As a consumer you would have applied for debt review if you were struggling financially.

Debt Review or Debt Counselling is governed under laws of the National Credit Act 34 of 2005 which was promulgated in 2007. It has protected consumers ever since from having their assets repossessed.

Your Debt Counsellor would have made application to court confirming that you were over indebted. The Debt Counsellor would have obtained a Court Order which granted you legal protection during the review process until payment of the final instalment. Once a consumer has settled all debt in full, he/she will be issued with a Clearance Certificate by the Debt Counsellor. Once the certificate is issued, all credit bureaus and credit providers will be notified that you are no longer under debt review and you will be able to purchase on credit again. Remember to be wise, make informed decisions especially when you transact and enter into any credit agreement. Do you really need that item?

It often happens that a consumer is over-indebted and applies for debt review. They later find that their financial circumstances have changed due to a dramatic increase in their salary and they are now able to service their original monthly debt obligations. They would have a prima facie case for cancelling their debt review. A formal consult with the consumer will establish whether there are merits to their case. You should only consider coming out of debt review if you are able to manage payments comfortably again or if you have settled all your debt. Another reason could be where there is only one long term agreement remaining such as a home loan. Once all other debts are settled, the consumer should be able to exit from Debt Counselling and pay the bond directly with the credit provider. Before the withdrawal guidelines were implemented, a consumer could simply be removed from debt review by requesting his debt counsellor to issue a 17.4 Form. This is no longer the case and formal processes must be followed in certain instances in order to be removed from Debt Review. If the Debt Counsellor did not issue a 17.2 Form you will be able to be removed from Debt Review without the need to approach an attorney for assistance.

The Withdrawal Guidelines which are listed below stipulate when Debt Review may be cancelled:

WITHDRAWAL GUIDELINES – 002/2015 – (NCR)

INTRODUCTION

The National Credit Act (“the Act”) introduced debt review as a debt relief measure for over-indebted consumers. This is a statutory process which is only conducted by registered debt counsellors.

The process to withdraw or terminate debt review by the consumer or debt counsellor is not

specified in the Act; however the credit industry has in the past years developed a voluntary

withdrawal process and a Form 17.4 to facilitate the withdrawal process either by a consumer or DC.

The application of this voluntary withdrawal process was overturned by the judgment granted

in the case of Rougier v Nedbank which provided clarity on whether a debt counsellor has the

statutory power to withdraw or terminate debt review. In terms of this judgment any act by

a debt counsellor to terminate or withdraw debt review is beyond the statutory powers of a

debt counsellor as espoused in the Act, therefore the conduct is prohibited.

Following an intensive review process of this judgment and its impact by the Credit Industry

Forum(CIF), the NCR is pleased to announce that the paper developed by the CIF has been

signed off and is issued as guidelines to be applied by all industry participants effective immediately.

These guidelines replace the use of Form 17.4.

Please take note that amendments to the Act, its regulations or case law supersede provisions made

in these guidelines and will when necessary be amended.

COMPLIANCE

Credit Providers, Credit Bureaus and Debt Counsellors are requested to comply by consistently

applying these guidelines. Non-compliance with these guidelines should be reported to the NCR.

GUIDELINES

1. WHEN CAN A CONSUMER EXIT DEBT REVIEW PROCESS?

• Section 71(2)(b)(i) of the Act initially made provision for consumers to only exit debt review

through issuance of a clearance certificate after they have paid all their re-arranged debts

in full. The effect of this provision is that in instances where a home loan formed part of the

debt review application, consumers have to remain under debt review for the duration of the

home loan term even after settling re-arranged short term debts. This provision will however

change upon proclamation of the National Credit Amendment Act (NCAA) under section 71(1)

as follows:

(1) A Consumer whose debts have been re-arranged in terms of Part D of this Chapter must be issued with a Clearance Certificate by a Debt Counsellor within seven days after the Consumer has –

(a) Satisfied all the obligations under every credit agreement that was subject to that debt

re-arrangement order or agreement in accordance with that order or arrangement; or

(b) Demonstrated:

(i) financial ability to satisfy the future obligations in terms of the re-arrangement order or

agreement under-

(aa) a mortgage agreement which secures a credit agreement for the purchase or improvement of

immovable property; or

(bb) any long term agreement as may be prescribed;

(ii) that there are no arrears on the re-arrangement contemplated in subparagraph (i);

and

(iii) that all obligations under every credit agreement included in the re-arrangement order or

agreement other than those contemplated in subparagraph (i), have been settled in full.

2. CAN A DEBT COUNSELLOR TERMINATE OR WITHDRAW THE DEBT REVIEW PROCESS?

• NO. A debt counsellor does not have statutory powers to terminate or withdraw the debt review

process. This means that a debt counsellor can no longer issue Form 17.4 and update DHS with

status G (Voluntary withdrawal by consumer) or H (Withdrawal by a debt counsellor). There is

however varied ways in which a consumer can be withdrawn from debt review which will be

set out below.

3. CAN A CONSUMER WITHDRAW FROM DEBT REVIEW PROCESS ONCE A DEBT REVIEW

COURT ORDER HAS BEEN OBTAINED?

• Once a debt review court order has been obtained a consumer cannot terminate or withdraw

the debt review process, they can however approach the court to rescind the order or apply for

an order which declares that the consumer is no longer over-indebted.

• Upon receipt of the order, a debt counsellor will notify the credit providers of the withdrawal by

means of Form 17.W and update DHS with status G.

4. CAN A CONSUMER WITHDRAW OR TERMINATE DEBT REVIEW PROCESS PRIOR TO

OBTAINING DEBT REVIEW COURT ORDER?

• Consumers can only withdraw or terminate the debt review process prior to declaration of overindebtedness as per section 86(7) of the Act and issuance of Form 17.2 subject to payment of

debt counselling fees as per NCR Debt Counselling Fee Guidelines.

• If a determination is made and no court order is in place, the consumer will remain under debt

review.

• A debt counsellor will notify the credit providers of the withdrawal by means of Form 17.W and

update DHS with status G.

5. CAN A DEBT COUNSELLOR SUSPEND HIS/HER SERVICE FROM A CONSUMER UNDER

DEBT REVIEW PROCESS?

5.1 Where section 86(7) determination is made and the consumer is not co-operating

• Where a consumer is not co-operating with the debt counsellor (e.g. not providing relevant

information or proof, non payment of debt counselling fees, etc) and a determination in terms

of section 86(7) of the Act is made, a debt counsellor can suspend provision of his/her service

to the consumer.

• Prior to suspension of the service, a debt counsellor will notify the consumer of the intended

suspension of service, the consequences and allow the consumer 10 business days to remedy

the situation.

• Debt counsellor to remain the debt counsellor on record for the consumer.

The following information should be included in the notice of intended suspension to the

consumer:

i. Notice of pending service suspension and the reasons thereof;

ii. Consequences of non co-operation(e.g. risk of termination by credit providers, inability to

apply for further credit , consumer is still under debt review, no withdrawal request to be

processed, etc) ;

iii. Option to remedy the situation within 10 working days;

iv. If no response is received and the situation has not changed, consumers and credit

providers should be notified of the suspension of service by means of Form 17.W.

5.2 Where a consumer has elected to make direct payments to credit providers

• In terms of the NCAA, a consumer has a right to make direct payments to credit providers and

not make use of the services of a Payment Distribution Agent (PDA).

• Election by consumers to make direct payments to credit providers cannot be construed as non

co-operation and should not be used as a reason for suspension of debt counselling services.

The following information relating to election to make direct payments should be included in

the Form 16 signed by the consumer when they apply for debt review:

i. Consumer remains responsible to make all payments as re-arranged, in full and on time.

ii. Proof of payments must be sent to the debt counsellor on a monthly basis for record

keeping and to enable provision of after care service as a consumer cannot be under debt

review without a debt counsellor.

Guidelines for the Withdrawal from Debt Review

iii. Consequences of making short or late payments(e.g. risk of termination by credit providers)

iv. Debt counselling fees are payable to a debt counsellor for services rendered and this

includes payment of aftercare fees.

v. For a debt counsellor to issue a clearance certificate, all after care fees must be up to date.

Where the debt counsellor has suspended provision of service, a consumer must provide

proof of settlement letters from credit providers for a debt counsellor to issue a clearance

certificate.

6. CAN A CONSUMER BE TRANSFERRED TO ANOTHER DEBT COUNSELLOR?

• A consumer under debt review may be transferred to another debt counsellor subject to

payment of all debt counselling fees where it has been established that the previous debt

counsellor followed the correct process.

• Form 17.7 should be used to facilitate this process.

CONCLUSION

All debt counsellors are requested to disclose this information upfront and in writing to consumers

to ensure that they are fully aware of the implications of being under debt review.

If you are unsure about whether you can cancel your Debt Review, you may call one of our attorneys for who will be able to assist you .

Posted in Legal Resources

The “Cooling Off” Period

Published 3rd August 2016 | By Resham Sibran

A “cooling off” period gives a Purchaser the right to unilaterally cancel a sale agreement.

This stems from Section 29A of the Alienation of Land Act 68 of 1981, as well as the Consumer Protection Act 68 of 2008. Under the Alienation of Land Act, the purchase price dictates whether the period applies, and under the Consumer Protection Act, any direct marketing dictates whether the period applies.

The cooling off period under the Alienation of Land Act, currently applies to properties which are sold for a value of R250 000-00 or less.

This cooling off period was legislated in order to protect Purchasers who require statutory protection. This protection only applies to residential property sales where the purchase price is R250 000-00 or less, and the purchaser is a natural person.

Commercial, industrial and agricultural properties are excluded from the application of the cooling off period. In addition, a company, close corporation and a trust is excluded from the protection afforded by the cooling off period. These categories relate to persons who can reasonably be expected to understand the nature of the transaction and if not, to obtain legal advice before entering into the transaction.

A further exclusion applies when the same Purchaser and the same Seller enter into a new sale agreement, in respect of the same land and on the same terms as previously contracted into between the parties. Therefore any Purchaser who signs a sale agreement for a piece of land, is protected by the cooling off period once only, and will not be afforded the benefit the second time around. In practice this would apply to all sales, where the cooling off was applied and the sale cancelled, or when a sale falls for any reason, and the Purchaser enters into a new sale agreement for the same property on the same terms.

Lesser known exclusions apply as well. If a Purchaser reserves the right to nominate or appoint another person to take over his/her responsibilities and rights under a contract, then no cooling off period will apply. The cooling off period will further not apply in the event that an option was exercised, which option was open for exercise for a period of at least 5 days.

Under the Alienation of Land Act, a Purchaser may not waiver or relinquish the right afforded by the cooling off period, and any deposits or fees paid must be refunded within 10 days of termination of the contract. No damages are payable, and all penalties and fees are void from operation regardless of agreements to the contrary.

The cooling off period, if relied upon requires that the Purchaser give written notice to the Seller or his/her agent within 5 days of entering into the agreement. The days are calculated by excluding the day the contract was entered into, as well as excluding weekends and public holidays. Important note must be made to “offers to purchase” which do not constitute a binding sale agreement until accepted by the Seller. In all cases of offers to purchase, the 5 day period runs after the contract becomes valid and binding i.e. date of signature by the Seller.

In the event of a Purchaser entering into a further sale agreement or signs an offer for another property, the first offer or sale agreement will be automatically revoked and cancelled. Written notice must be given to the Seller of the first agreement in such an event. Failure to do so is an offence under S29A, and may result upon conviction to a fine or to imprisonment or to both a fine and imprisonment. The notice need not be delivered if the purchaser intends to purchase both properties.

A further cooling off period applies under the Consumer Protection Act, and it is important to note that this cooling off applies only when a transaction is the result of direct marketing. Marketing directly by person to person, by mail, email or sms will result in the cooling off period being applied. Under these circumstances the purchaser may rescind/ cancel the agreement within 5 days after the agreement was concluded, regardless of the purchase price.