Clear mes­sage to credit providers

The Citizen (KZN) - - Opinion -

Over-in­debted con­sumers recorded a huge vic­tory for the “lit­tle guys” when the Western Cape High Court in Cape Town last week ruled credit providers were in con­tra­ven­tion of the Na­tional Credit Act (NCA) for over­charg­ing on le­gal fees and in­ter­est. The Stel­len­bosch Univer­sity’s Law Clinic and Sum­mit Fi­nan­cial Part­ners brought the case on be­half of sev­eral cus­tomers of loan providers who ended up ow­ing sev­eral times the ini­tial sum bor­rowed af­ter falling into de­fault. Ac­cord­ing to them, the ma­jor­ity of the ap­pli­cants are “poor, over-in­debted and sink­ing deeper into fi­nan­cial dis­tress”.

The Law Clinic asked the court for a declara­tory or­der ef­fec­tively lim­it­ing a con­sumer’s to­tal debt re­pay­ment to dou­ble the orig­i­nal debt.

The NCA was in­tro­duced to “pro­mote a fair and non-dis­crim­i­na­tory mar­ket­place for ac­cess to con­sumer credit and for that pur­pose to pro­vide for the gen­eral reg­u­la­tion of con­sumer credit and im­proved stan­dards of con­sumer in­for­ma­tion”.

A class ac­tion is set to fol­low, re­sult­ing in bil­lions back for con­sumers in credit fees. Credit providers must now ap­point an ex­pert to deter­mine how much the ap­pli­cants were over­charged.

“Cred­i­tor providers have no in­cen­tive to look af­ter con­sumers or not to ex­ploit con­sumers,” said act­ing judge Bryan Hack in de­liv­er­ing his judg­ment.

“Be­cause they can utilise their re­sources to pur­sue con­sumers who de­fault with a de­gree of im­punity, know­ing that they will ul­ti­mately, even if it takes a con­sid­er­able time, re­cover all that is owed to them, in­clud­ing their very sub­stan­tial le­gal costs in­curred.

“The es­ca­la­tion of in­debt­ed­ness as a re­sult of costs set out suggest the credit providers are not even pay­ing lip ser­vice to the need for fair­ness and eq­uity. I take ju­di­cial no­tice of the no­to­ri­ous fact that con­sumers are be­ing ca­joled and en­cour­aged [to ap­ply] for credit.”

While we urge peo­ple to avoid get­ting into fi­nan­cial trou­ble, this judg­ment sends out a clear mes­sage to credit providers to stop ex­ploit­ing peo­ple.

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