The application of the National Credit Act 34 of 2005 within debt relief industry

Abstract

The purpose of this study is to evaluate, within the practical arena, how debt counselling industry guidelines, being the Task Team Agreements and the Court Application Guidelines, challenge the application and interpretation of the National Credit Act 34 of 2005 (the NCA), in respect of the debt review process by leading to impractical application. The study achieves this purpose by discussing select challenges under two objectives to evaluate possible solutions to these challenges. The first objective is to discuss select factors that a debt counsellor must consider in determining overindebtedness. The finding of over-indebtedness is evaluated with consideration of the concept “financial means, prospects and obligations” as described in sections 78 and 79 of the NCA. The interpretation thereof is done with specific reference to the realisation of assets, consideration of household income, and the proposed consumer budget. These challenges demonstrate how opposing views and impractical expectations regarding “financial means, prospects and obligations” delay the court process in debt reviews. The second objective of the study is to discuss select factors that magistrates should consider in determining whether the re-arrangement proposal of a debt counsellor is fair. The select factors discussed are: interest rate concessions, repayment term concessions, the application of the in duplum-rule to debt restructuring proposals, and the ordering of a reckless credit investigation by a magistrate. The challenges discussed under the two aforementioned objectives demonstrate how the interpretational uncertainties with regard to the select factors challenge the finalisation of the debt review court process. The study concludes with recommendations on how these interpretational uncertainties can be resolved.