A creditor’s obligations in terms of Section 129 of the NCA

Creditor provider’s obligation in terms of Section 129 read with Section 130 of the National Credit Act 34 of 2005, with reference to Kubyana v Standard Bank of South Africa Limited (CCT65/13) [2014] ZACC 1

The Constitutional Court handed down judgement outlining and highlighting the creditor’s obligation in terms of section 129 of the National Credit Act as follows:

A credit provider wishing to enforce a credit agreement must deliver a notice to the consumer setting out the consumer’s default and drawing the consumer’s attention to his or her rights.

In addition to compliance with section 129, the creditor must fulfil further requirements in terms of section 130 of the Act, before commencing legal proceedings by ensuring that the consumer is in default and has been in default for at least 20 days and (a) at least 10 days has lapsed since the creditor delivered the notice and (b) in terms of section 129(1) the consumer has not responded to the notice or (c) has responded to the notice by rejecting the credit provider’s proposal.

When a consumer has elected to receive notices by way of post, a credit provider must prove (i) dispatch of the notice by way of a registered mail, (ii) the notice reached the correct branch of the Post office, and (iii) that the notification from the Post Office requesting that the consumer collect the section 129 notice was sent to the chosen address.

In the aforementioned case the Appellant, Mr Kubyana and the Respondent, Standard Bank South Africa Limited entered into an instalment sale agreement for a purchase of a vehicle. The appellant failed to make regular payments and fell into arrears. In 2010 the Respondent sent a notice in terms of section 129 of the act to the appellant. The notice was sent by registered post to the branch of the Post office which the appellant had chosen. Although two notifications were sent to his home requesting that he collect his registered mail, he failed to do so. Five weeks later the notice was returned to the Respondent uncollected.

The respondent approached the court to enforce the debt and the Constitutional Court upheld the decision of the High Court which was in favour of the Respondent and held that it had taken the reasonable steps as contemplated in section 129 of the Act and has discharged its obligations as required by the Act.

It further held that the Act does not allow consumers to frustrate the delivery of the section 129 notice by ignoring notices from the Post Office. It further noted that it need not have to establish that a consumer knew of his or her options as contemplated in the Act before a credit agreement is enforced against them. It is the duty of the consumer to show why their attention was not drawn to the available recourse(s).

Socio Ecomonic Right Institute (SERI) who were admitted as Amicus Currie, argued that the court was flawed when it discharged itself from the duties to establish whether on the probabilities, the section 129 notice had reached the distressed consumer and they were notified of the available mechanisms. According to the institute, the judgement suggests that: “ a distressed consumer who fails to collect his or her registered mail acts unreasonably and “eschew(s)” reliance on the consensual dispute resolution mechanism provided for by the National Credit Act”.

The institute further went to say that the judgement fails to take into cognisance the “uneven distribution of postal services across South Africa and the mobility of the South African poor and does nothing to protect the distressed consumer who have fallen into arrears on their credit agreement and who are genuinely in need of debt counselling and other alternative dispute resolution mechanism (s)”.

This case has since provoked the amendment of the National Credit Act Amendment Act 19 of 2014, which allows the section 129 to be served by registered post or by hand to an adult person at an address nominated by the consumer. The consumer gets to decide the manner of service.

Special execution of a debtor’s primary residence; Court confirms position in Standard Bank of South Africa Ltd v Hendricks and Another

Mortgage bonds are those loans secured by the major financial institutions in assisting one to purchase property. The purchaser then has the obligation to ensure repayment of the bond on each and every month thereof. Failure to do so will regard in the securing bank applying for foreclosure.

It was explained in the Standard Bank of South Africa Ltd v Hendricks and Another and Related Cases 2019 (2) SA 620 (WCC), [2019 ALL SA (WCC) case it was explained that foreclosure by a financial institution was regarded as the application for the money judgment and an order of special execution against the immovable property which was mortgaged to secure the loan and which is the primary residence of the judgement debtor must be intrinsically connected and must be brought in the same proceeding and not in separate applications.

It is also extremely important to note that the application must be served personally on the debtor unless the court orders otherwise.

The importance of the above is in order to ensure that the debtor has sufficient knowledge of the proceedings as this, in turn, affects his status.

The application for the money judgment may be postponed together with the application for an order of special execution against the property which is the residence of the judgment debtor. This is in order to effect the above rule which indicates that these two applications may not be conducted separately as they are intrinsically linked to one another and therefore engage a debtor’s Section 26 Constitutional right.

Section 26 of the Constitution grants and guarantees the right of access to adequate housing. With the court in Jafta v Schoeman and Others, Van Rooyen and Others 2005 (2) SA 140 (CC) it was held that “relative to homelessness, to have a home one calls one’s own, even under the most basic circumstances, can be a most empowering and dignifying hum experience”.

Section 26 (3) states that no one is to e evited from their home “without an order of court made after considering all relevant circumstances such as:

  1. Whether Rule 46A introduces substantive legal requirements for obtaining an order for the execution of judgments in mortgage contracts,
  2. Whether to grant judgment for the accelerated full outstanding balance and then postpone the application to declare the property secured by the bind specially executable given the impact on the costs and the potential for attachment and execution of movables,
  3. The circumstances to grant money judgment,
  4. Whether the court has the discretion to decline to grant a default money judgment,
  5. Whether the postponement of the application for the money judgment is object able or desirable,
  6. Whether the court has a discretion, when postponing an application for executability, to afford the mortgagor an opportunity to remedy the default,

The full bench on the Standard Bank case required personal service on the debtor of the notice of a motion for a judgment sounding in money and an order of executability, required that more should be said on the attempt to achieve personal service than simply a reference by the Sheriff to the fact that the debtor was not present or could not be found at the premises. Such personal service could include service at the debtor’s workplace or at their home over the weekend.