South Africa’s economy was high on the agenda of President Zuma’s inauguration address. He outlined plans to bolster the economy. Many experts state that South Africans do not save enough and are increasingly becoming indebted. Gill Marcus, the South African Reserve Bank Governor, said recently that the interest rate may rise in the future as the South African economy battles to grow.  South Africans, as any other people, require credit. Credit for homes, cars or home improvement. It is an essential part of life. It affects the manner in which we live and has knock-on effects on the economy. Given the inequity of resources within South Africa, the legislature has aimed to enable credit providers to provide credit to those who could not ordinarily afford it and also to prescribe rules and regulations that do not make beneficiaries of credit victim to reckless and draconian credit agreements by credit providers.

It is an aim of the National Credit Act Number 34 of 2005 (the “Act”) to strike a balance between granting credit to South Africans and the ability of South Africans to repay their credit. The problem the legislature is trying to avoid is a problem that faced the United States of America during the recession when hundreds of thousands of people could no longer pay their mortgage bonds – it has been asserted that that problem resulted from reckless credit. In any event, the legislature can only create the framework in which to grant credit – it cannot guarantee that as a result, people would pay their debt. Part of that framework appears at sections 129 and 130 of the Act.  It sets out inter alia the requirements that a credit provider must  follow should it wish to, at a later date, institute legal action.

In a recent constitutional court case of Kubyaba v Standard Bank of South Africa 2014 (3) SA 56 (CC) (“Kubyaba”), the Applicant and consumer, Mr Kubyaba, approached the Constitutional Court to grant leave to appeal against the judgment of a high court which granted judgment for the Respondent (then plaintiff), Standard Bank. The case focuses around the section 129 notice (the “notice”) whereby a credit provider may send this notice but may not proceed to institute legal action (section 130) unless section 129 is complied with. The notice need not be sent by the credit provider but should the credit provide wish to institute legal proceedings, the need for the notice is required before legal proceedings are instituted. The reasons requiring the notice to be sent prior to instituting legal proceedings are, inter alia, because the legislature aimed to reduce litigation against consumers and to opt instead for assisting those who cannot pay through a process of debt counselling (for example). This would give the consumer options to try to bring the outstanding payments up to date and to perhaps have less onerous monthly payments going forward.

It is common practice for a credit agreement to have a domicilium citandi et executandi clause – this is a clause that allows either party to serve documents or notices on the other at an address agreed to by the each party without the need of proving that the party who is to receive the documents actually resides there. Should a party at a later date move to another residence (for example) different from the chosen domicilium citandi et executandi, he or she merely needs to give notice to the other party of the new address. The failure to do so could result in a party not receiving documents or notices and leaving him/her in a position where the delivery of the documents or notices on the chosen domicilium is registered as valid delivery. The Constitutional Court in Sebola and Another v Standard Bank of South Africa Ltd and Another 2012 (5) SA 142 (CC) (“Sebola”) dealt with the surrounding provisions of the Act which detail this. In Kubyana, the Court summarised the position as “there is no general requirement that the notice be brought to the consumer’s subjective attention by the credit provider, or that personal service on the consumer is necessary for valid delivery under the Act”.

In this case, Standard Bank sent the notice (twice) to the consumer by registered post who did not collect it from the post office and as such the notices were sent back to Standard Bank. Accordingly, Standard Bank instituted legal action in terms of section 130 of the Act. On the one hand, the legislature aimed for the consumer to become aware of his default and set out options that he may use; and on the other hand, the legislature allowed for a mechanism that where the notice had been delivered and no response was given, legal proceedings may be instituted. It is the balance that the legislature tried to achieve between the protecting consumers and still maintain the option for credit providers to institute legal proceedings if they so elect.

The Court found that where a consumer fails to collect the notice from the post office which results in him/her not becoming aware of his/her rights and options under the Act, the credit provider can do no more than that. The Court concluded that when delivery occurs through postal service, proof that these obligations have been discharged entails proof that –

• the section 129 notice was sent via registered mail and was sent to the correct branch of the Post Office, in accordance with the postal address nominated by the consumer. This may be deduced from a track and trace report and the terms of the relevant credit agreement;

• the Post Office issued a notification to the consumer that a registered item was available for her collection;

• the Post Office’s notification reached the consumer. This may be inferred from the fact that the Post Office sent the notification to the consumer’s correct postal address, which inference may be rebutted by an indication to the contrary; and

• a reasonable consumer would have collected the section 129 notice and engaged with its contents. This may be inferred if the credit provider has proven the above three points, which inferences may, again, be rebutted by a contrary indication: i.e. an explanation of why, in the circumstances, the notice would not have come to the attention of a reasonable consumer. 

In summary, if you, as a consumer, do not collect the notice from the Post Office and therefore do not acquaint yourself with your rights and options under the Act, the credit provider is under no further obligation to bring those rights and options to your attention. Furthermore, the credit provider may thereafter institute legal proceedings against you without further prior notice. Should the credit provider obtain judgment against you, not only may it, inter alia, obtain a warrant of execution against your movables but you will have a judgment against your name which would have a negative result against your credit record affecting an application for credit in the future with a credit provider.

Written and prepared by Kirith P. Haria
BOUWER KOBELI MORABE

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