADE AND INDUSTRY
NATIONAL CREDIT AMENDMENT BILL [B – 47B] 2013
1. NEW CLAUSE: REVISION OF GOVERNANCE STRUCTURES
It is not certain why the governance of the National Credit Regulator, as provided for Section 19 of the NCA, requires alteration.
2. NEW CLAUSE: CRIMINAL OFFENCE WHERE PROHIBITED CHARGES ARE CHARGED BY CREDIT PROVIDER
Is a criminal sanction appropriate in the circumstances? This is contrary to the current compliance framework under the NCA which provides for compliance notices to be issued first for non-compliance with the NCA. On what legal or other basis is this being advocated? Does the “harm” that the legislation wishes to address warrant a criminal sanction? On what basis will this process be administered and what “checks” and “balances” including appeal process will be available to ensure the rights of all stakeholders are taken into account under law? The remedy under law should be appropriate and proportional to the harm being guarded against.
3. NEW CLAUSE: CAPPING / REGULATING COST OF CREDIT INSURANCE
Supply and demand (economic forces) should determine cost of credit insurance not legislation. Does the Parliamentary Committee of DTI have authority to make legislation in respect of the insurance industry? The Financial Services Board and legislation relating to financial services and products falls under the auspices of the Department of Finance and Minster of Finance and not the Department of Trade and Industry.
4. CLAUSE 20: ALIGNMENT OF THE DELIVERY OF SECTION 129(1) NOTICE TO CASE LAW
THE CASE LAW CONSIDERED
The Parliamentary Committee has provided no indication as to the wording or the impact envisaged by the intended alignment of the National Credit Act with the outcome of the Sebola and Another v Standard Bank of South Africa Ltd and Another-decision supra. Commentary on this issue is therefore open to interpretation of what the Parliamentary Committee’s intention ‘might’ be, relating thereto.
“Notice” and the true meaning of the word in terms of Section 129 of the National Credit Act (“NCA”) has long since its promulgation been a point of contentious and continuous litigation.
As Cameron J points out in the judgement Sebola and Another v Standard Bank of South Africa Ltd and Another (CCT 98/11) [2012] ZACC 11; 2012 (5) SA 142 (CC); 2012 (8) BCLR 785 (CC) (7 June 2012) [34]:-
“…The meaning this Court assigns to the statutory provisions will have significant practical impact.16 There has been uncertainty for some years about their meaning, with conflicting first-instance decisions. The Supreme Court of Appeal in Rossouw settled those disputes, but it did not have the benefit, as we have had, of argument specifically on the constitutional impact of the various interpretations. Nor did it have the benefit of the three amici. Their contrasting arguments greatly enriched the debate about the statute. Moreover, as the Sebolas’ challenge demonstrates, the resolution Rossouw reached is controversial. That emerges too from the wide-ranging submissions made to us. It is desirable in the interests of certainty that this Court decide the appeal.”[1]
Section 129 does not in its current form refer anywhere to the word “delivery”, but merely requires “notice”. Section 130 of the NCA, however contains the word delivery, which relates not only to notice in terms of Section 129 but also to notice in terms of Section 86(9) of the NCA.
The Constitutional Court presented sound argument as to why these two sections should not be read in isolation. Cameron J presented the following:
“First, it is impossible to establish what a credit provider is obliged and permitted to do without reading both provisions. Thus, while section 129(1)(b) appears to prohibit the commencement of legal proceedings altogether (“may not commence”), section 130 makes it clear that where action is instituted without prior notice, the action is not void.
Far from it. The proceedings have life, but a court “must” adjourn the matter, and make an appropriate order requiring the credit provider to complete specified steps before resuming the matter. The bar on proceedings is thus not absolute, but only dilatory. The absence of notice leads to a pause, not to nullity. But to deduce this, it is necessary to read section 129 in the light of section 130. Section 129 prescribes what a credit provider must prove (notice as contemplated) before judgment can be obtained, while section 130 sets out how this can be proved (by delivery).”[2]
The purposeful omission of the word “delivery” from the constructs of Section 129 cannot and should not be overlooked. The Constitutional Court’s criticism of the fact that the regulations promulgated under the NCA, had failed in its attempts to address the issue of delivery in terms of Section 130[3] should also not be overlooked.
The Court however, in accordance with sound principles of Interpretation of Statue, applied an approach which gave consideration to the NCA as a whole, and more specifically to the contents of section 65(1) and (2), section 96 and section 168.
There can be little doubt to the careful balance that the Constitutional Court had applied in its interpretation and subsequent decision on delivery of the Section 129 notice. The intended amendment is therefore ill-conceived as clarity on the issue of delivery of the 129(1) notice has clearly been considered and will be regulated through the decision aforementioned.
A further question as to the intended alignment of wording of Section 129 with the Sebola decision arises: Would the resultant alignment require “delivery” or actual physical “receipt” of notice as contemplate in Section 129? The court dealt with at least three different opinions on what would constitute notice in terms of Section 129(1)(a):
“SERI sought an order declaring that section 129(1)(a) “requires that the notice issued in its terms comes to the attention of the consumer”[4].
“The NCR argued that the notice should come to the consumer’s attention “insofar as possible”[5].
“The Bank and BASA supported Rossouw. They contended that, read together, sections 129 and 130 require the credit provider to prove only “delivery”, and for this proof of despatch of the notice (and not receipt at the consumer’s address, nor delivery to the post office in question) would be sufficient.”[6]
Delivery in its purest form is described as: “the action of delivering letters, parcels, or goods” and furthermore, “an item or items delivered on a particular occasion”[7].
From the aforementioned it is clear that the delivery of a Section 129(1) does contain an element of delivery as well as receipt, but personal receipt is not required. Any contention or intended outcome focussed on the actual receipt of a 129 notice will result in an untenable situation. Debtors will have a clear defence to any form of legal action unless physical delivery has been proven, resulting in exorbitant costs run up through legal process. The capping of fees in the process of collecting debts will further adversely affect the creditor who now has to establish physical delivery with no basis for recovery of costs. Such a manifestation in our law will result in legitimacy and legality issues that have to be considered in far more detail.
The aforementioned decision is clear. Delivery as contemplated in terms of Section 130 dictates that the 129 letter of demand must be sent via registered postage accompanied by a track and trace proof obtained from the South African postal service for purposes of proving delivery of the 129 notice to the address chosen by the consumer. Actual collection from the post office is not a requirement.[8]
The practical implication of including words like “delivery” into Section 129 will not only result in additional litigation and further legal uncertainty, but will surely have unintended consequences including an impact on the application of Section 130(4)(b)(i) and (ii) notwithstanding the fact that other forms of delivery other than the process of delivery via registered postage has been acknowledged to exist.
Therefore it must be contended that there exists no basis for the inclusion of the word “delivery” into the wording of Section 129, nor for the alignment of the NCA with the outcome of the Sebola-judgment, especially since the Constitutional Court’s ruling on this issue has left no room for error or interpretation to the application of the word “notice” as contained in Section 129(1)(a) of the NCA.
OUR RECOMMENDATION / SUGGESTION GOING FORWARD
It is therefore our recommendation that since the common law through the Sebola judgment will govern this issue there is no need for the legislature to codify this in the NCA.
5. NEW CLAUSE: PROVIDING FOR OFFENCE TO COLLECT, SELL OR RE-ACTIVATE PRESCRIBED DEBT
PREAMBLE
From the outset we register our surprise as to the inclusion of this clause. For all intent and purposes current law (the Prescription Act in its entirety together with applicable case law) is more than adequate in terms of dealing with the concept of prescription. Furthermore, should there be any concern of abuse the current laws together with powers already vested with regulatory bodies are sufficient to deal with contravening parties – is this an instance of changes to law being proposed when simply put the existing laws are not being enforced?
If one is to have a common sense perspective, a starting point would be on whether or not to accept the principle that if a person borrows money they then have an obligation to repay it. If that principle is acceptable to society then the only reason why the debt is not repaid (and the logical process thereafter) is:
· There is mal-intent on the part of the borrower and they either never intended to repay the money or choose to apply their available resources to other means in priority to their obligation to repay debt. In these instances current law allows for adequate mechanisms for the lender to pursue and recover the debt owed. Deceitful behaviour on the part of the borrower in terms of evading the attentions of the lender will not enable them to escape their obligation.
· There is recklessness on the part of the lender and they should have been aware that the borrower had no possibility to ever have the means to repay the debt. Current law adequately deals with the consequences for the lender in these circumstances.
· Finally, those who wish to repay their debt but cannot at that point in time (perhaps due to an unforeseen event such as loss of employment or other source of income; increased cost of living or some event that diverted resources). Common sense is that the lender and borrower come to a form of arrangement then or at any future point in time to settle, whether that be within the ambit of a legal process or not. Abuse is currently well avoided by current law in terms of both excessive interest and fees being raised or should the borrower wish to exercise the right to raise prescription as a defence. This compels the lender to then follow a legal course of action. Both parties can then present their case and the court will decide on the facts and merits of that specific case. Should the lender ignore the borrower wish to raise prescription and continue to demand payment without recourse to the courts the existing regulatory bodies (NCR, Debt Council or Law Society) have powers to intervene re what would be considered harassment.
So again we say; why the need for change and the insertion of this clause? We are not aware of any research or facts that give rise to inclusion of this proposed amendment. We have set out below arguments concerning the flaws in the process being undertaken, technical challenges, practical considerations and the likely impact as a result of the proposed amendments. As we believe them to be considerable it is also of surprise and noteworthy that only a mere few days have been allocated for consideration of a complex issue and submission of commentary.
PARLIAMENTARY PROCESS & STAKEHOLDER PARTICIPATION
Reference in the “Call for Further Input on the National Credit Amendment Bill, B47-2013” is made to “these issues that arose from the first public involvement process on the National Credit Amendment Bill, B47 – 2013”. In fact, neither Government Gazette No. 3650 date 29 May 2013 relating to the invitation for the public to comment on the Draft National Credit Act Policy Review Framework, 2013 nor Government Gazette No. 36505 dated 29 May 2013 relating to the invitation for the public to comment on the Draft National Credit Amendment Bill, 2103 and nor the Bill, B47 – 2013 itself, make any reference to prescription or the collection, sale or re-activation of prescribed debt. The Parliamentary Committee should refrain from introducing this amendment until proper consultation with all relevant stakeholders has been conducted. Stakeholders and the public at large should be afforded sufficient time to consider this issue and provide informed feedback and input.
Fundamental Constitutional rights, such as the audio alteram partem rule, are therefore being infringed which not only taints the legitimacy of the process around these proposed amendments but calls into question the motivation behind not affording relevant stakeholders an opportunity to participate fully in the process. Remedies under RSA Constitutional Law and Administrative Law may need to be applied.
Further to this, the Prescription Act falls under the auspices of the Department of Justice and the Minister of Justice. It therefore appears that the Department of Trade and Industry is attempting to broaden its scope of authority beyond its mandate.