1. The Debt Collectors Amendment Bill 2016 THE DEBT COLLECTORS AMENDMENT BILL 2015 A CRITICAL EVALUATION Dawid Marais

2. The Debt Collectors Amendment Bill 2016 CONSTITUTIONAL BASIS FOR THE AMENDMENT The Constitution of the Republic of South Africa, 1996, requires the establishment of a society that is based on democratic values of:  Social justice  Human dignity  Equality  The advancement of human rights and freedoms

3. The Debt Collectors Amendment Bill 2016 STATED REASONS FOR THE AMENDMENTS  Recent court cases and media reports have highlighted the flagrant abuses prevalent in the collection of debts;  The victims of these abuses in the collection of debts are mostly the poorest and most vulnerable members of society;  The existing legislative framework would seem to be inadequate in ensuring that debts are recovered in a fair and efficient manner where there is proper control and oversight; and  There is a disparity in the tariffs charged by debt collectors and attorneys doing debt collection.

4. The Debt Collectors Amendment Bill 2016 ROLE PLAYERS AND POINTS WHERE ABUSE CAN OCCUR  The infringing credit providers  The infringing attorneys  The infringing debt collectors, including debt collectors acting as agents for attorneys and other debt collectors  The Debt Collectors Council (oversight over debt collectors)  The Law Societies (oversight over and training of attorneys)  The Courts, including Clerks of the Court  The Department of Justice (oversight over and training of the Clerk of the Court / review of legislation )  The Magistrates’ Commission (oversight over and training of the Magistrates)  The Debtors  The National Credit Regulator (oversight over credit providers and consumer education)  Department of Trade and Industry (review of legislation)

5. The Debt Collectors Amendment Bill 2016 THE NEED FOR AN INTEGRATED CROSS FUNCTIONAL REVIEW OF DEBT COLLECTION PROCEDURES  If it is considered how many different role players are involved in the collection of debt, it is clear that a law review committee needs to be established, consisting of experts having a broad knowledge of all the relevant aspects of the South African Law, credit risk and debt collection;  This committee should come up with a comprehensive, cross-functional plan to revamp the debt collection system and make proposals for the amendment of the various laws, regulations, Rules of Court and codes of conduct.

6. The Debt Collectors Amendment Bill 2016 CONSIDERATION OF ASPECTS OF THE BILL  Provisions requiring attorneys to register as debt collectors  Definitions  Section 8  Section 8A  Improper conduct provisions  Section 15

7. The Debt Collectors Amendment Bill 2016 PROPOSED AMENDMENT TO DEFINITION OF “DEBT COLLECTOR” – INCLUSION OF ATTORNEYS “debt collector” means— (a) any person, including an attorney or his or her employee or agent contemplated in section 8A, or a party to a factoring arrangement, who for reward collects debts owed to another on the latter’s behalf; (b) any person who, other than a party to a factoring arrangement, in the course of his or her regular business, for reward takes over debts referred to in paragraph (a) in order to collect them for his or her own benefit; (c) any person who, as an agent or employee of a person referred to in paragraph (a) or (b), collects the debts on behalf of such person, excluding an employee whose duties are purely administrative, clerical or otherwise subservient to the actual occupation of debt collector;"

8. The Debt Collectors Amendment Bill 2016 THE INFLUENCE OF THE MEANING OF “DEBT” IN LAW “Debt” is law has a wide meaning and may arise in a variety of ways:  By agreement (e.g. small debts from consumer credit agreements to massive debts arising from commercial agreements);  As a result of a delict committed by one person against another (e.g. claims for damages to property (e.g. motor vehicle damages as a result of an accident), personal injury claims, claims against the state for unlawful arrest, damages for defamation);  By operation of law (e.g claims against the Motor Vehicle Accident Fund);  Cost orders granted by Courts (e.g. an attorney obtains an interdict or other “non-debt” based remedy in a Court and the Court grants a costs order in favour of the attorney’s client, which the attorney then collects on behalf of the client)

9. The Debt Collectors Amendment Bill 2016 CONSEQUENCE 1:  In terms of the proposed amendment, virtually all attorneys doing litigation work involving money claims will have to register as debt collectors.  This is clearly a far-reaching consequence that was never intended.  It is, therefore, clear that as far as attorneys are concerned, the definition of “debt” should be limited, e.g. to debts in terms of agreements to which the NCA applies.

10. The Debt Collectors Amendment Bill 2016 CONSEQUENCE 2 In terms of section 8, if an incorporated firm of attorneys is in any way involved in debt collecting (i.e. conducts business as a debt collector): the company will have to register; and all the directors of such company will have to register, with the result that sometimes hundreds of directors who have nothing to do with debt collection will have to register.

11. The Debt Collectors Amendment Bill 2016 THE CONFUSION CREATED BY THE WORDS “CONTEMPLATED IN SECTION 8A” IN RELATION TO ATTORNEYS IN THE DEFINITION OF “DEBT COLLECTOR  The clear intention was to include all attorneys involved in the collection of consumer credit debts in the definition of “debt collector”;  However, the words “contemplated in section 8A” may be interpreted that only attorneys registered in terms of section 8A will be deemed to be debt collectors;  Thus, if an attorney fails to register, he is not deemed to be a debt collector and then the Act will not apply to him / her;  Therefore, the formulation of the definition is circuitous and creates a nonsensical scenario;  The phrase should rather be removed from the definition for the sake of clarity.

12. The Debt Collectors Amendment Bill 2016 PROPOSED CHANGE TO SECTION 15: IMPROPER CONDUCT / SECTION 103(5) NCA  Improper conduct if the debt collector: “charges collection costs, an initiation fee, service fees, default administration charges or other charges which exceed the unpaid balance of the principal debt at the time of default”  Seems to mimic section 103(5) of the NCA with the purpose of aiding in the enforcement of section 103(5);  As such, most unfortunate, as many debts collected by collectors are not subject to the NCA;  Where the NCA is not applicable, the common law duplum rule (which only applies to interest) applies;  The Bill does not amend the common law duplum rule, but seeks to introduce a form of misconduct as if the rule will be amended / or does not exist. As such it makes perfectly lawful conduct a form of misconduct;  The wording is also in conflict with the wording of section 103(5): “(5) Despite any provision of the common law or a credit agreement to the contrary, the amounts contemplated in section 101 (1) (b) to (g) that accrue during the time that a consumer is in default under the credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under that credit agreement as at the time that the default occurs.”  What a collector can collect is already regulated by section 19 of the DCA, which must be read with section 103(5) of the NCA. In both instances, a contravention is an offence and clearly improper conduct. The proposed provision only creates confusion and should be scrapped.