Rules for Registered Credit Providers in South Africa

This article outlines the Latest Debt Review Process Rules for Credit Providers based on the latest task team agreements.

Rules for Registered Credit Providers

• Within 5 business days of receiving Form 17.1, the Credit Provider is required to provide a Certificate of Balance (COB) in the standardized format and include on or attached to the COB consent to receive notice of delivery of notices and legal documentation by fax or email.
• Upon receipt of the debt re-arrangement proposal that meets the requirements of the Act and debit order and stop payment cancellation instructions, the Credit Provider should:

a) Cancel all debit orders and salary deductions in respect of the debt repayments
subject to the debt review (as required by law); and
b) Refrain from applying set-off against credit balances or salary and other credits to
the consumer’s bank account.

• Within 10 business days of receiving the Form 17.2 accompanied by the Affordability Assessment summary and a debt re-arrangement proposal, the Credit Provider should, in writing (Which could include an agreement to reflect the terms and conditions):

a) Accept the debt re-arrangement proposal if it meets the minimum requirements
of the Debt Restructuring Guidelines and implement the restructured terms of the
agreement in accordance with the debt re-arrangement proposal on their systems,
or
b) Reject the debt re-arrangement proposal, give notice of the intention to legally
oppose it and provide written reasons for having rejected it.

Termination of Debt Review by Credit Providers

Credit Providers should not terminate debt reviews where:

a) The 17.2 notice has been received; and
b) An Affordability Assessment summary and debt re-arrangement proposal meeting
the minimum debt restructuring guidelines has been submitted to Credit Providers
as set out above; and
c) The consumer is maintaining repayments, including mandatory payments, that
are in line with the debt re-arrangement proposal submitted to Credit Providers
and that meet the minimum requirements of the Debt Restructuring Guidelines;
and
d) The consumer does not breach any other material provisions of the credit
agreement

• Credit Providers should take reasonable steps to verify whether payment in accordance with the debt re-arrangement proposal have been made before terminating debt review and instituting collection action. This includes obtaining written verification with the PDA and Debt Counsellor that payments have been made.
• Credit Providers should terminate debt reviews and institute collection action where:

(a) The consumer is in default and no 17.2 notice and debt re-arrangement proposal
is received from the DC within 60 business days after the date on which the
consumer applied for the debt review; or

(b) The consumer is in default, no repayments that are in line with the debt
re-arrangement proposal submitted to Credit Providers and meet the minimum
requirements of the Debt Restructuring Guidelines are received and reasonable
steps have been taken to verify from the relevant PDA and Debt Counsellor that no
or insufficient payments have been made by the consumer; and/or;

(c) The consumer is in default of the credit agreement in a respect other than
payment default, such as a default on maintaining the payment of credit-linked
insurance premiums.

• The Credit Provider should:

a) Limit the number of matters contested through the Courts by opposing only on
material grounds (such as prejudicial non-compliance with the law or debt
re-arrangement proposals that are unreasonable or unduly prejudicial to the Credit
Providers);

b) Ensure the mandates issued to their attorneys reflect this guideline.

Suggested conduct by Credit Providers

We suggest that credit providers who do not already do so should conduct
themselves in the following fashion and that these provisions be incorporated into
the section 48 code of conduct to combat over-indebtedness to the extent not
already covered:

• Credit Providers should improve the administrative co-operation with debt counsellors in order to speed up the finalization of proposals, by issuing specific policies and procedures in this regard.
• Credit Providers should implement formal policies on compliance with debt review provisions in the Act as well as any process and/or debt restructuring rules adopted under a section 48 code to combat over-indebtedness.
• Credit Providers should implement effective policies and procedures on the cancellation of existing debt orders and stop orders on the duly authorized instruction of the consumer.
• Credit Providers should proceed to termination and legal enforcement action when legally justified and in line with the provisions of the Act as well as any process and/or debt restructuring rules adopted under a section 48 code to combat over indebtedness.
• Credit Providers should formalize the mandates of external law firms which deal with debt counseling applications on behalf of the credit provider in order to ensure that matters are to be opposed only on material procedural and/or substantive grounds.
• Credit Providers must have a central unit/point of contact with an appropriate mandate to manage the engagement with a particular client who has applied for debt review via the appointed Debt Counselor.
• Credit Providers must establish formal policies on the trade-off of competing claims between different products in line with national debt re-arrangement guidelines issued by the NCR (in terms of the Act) as well as any industry agreed debt re-arrangement rules under a section 48 code.