Stel­len­bosch Uni­ver­sity’s Law Clinic wants the high court to rule on al­low­able debt col­lec­tion fees

The Star Early Edition - - NEWS -

IT’S ES­TI­MATED more than R1 bil­lion rand has been il­le­gally over-de­ducted from thou­sands of dis­tressed debtors by un­scrupu­lous credit providers.

On Wed­nes­day, Stel­len­bosch Law Clinic filed an ap­pli­ca­tion in the Western Cape High Court, seek­ing ju­di­cial in­ter­ven­tion on the man­ner in which debt is col­lected. It be­lieves debt col­lec­tion needs to be reg­u­lated and that costs must be capped.

The clinic is joined by Sum­mit Fi­nan­cial Part­ners in rep­re­sent­ing 10 of their clients. All the ma­jor role play­ers in the credit in­dus­try are in­volved, with 49 re­spon­dents, in­clud­ing all the ma­jor banks, the lend­ing in­sti­tu­tions, the min­is­ters of Jus­tice and Trade and In­dus­try, and the Na­tional Credit Reg­u­la­tor.

Stephan van der Merwe, se­nior at­tor­ney at the uni­ver­sity’s Law Clinic, says there’s wide­spread abuse in the in­dus­try.

“We have a lot of sit­u­a­tions where peo­ple have been gar­nished with emol­u­ment at­tach­ment or­ders against their salaries. When you sit down and look at it you find amounts in ex­cess of five, six, seven times the prin­ci­pal debt and they’re ex­pected to con­tinue mak­ing pay­ments on it,” he says.

In one case, a client was granted an ini­tial loan of R600, but had paid back more than R5 000 – about eight times the ini­tial loan amount. In an­other, a farm labourer, earn­ing R2 000 a month, has R970 gar­nished from his monthly salary. Back in 2011, he was given a loan of R16 000 and has re­paid in ex­cess of R31 500 – yet the cred­i­tor al­leges he owes R37 000.

Van der Merwe says the rea­son they get away with it is be­cause there are no rules that the costs levied against the debtor are taxed.

“What you have is the cred­i­tors go­ing to their at­tor­neys or their col­lec­tion agents and telling them to col­lect on the debt but the charges are borne by the debtor.

“This is why the debtors end up pay­ing these astro­nom­i­cal amounts for small loans, be­cause the at­tor­ney and col­lec­tion agency fees are dumped on them.”

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