An application was filed with the Western Cape High Court today (8 August) in which the Stellenbosch University Law Clinic, Summit Financial Partners (Summit), and 10 of their clients request judicial intervention relating to debt collection practices. The intervention has the potential to dramatically impact on the South African financial landscape.
The case follows in the wake of the Clinic's earlier work in the 2016 landmark Constitutional Court case of University of Stellenbosch Legal Aid Clinic & others v Minister of Justice and Correctional Services & Others, where the highest court in the country agreed that several practices relating to the abuse of emolument attachment orders, were unconstitutional.
Two years on, the applicants have approached the court regarding what they identify as the unilateral, unregulated manner in which creditors and collection agents add costs, including legal fees, to debtors' accounts both before and after judgement.
As a result of this practice, which they say is in contravention of section 103(5) as read with section 101(1)(b) to (g) of the National Credit Act 34 of 2005, financial experts at Summit have estimated that more than a billion rand has been illegally over deducted from thousands of distressed debtors by unscrupulous credit providers. In the case of just one of these debtors, who is also one of the applicants in this matter, an amount of R5 100 had been collected on an initial debt of R600.
“The fact that 49 respondents, including all the main banks and major lending institutions, have been joined to the application, is indicative of the impact that this case could have on the South African credit market," comments Dr Theo Broodryk, Head of the Law Clinic.