IN THE NATIONAL CONSUMER TRIBUNAL HELD IN CENTURION JUDGMENT

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1 IN THE NATIONAL CONSUMER TRIBUNAL HELD IN CENTURION Case Number: NCT/48770/2016/140 (1) NCA In the matter between NATIONAL CREDIT REGULATOR APPLICANT and GOISTEONE LEONARD GABAOUTLOELE RESPONDENT Coram: Prof Tan ya Woker - Presiding member Adv J Simpson -Member Mr X May - Member Date of hearing -27 January 2017 JUDGMENT APPLICANT 1. The Applicant is the National Credit Regulator (hereinafter referred to as "the Applicant"), a juristic person established by section 12 of the National Credit Act 34 of 2005 (the Act). 2. At the hearing the Applicant was represented by Ms L Swartz and Ms C Young. RESPONDENT 3. The Respondent is Goisteone Leonard Gabaoutloele ("the Respondent") trading under the name of Motlogekwa Trading Enterprise CC. The Respondent was previously a debt counsellor who was registered in 2008 with the Applicant under registration number NCRDC481. At the time the current

2 application was launched the Respondent's debt counselling registration fees were in arrears and so the Respondent's registration as a debt counsellor had lapsed. 4. At the hearing Mr Gabaoutloele appeared in person. He did not have a representative. TYPE OF APPLICATION 5. The matter was referred to the National Consumer Tribunal (Tribunal) because the Applicant was of the view that the Respondent was contravening certain sections of the Act. The Applicant sought to have this conduct declared to be prohibited conduct in terms of section 150 (1) of the Act and requests inter alia that the Respondent be interdicted from acting as a debt counsellor BACKGROUND 6. Based on the Applicant's pleadings, the Respondent was registered as a debt counsellor with the Applicant on 26 August 2008 under registration number NCRDC 481. However, during 2013, the Respondent failed to pay his full registration fees and a debit balance of RB0.00 appeared against his profile. Then in 2015 the Respondent failed to pay his registration fees at all. Hence the Respondent's registration as a debt counsellor has lapsed. 7. The Respondent failed to submit annual compliance reports as required by condition A7 of his conditions of registration read with section 52 (5) (n and Regulation 69 (1) and (2) of the Act. 8. On 30 May 2013, the Applicant received a complaint from a consumer, Ms Suzan Thule, in which she 9 alleged that she had made 4 payments of R directly into the Respondent's bank account on the understanding that this would be distributed to her creditors. However her creditors were not paid and so she received an adverse listing with the credit bureaus. The complainant appealed to the Applicant to help her 'to make him pay' because, she explained, she could not do anything for herself.1 9. The Applicant sent s to the Respondent on 11June2013, 31July2013 and 10 September 2013, requesting that he respond to the complaint. To date the Respondent has failed to respond adequately to the complaint and has not provided the Applicant with a complete copy of the complainant's file. 1 See page 43 of the documents, complaint received from Suzan Thulo. Page2of 12

3 10. On 20 October 2014, the Applicant authorised an investigation into the debt counselling practices of the Respondent. Sphiwe Mashaba and Douglas Musandiwa were appointed to conduct the investigation which was scheduled for 7 November However, on that date, the investigation could not be conducted because the Respondent refused to allow the inspectors entry into his premises On 18 November 2014, the Applicant issued a summons against the Respondent in terms of section 139 (3) (a) and (b) of the Act, requesting him to appear at the business premises of the Applicant on 2 December The summons required the Respondent to provide a number of files for the inspectors to inspect. The summons set out the documentation which should be included in the files including, inter alia, the form 16 signed by consumers, the form 17.1 and the form 17.2 and proposals prepared by the Respondent The Applicant conducted an interview with the Respondent on 2 December 2014 and 1 O consumer files were assessed. It must be noted that the files brought by the Respondent were from debt reviews conducted in 2009 to The assessment of the files revealed that certain documents were missing from the files such as the Form 17.1, Form 17.2 and Form 16. In most instances no debt restructuring orders or consent orders could be located. In two matters the Respondent did refer the matter to court but the Respondent failed to obtain debt restructuring orders. 14. The investigation also revealed that the Applicant was charging consumers fees in excess of the limit of R50 as prescribed by the Act and the Regulations The inspectors concluded that the Respondent conduct had breached the Act and his conditions of service in a number of different ways. Hence the Applicant filed this application with the Tribunal and seeks a number of different orders from the Tribunal against the Respondent. 2 It must be noted that there is a dispute about whether these were the correct business premises. The Respondent alleges that he informed the Applicant that his business had re-located to new premises whilst the Applicant maintains that this Is the address which it has on record. Be that as it may, the inspection could not go ahead on the scheduled date. 3 See page 56 of the documents for a full list of the documentation which should appear in the files as requested by the Applicant. Pagel of 12

4 COMDONATION 16. The main matter was rendered complete on 2 June The Respondent should have filed his answering affidavit on or before 24 June The Respondent filed an application for condonation on 8 August The complete filing notice in respect of the condonation application was issued to the parties on 15 September Judgement was issued on 13 October 2016 granting condonation for the late filing of the Answering affidavit. Any replying affidavit would therefore have to be filed within the normal period of 10 business days (by 28 October 2016). 20. The Applicant then filed a Replying affidavit on 11 November Although the Applicant did not formally apply for condonation to permit the late filing of the Replying affidavit, the Tribunal canvassed the issue with the parties. The Applicant was unaware of the fact that the Replying affidavit was filed late. The Respondent indicated that he did not object to the late filing of the Replying affidavit. No new evidence was presented in the Affidavit which materially prejudices the Respondent. 21. Under the circumstances the Tribunal granted condonation for the late filing of the Replying affidavit. APPLICABLE SECTIONS OF THE ACT 22. The following sections of the Act and the Regulations are applicable to this matter: Section 44 (2) A person must not offer or engage in the services of a debt counsellor in terms of this Act, or hold themselves out to the public as being authorised to off er any such service, unless that person is registered as such in terms of the Chapter. Section 52 (5) (c) A registrant must comply with its conditions of registration and the provisions of this Act Page4of 12

5 Section 52 (4} (b} A registration takes effect on the date on which the certificate of registration is issued and remains in effect until it has lapsed on the 1st day upon which the prescribed renewal should have been paid. Section 52 (5) (d} A registrant must pay the prescribed annual renewal fees within the prescribed time. Section 52 (5} (n read with Regulation 69 (1) and (2) Section 52 (5) (n provides that a registrant must file any prescribed reports with the National Credit Regulator in the prescribed manner and form. Regulation 69 (1) provides that a compliance report must be submitted in Form 41 by 15 February each year for the period 1 January to 31 December. Regulation 69 (2) provides that registered debt counsellors must complete and submit the statistical return in Form 42 in respect of the quarters of each year by certain set dates. Section 86 (1) read with Regulation 24 (1) Section 86 (1) provides that a consumer may apply to a debt counsellor in the prescribed manner and from to have the consumer declared over-indebted. This is amplified in Regulation 24 (1) which provides that a consumer who wishes to apply to a debt counsellor to be declared over-indebted must submit to the debt counsellor a completed Form 16 or he must provide a detailed list of information to the debt counsellor. Regulation 24 (1) provides a lengthy list of all the information which must be provided to the debt counsellor Section 86 (4) read with Regulation 24 (2) and 24 (5) Section 86 (4) provides that when a debt counsellor receives an application from a consumer to be declared over-indebted he must notify in the prescribed manner and form all the credit providers who are listed in the application and every registered credit bureau. This is amplified in Regulation 24 (2) which provides that within 5 days after receiving an application for debt review the debt counsellor must deliver a completed form 17.1 to all the credit providers and credit bureaus. Regulation 24 (5) provides that the 17.1 notice must be sent by fax, registered mail or provided the debt counsellor keeps a record of the date, time and manner of delivery of the notice. Section 86 (6) read with Regulation 24 (6) and 24 (10) Section 86 (6) provides that a debt counsellor who has accepted an application from a consumer must determine, in the prescribed manner and within the prescribed time (a) whether the consumer appears to be over-indebted; and (b) if the consumer seeks a declaration of reckless credit, whether any of the consumer's credit agreements appear to be reckless. Page 5of 12

6 This section is amplified in Regulation 24 (6) which provides that within 30 business days after receiving an application in terms of section 86 (1) of the Act, a debt counsellor must make a determination in terms of section 86 (6). Then in terms of Regulation 24 (10) this determination must be sent to all affected credit providers within 5 business days. Section 86 (7) If as a result of an assessment a debt counsellor concludes that a consumer is over-indebted the debt counsellor may issue a proposal regarding how the consumer's problems can be resolved. Once he has issued this proposal section 86 (8) states that he may either have the proposal confirmed as a consent order in terms of section 138 or he must refer the matter to the Magistrate's Court with a recommendation. Section 86 (10) If a consumer is in default under a credit agreement that is being reviewed by a debt counsellor, the credit provider may at any time at least 60 business days after the date on which the consumer applied for the debt review, give notice to terminate the review. Schedule 2 (2) of the Act read with 9. 1 of the Respondent's conditions of registration. According to schedule 2 (2) of the Act the Respondent is entitled to charge a consumer an application fee of R50. Further fees could be charged in accordance with the Debt Counselling Fee Guidelines issued by the Applicant. At the time falling within the scope of this investigation, these guidelines permitted debt counsellors to charge R300 as a rejection fee, a restructuring fee to the maximum of R3000 for a single application and R4000 for a joint application, monthly after-care fees and legal fees which had to be disclosed upfront to a consumer and could only be recovered if the consumer had agreed to this in writing. The Respondent has also signed conditions of registration and according to the Applicant he contravened these conditions by failing to provide debt counselling services in a fair and timely manner (Condition A2); failing to notify the Applicant of his change of address (Condition 6); refusing to allow the inspectors entry into his premises to conduct an authorised investigation (Condition 8); receiving payments directly from consumers into his bank account and not utilising a payment distribution agency (Condition 81); and failing to submit annual compliance reports. Page 6of 12

7 THE HEARING 23. Based on the affidavits submitted and the Respondent's oral submissions, most of the facts in this matter are common cause, the defence presented by the Respondent was essentially only an attempt to explain the difficulties he experienced in conducting his debt counselling practice. 24. The Applicant had established, by the time of the hearing, that the Respondent had paid R200 towards his annual registration fees on 1 July However, he was still in arrears with his 2016 registration fees. These fees have increased and so the Respondent is in arrears by R650. The Respondent stated that he was unaware of the increase in fees and that, nevertheless, he had decided not to pay the fees until this matter was finalised. He explained that his failure to pay the fees in 2013 and 2015 amounted to an oversight. 25. The Respondent acknowledged that he had not submitted any compliance reports and described this as an oversight on his part. 26. The Respondent agreed that the complainant had deposited money directly into his bank account and he accepted that he had not handed over a complete file to the Applicant. He explained that at the time he was having problems with Payment Distribution agents (PDA) and at the time he was moving over to another PDA. Of the funds paid over to him by the Complainant he had taken R3 500 for his own fees and R1600 for legal fees. The rest (R910) he had paid over to a PDA. The matter was however never taken to court. 27. He further agreed that he had taken money directly from consumers which was over and above the R50 permitted by the Act and explained that this was for credit bureau reports (R50) and fees for accountants which he used when consumers did not have salary slips, such as taxi drivers (R350). 28. He accepted that he did not have complete files but stressed two main points: (1) a great deal of time has elapsed since these files were first opened (in 2009 and 2010) and so documents could easily have gone missing. (2) At that time debt counselling was not well received by credit providers and so there was very little co-operation from them. This meant that debt counsellors had a very difficult job to do and often Page 7of12

8 had to send documents more than once. This could explain why some documents were sent to creditors a long time after consumers applied for debt counselling. 29. The Respondent also argued that the Applicant had made copies of the files and so could have been responsible for documents going missing. The Applicant strenuously denied that this would have been the case arguing that there would be no point in the Applicant attempting to sabotage a debt counsellor and that its role was simply to ensure that a debt counsellor is doing his job properly and in accordance with the Act. 30. The Respondent stated that he had made use of a PDA and that Hannetjie Van der Merwe to whom consumers had made payment was a registered PDA by another name. The Applicant was of the view that this person was not a registered PDA. 31. The Respondent explained that he had not allowed the inspectors into his premises when they originally arrived to do the investigation because those were not his business premises and he was not working that day. He stated that he had informed the Applicant of his change of address and that he had had two compliance visits at his new premises therefore the Applicant was or should have been aware of the correct address. 32. The Respondent is of the view that the Applicant should have engaged further with him and afforded him an opportunity to present the documents in the files and explain matters further before referring the matter to the Tribunal. However, at the hearing he acknowledged that he did not have the documents which were missing from the files. 9 ASSESSMENT 33. As stated above, the salient facts in this matter are common cause although the Respondent has sought to provide explanations for his conduct. 34. From the evidence presented to the Tribunal, there are three broad issues that need to be considered: (1) The failure to pay registration fees and submit compliance reports to the Applicant; (2) Missing documents in the assessed files and the age of the files; (3) Overcharging of fees. Page 8of 12

9 Failure to pay registration fees and submit compliance notices 35. The Respondent acknowledges that he failed to pay his full registration fees in 2013 and any regislration fees at all in 2015 and for the 2016 year. He describes his failures in 2013 and 2015 as an oversight on his part but explains that he deliberately did not pay in 2016, choosing instead to await the outcome of this matter. 36. The failure to pay fees means that the Respondent's registration as a debt counsellor has lapsed and that it lapsed in 2013 when he failed to pay the full amount of the fees owed.4 The Tribunal is of the view that once a debt counsellor fails to pay his fees, his registration lapses and that in order to resume or continue his activities as a debt counsellor he would have to apply again for registration. The Applicant would then have to apply its mind in order to establish whether or not the debt counsellor satisfied any prescribed education, experience or competency requirements.s The Act further provides that the Regulator may refuse to register a prospective registrant if he fails a fit and proper test or any other prescribed tests or the Regulator may impose further conditions of registration on the proposed registrant.7 By continuing to act as a debt counsellor without applying for registration, the Respondent is engaging in prohibited conduct. 37. The Respondent has also engaged in prohibited conduct by failing to submit annual or quarterly compliance reports as prescribed by the Act and the Regulations. Again he seeks to explain this by calling this an oversight on his part. The files presented by the Respondent and assessed by the Applicant 38. It is common cause that documents were missing from the files and that other documents which are in the files have not been completed properly. Either the work was not done (at all or properly) or proper records have not been kept. Either way this constitutes prohibited conduct under the Act. The Respondent has argued that the Applicant should have engaged with him further and that he should have been given a further opportunity to present these documents and to explain his conduct. 44 The exact consequences of failing to pay registration fees on time was for a time a matter of some dispute. This was resolved in the case of NCT NCR v Lightning Cash Loans, where the Tribunal found that failure to pay fees meant that the registration lapsed and therefore it was not necessary for the Applicant to apply for the deregistration of those registrants who had failed to pay their annual fees. This issue is now beyond dispute because the Act was amended in 2015 to cater for this situation. See section 52(4)(b)(iii) of the Act. 5 See section 44 (1) (3) (a). 6 Section 45 (3). 7 Section 48 (3). Page 9of12

10 39. However, the Tribunal is of the view that the Respondent has been given ample opportunity to present the missing documents. Nevertheless, the Tribunal is mindful of the fact that the files presented to the Applicant for inspection were files from a time when debt counselling was still in its infancy and that debt counsellors experienced substantial problems trying to get co-operation from credit providers. 40. This does not however excuse the Respondent's conduct in the case of the complainant. The Respondent was asked on a number of occasions to resolve the problem and to date he has failed to present her full file. It is clear from the s which were sent to the Respondent regarding the complainant's allegations that he made no attempt to resolve this issue with the Applicant. 41. In this regard it must be noted that the files presented and assessed by the Applicant date from 2009 and These files were assessed by the Applicant in December The application was lodged with the Tribunal in May Section 166 (1) of the Act is applicable Limitations of bringing acfion.- (1) A complaint in terms of this Act may not be referred or made to the Tribunal or to a consumer court more than three years after- ( a) the act or omission that is the cause of the complaint; or (b) in the case of a course of conduct or continuing practice, the date that the conduct or practice ceased. 42. It therefore appears that any allegations regarding the content of these files may have prescribed as the acts or omissions occurred longer than three years before the files were even assessed, let alone by the time the application was lodged with the Tribunal. The Applicant reasonably could have required the Respondent to provide more recent files to assess. The Applicant submitted that debt counselling is an ongoing process and until an order is made and the debt settled. Therefore the files in question were not prescribed. The Applicant further submitted that the Tribunal could not consider prescription as it is only for the Respondent to raise, in accordance with Prescription Act 68 of 69. The Tribunal takes note of these submissions and can shortly state that the Prescription Act is not applicable in this matter. The NCA does not contain any provision rendering it subject to the Prescription Act. The NCA has its own specific provision relating to prescription. The Tribunal further has inquisitorial powers that enables it to raise issues such as prescription if necessary. There is no evidence that these consumers were still clients of the Respondent or that the process was still ongoing. Even if the process was still ongoing, the acts and omissions still took place longer than three years ago. The Act does not provide for any exceptions in this regard. Page 10 of12

11 43. The complaint relating to Ms Thulo however arose in 2013 as this is when she lodged the complaint and made the payments to the Respondent. Her complaint is therefore not affected by prescription. The amounts charged by the Respondent in contravention of the Act are listed in paragraph 27 above and are clearly in contravention of the Act. Overcharging 44. It is clear from the documents submitted to the Tribunal that the Respondent charged consumers fees which are not authorised by the Act and in the case of the complainant he took fees to which he was not entitled. This is prohibited conduct and is, in the Tribunal's mind, the most serious of the Respondent's conduct. PROHIBITED CONDUCT 45. Jn conclusion therefore the Tribunal finds that the Respondent has engaged in prohibited conduct by- (1) continuing to act as a debt counsellor after his registration had lapsed, a contravention of section 52 (5) (d); (2) failing to provide the Applicant with compliance reports, a contravention of section 52 (5) (f); and (3) overcharging consumers fees, a contravention of schedule 2 (2) of the Act and general condition 9 of his conditions of registration 46. The evidence presented to the Tribunal demonstrates that the Respondent's files are in disarray. He was further unable to provide a complete file in Ms Thule's matter. At the very least the Respondent has failed to keep proper records and that this is prohibited conduct in that he failed to perform his debt counselling duties in a manner that is consistent with the purposes and requirements of the Act (general condition 2 of his conditions of registration). APPROPRIATE ORDER 47. The Applicant has asked that an administrative penalty be imposed on the Respondent. The Respondent opposed this on the basis that he has not made a great deal of money out of debt counselling and it is not his full time job. Page 11of12

12 48. No evidence was presented to the Tribunal regarding the Respondent's financial position. Based on the Respondent's submissions he only regards debt counselling as a side or part time business. He has not taken on any ne"'' clients since Based on the returns submitted by the Respondent to the Applicant, it appears that throughout his career he may have had over 400 clients. 49. After carerul consideration the Tribunal decided not to impose an administrative penalty on the Respondent. The Respondent's registration as a Debt Counsellor has already lapsed and he will have to reapply if he wishes to register again. In the specific circumstances of this matter a further administrative fine is not warranted. Any consumers that the Respondent has overcharged must however receive reimbursement. ORDER 50. The Tribunal hereby makes the following order The Respondent is ordered to appoint an independent auditor at his own cost to assess all his debt review files from April 2010 (three years prior to the complaint being laid with the Applicant by the complainant) to determine any excess fees charged to consumers and any amounts paid by consumers to the Respondent which were then not paid over to the credit providers; and to then ensure that these consumers are reimbursed The Respondent must provide the independent auditor's final report to the Applicant regarding the above steps taken and the reimbursements made within four months of the date of this judgment The Respondent is interdicted from performing the duties of a Debt counsellor. He is cautioned that he may not carry out the functions of a debt counsellor as his registration has lapsed. The Respondent is however free to again apply for registration as a debt counsellor should he wish to. Prof. T Waker Presiding Member Adv J Simpson and Mr X May concurring Authorised for issu ~y the Nation I Cons mer Tribunal casenumber ;f 4~~q-o Zd6 \W-Oti '2.34 Date. ;>.oa 1.D2:.1 1 I Ccyy! mm I dd Nattonal Consume Tnbunal Ground Floor Building B Lakefield Office Park 272 West Avenue Centurion 0157 wwwthenct.org.za Page 12of12