LOGIKOSCredit Management Services CC

Transcription

1 LOGIKOSCredit Management Services CC Reg No: 2007/064067/23 PO BOX 745 SABIE 1260 TEL/FAX REG NO NCRDC94 OPEN LETTER 7 April 2016 Open Letter to the National Credit Regulator Dear Regulator It is common course in the debt counsellor s fraternity that there are serious problems that need to be addressed as a matter of urgency. It is my humble submission that due to a lack of leadership and proper guidance to all parties, the debt counselling process has developed into a laissez faire breeding ground for litigation where the legal fraternity hijacked the process to the detriment of consumers in particular and debt counsellors at large. This is a flagrant contradiction of the spirit and purpose of the Act. A recent High Court Ruling 1 questioned the validity of computer based debt restructuring programs which the National Credit Regulator insist debt counsellors use. The Judge ruled proposals to be fatally irrational (47) and that it effectively granted the consumer perpetual credit at the expense of the creditor and that this is a violation of the purpose of the Act (33). Being the debt counsellor in the case I was forced to conduct my own investigation and was appalled to find that the debt counselling process was hijacked and taken on a route that is so far removed from the provisions of the Act that if and when proposals are challenged in higher courts, it falls apart and are declared irrational at the expense of the debt counsellor and the consumer. Based on the Judgment, I raised a formal complaint with the National Credit Regulator on the 5 th of August It took the Regulator eight months to finalise this urgent complaint with the final reply dated the 6 th of April The outcome of the complaint is not in accordance with Section 140 of the Act which prescribes that the Regulator must either refer the matter to an adjudicating body to deal with it or issue a non referral notice to allow me the complainant to refer the matter to the Tribunal. Although Section 15(a) of the Act state that the Regulator may not adjudicate in any dispute the Regulator indeed declared that the creditors did not contravene any provisions of the Act and closed the file. I submit that during my investigation I found that the fundamental principles of debt review have been applied wrongly; and realised the catastrophic implications this have to all consumers who have applied for debt review over the past eight years. I therefore feel obliged to write this open letter to the National Credit Regulator and bring this to the attention of everybody who on a daily basis perform duties set out by this Act or anybody who may be affected by any provision of this Act. 1 Appeal Court Judgment Barnard/Coetzee vs MFC /FNB Case A801/ P a g e

2 On behalf of Concerned Debt Counsellors, I humbly submit the outcome to my investigations and the basis for our concerns. We request the Industry to address these serious issues and bring about necessary changes so the process will be in line with the provisions of the Act. CONTENT OF THIS LETTER Basic framework for the debt counselling process Page 2 Debt Review Process Determination of over indebtedness Page 3 Role of Credit Providers in the Debt Review Process Page 3 Different types of Applications Page 3 How to rearrange the obligations of the over indebted consumer Page 6 Current debt review rearrangements to the detriment of over indebted consumers Page 8 Debt Review Fee Guidelines Page 9 Conclusion Page 10 To resolve this serious situation NCR to investigate and address NCRDebthelp program Page 11 NCR to review and withdraw guidelines Page 11 NCR to apply for declaratory order Page 13 BASIC FRAMEWORK FOR DEBT COUNSELLING Magistrates Courts All Magistrates Courts are creatures of statute and have as such no inherent jurisdiction. S170 of the final Constitution provides that a Magistrate s Court may decide any matter determined by Act of Parliament, but does not possess the power to enquire into a rule on the constitutionality of any legislation. Debt Counsellor In National Credit Regulator v Nedbank Ltd; Du Plessis held that the debt counsellor is the applicant in a debt review application. Their role is neutral and in referring a matter to court in terms of S86(7) they are fulfilling a statutory obligation as a pro forma applicant. The Debt Counsellor has a duty to assist the court and should be available to render such assistance by way of furnishing evidence or making submissions as to his or her proposals or to answer to queries of the court. It is important to note that the registration conditions of a debt counsellor also ascertain that a debt counsellor should not enter into any agreement or engage in any activity which may prevent him or her from acting in the best interest of the consumer to whom the debt counselling services are provided - (point 5 of registration conditions). The Act Section 2(1) of the NCA states that when interpreting the sections of the NCA, effect must be given to the purposes of the NCA. It is important to always determine what the intention and purpose of the NCA is when interpreting any provision of the Act. The objects of the Act are set out in Section 3 and are directed at providing protection for the consumer and addressing imbalances that exist between consumers and credit providers. S3 sets out three main purposes, namely to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers by- (g) addressing and preventing over-indebtedness of consumers, and providing mechanisms for resolving over- indebtedness on the principle of satisfaction by the consumer of all responsible financial obligations. 2 P a g e

3 The National Credit Act must be interpreted in a manner that gives effect to these objects. DEBT REVIEW PROCESS The National Credit Act 34, of 2005 read with the Declaratory Order National Credit Regulator v Nedbank Ltd and Supreme Court of Appeal Judgment : Nedbank v The National Credit Regulator (662/2009 & 500/2010) read with case law and written papers by legal professionals have reference. Determination of Over Indebtedness S79(1) read with S78(3) provide the definition of over-indebtedness. In order to declare a consumer over indebted the requirements as set out in these sections must be met. The first problem that arises which I humbly submit has not been interpreted or applied correctly is S79(3) setting out that during the process of determining over indebtedness, a debt counsellor need to consider the settlement value of all credit facilities when calculating the consumers over indebtedness. This will be the total balance outstanding on the credit facility and not the minimum monthly payment required. Information required to determine over indebtedness that will form the basis of a rearrangement proposal: Regulation 24(7) list all the details which a consumer need to submit at the time of application when completing the application form (Form 16). Regulation 24(1)(iv) is very clear on what information should be submitted by the consumer in terms of his credit agreement :- List of all debts, disclosing monthly commitments, TOTAL BALANCE OUTSTANDING, original amount, and amount in arrears. The above information is required for all credit agreements under the NCA and are duly listed separately each under its own subsection under Regulation 24(1)(iv) referred to under (aa) to (ee) Role of the Credit Provider In terms of Regulation 24(3) a debt counsellor should verify the information received from the consumer with the credit provider. Regulation 24(4) make it clear that in the event that a credit provider fails to provide a debt counsellor with the correct information within five business days of such verification being requested the debt counsellor may accept the information provided by the consumer to be correct. In terms of Regulation 24(1) the credit provider must verify TOTAL BALANCE OUTSTANDING, monthly instalment, the original amount and if in arrears the amount in arrears. It is not required that the creditor provide new information but only to confirm or verify the information provided by the consumer to the debt counsellor. In terms of S86(5) the credit provider must (a) comply with any reasonable requests by the debt counsellors and (b) participate in good faith in the review and in any negotiations designed to result in responsible debt re-arrangement. The credit provider should be included in negotiations and proposals when a consumer is not yet over indebted but experiencing financial problems in terms of S86(7)(b). Such rearrangements may be made in terms of Section 116 of the National Credit Act. DIFFERENT TYPES OF APPLICATION There are three possible outcomes. I will only be dealing with the second and third outcomes. 1. The consumer is not over indebted; 2. The consumer is not over indebted but experiencing financial problems; and 3 P a g e

4 3. The consumer is over indebted. Procedures in terms of Section 86(6), (7), (8) and (9) It is important to note that all rearrangements to be lawful need to be endorsed by either a court or the Tribunal. S86(7)(b) WHEN THE CONSUMER IS NOT OVER INDEBTED, but nevertheless experiencing, or likely to experience, difficulty satisfying all the consumers obligations under credit agreements in a timely matter the debt counsellor may recommend that the consumer and the respective credit providers voluntarily consider and agree on a plan of debt re-arrangement S86(8)(a) If a debt counsellor makes a recommendation in terms of subsection 7(b) and the consumer and each credit provider concerned accept that proposal, the debt counsellor must record the proposal in the form of an order, and if it is consented to by the consumer and each credit provider concerned, file it as a consent order in terms of S138 and (b) if paragraph (a) does not apply the debt counsellor must refer the matter to the Magistrate Court with a recommendation. Regulation 24(9) states that any arrangement entered into must be reduced to writing and signed by all credit providers mentioned, debt counsellor and consumer. Point (23) of the Supreme Court of Appeal confirms that the debt counsellor may recommend that the consumer and the credit provider voluntarily agree on a debt re-arrangement plan. If they reach an agreement it can be filed as a consent order with the Consumer Tribunal or a court and if no agreement can be reached the matter must be referred to court. The current Task Team Agreements was formulated first in May 2010 by the actual Task Team and then again endorsed by the CIF (Credit Industry Forum) in 2015 to be issued by the National Credit Regulator as Debt Review Task Team Agreements of 2010 Guidelines. It is my submission that these agreements can only apply to consumers who are not over indebted but experiencing financial difficulty. The software program called DCRS currently calculates proposals within a conceptual framework which include the following Key Features :- Simultaneous finance charge (fees and interest) reductions and term extensions up to certain defined limits in order to significantly reduce monthly payment obligations for consumers (affordability gains) to overcome the debt stress situation. (Annexure D of the Task Team Agreements Page 4. Point 4 Finance Charge Reduction concessions The industry agreed to the following concessions. (Annexure D of the Task Team Agreements Page 4 5). b) The reduction of monthly service fees (as per the NCA) as part of the finance charge on the agreement to zero. c) In respect of secured loans (mortgages and vehicles and asset finance transactions) a reduction in the contractual interest rate to the rate at which the case solves subject to a limit of the prevailing rate plus 2%, to be fixed for the rehabilitation term, where after the rate and fees will revert to contractual if the debt is not settled. d) In respect of all unsecured debts a reduction in the interest rate to the rate at which the case solves subject to a limit of 0%, to be fixed for the rehabilitation term. When both the consumer and credit provider agree to these rearrangements the proposals will be confirmed by a consent order in terms of S P a g e

5 I therefore agree with the Department of Justice that only in instances where the debtor is not yet over indebted but likely to experience problems that the NCA provides explicitly for the parties to voluntarily agree on a debt re-payment plan which can then, if all credit providers agree, be filed as a S138 consent order 2. It must be emphasized that the Act does not provide for informal rearrangement. In terms of S87 all debt rearrangements must be made an order of court or the Tribunal. It is important to note that S116 should form the basis for these agreements where parties agreed to reduce interest rates and fees, as changes may only be made to an agreement in terms of S116(a) of the NCA. These changes must however reduce the consumer s liabilities under the original agreement because it constitutes an alteration of the original contract. The new agreements must be recorded in writing and signed by both parties as provided for in S116(c) of the NCA. Where the consumer is not over indebted but experience financial problems and no agreement can be reached the Debt Counsellor will also refer the matter to the Magistrate Court with a recommendations in terms of S86(7)(b) read with S86(8)(b) and S87(1). It is important however to note that proposals in this case will be in line with the provisions of S86(7)(c) as the Magistrate Court is a creature of statue and may only make orders to rearrange credit agreements as determined and provided for in terms of the Act. S86(7)(c) WHEN THE CONSUMER IS OVER INDEBTED. The Declaratory Order National Credit Regulator v Nedbank declared that S86(7) requires the debt counsellor to seek an order from the Magistrate Court. Although S 87(1) (requiring the Magistrate Court to conduct a hearing) only refers to S86(8)(b) (when consumer is not over indebted but have financial difficulties) the court found that the requirement to conduct a hearing indeed applies to matters that have been referred to the Magistrate Court under S86(7) (when consumer is over indebted) The court pointed out that a Magistrate Court can only provide the necessary judicial oversight if it conducts a hearing and is therefore obliged to conduct a hearing and make an order in terms of S87(1)(a) or 87(1)(b) of the Act where the consumer is over indebted. 3 Take note, the court found that the provisions of S86(8)(a)(i.e. consent orders in cases of successful voluntarily arrangements) do not apply to cases where the consumer was found to be over indebted. The court pointed out that the finding that a consumer is over indebted sets in motion a process that is not voluntary. Nothing however prevents the parties from seeking a consent order when they have settled a matter and agreed on the re-arrangement 4 Negotiations are not required if the consumer is over indebted. The parties may enter into negotiations in order to settle the matter, but it is not prescribed by the NCA. It is therefore submitted that the effect of the court s decision in this regard is that debt counsellors, in cases 2 Debt Rescheduling Application: Page 9 (point 10) Department of Justice and Constitution RSA 3 Communique : Page 1 Declaratory Order Issue 1/August 2009 by National Credit Regulator 4 Communique : Page 1 Declaratory Order Issue 1/August 2009 by National Credit Regulator 5 P a g e

6 where the consumer is over indebted, are not obliged to send proposals to credit providers before a matter is referred to court 5 HOW TO RE-ARRANGE THE OBLIGATIONS OF AN OVER INDEBTED CONSUMER S86(7)(c) if the consumers is over indebted the debt counsellor may issue a proposal recommending that the Magistrate Court make either or both of the following orders i) that one or more of the consumers credit agreements be declared reckless, or (ii) that one or more of the consumers obligations be re-arranged by (aa) extending the period of the agreement and reducing the amount of each payment due accordingly (bb) postponing during a specified period the dates on which payments are due under the agreements (cc) extending the period of the agreement and postponing during specified period the dates on which payments are due under the agreement and (dd) recalculating the consumers obligations because of contraventions of Part A or B of Chapter 5, or Part A of Chapter 6 (in case of unlawful provision) The Act clearly makes a distinction between the term re-arrangement and recalculation. Only when there is an unlawful provision - for example incorrect fees or interest rate that contravenes the Act - is the debt counsellor allowed to do a recalculation. The Act states clearly that the debt counsellor may only re-arrange the agreement and provide specific details as to how this may be done. The word rearrange are defined in the American Heritage Dictionary meaning to put into a new order and the Cambridge Dictionary to change the order, position or time of arrangement already made It has to be noted that nowhere in the Act does it makes provision for a debt counsellor to calculate interests and fees when rearranging agreements under a debt review application. Neither does the Act require of a debt counsellor to verify any interest rates of any agreements including credit facilities. Point 2.15 under the Objects of the Bill of the NCA confirms the recommendation that may be made by a debt counsellor to re-organise the consumer s debt by extending the term of any agreement, postponing payments, re-calculating unlawful fees or interest, or ordering adjustments to improperly charged items In terms of Regulation 24(1)(iv) the rearrangement must be done on the Total Balance Outstanding. This balance is inclusive of all future interests and fees collectable in terms of the contractual agreement. The Act do not allow for any additional interest to be charged on a Debt review re-arrangement, which is confirmed by S66 of the NCA. Section 66 A credit provider must not, in response to a consumer exercising, asserting or seeking to uphold any right set out in this Act or in a credit agreement a) discriminate directly or indirectly against the consumer, compared to the credit providers treatment of any other consumer who has not exercised, asserted or sought to uphold such a right; 5 Communique : Page 2 Declaratory Order Issue 1/August 2009 by National Credit Regulator 6 P a g e

7 b) penalise the consumer; c) alter, or purpose to alter, the terms or conditions of a credit agreement with the consumer, to the detriment of the consumer; d) take any action to accelerate, enforce, suspend or terminate a credit agreement with the consumer. When charging a consumer under debt review additional interest, costs and fees on the extended term it refute the relief provided for in the Act and is to the detriment of the consumer. I herewith attach an example Annexure E of a proposal done in terms of the provisions of the Act as proof that the Act intended rearrangements to be simple and logical without prejudicing the consumer or credit provider. In terms of Credit Facilities it is important to note that the Act require from a debt counsellor when determining over indebtedness that the settlement amount must be used as set out in Section 79(3) The Act does not refer or mention instalments, interest rates or payment terms for a credit facility, it further does not differentiate between the allowed rearrangement for a credit agreement and a credit facility. These accounts are listed under the same Regulation 24(1)(iv)(cc)(ee)(ff). Because the Act does not define the word charges we still have to determine the correct interpretation of S88 in terms of S2(1) of the Act read with S3 that credit should be transparent at all times. Section 88(1) specifically provides that a consumer who has filed an application in terms of debt review must not incur any further charges under a credit facility or enter into any further credit The word incur is very specific and give us some indication to what the legislator had in mind. When you incur something it is something undesirable. You incur penalties, expenses a parking ticket. You will not say I incur free tickets to the Rugby World Cup it can therefore not be interpreted to be applying only to additional credit. Also consider S4(6)(a) and (b)(ii) of the Act and note that it refers to charges under S103(5) of the NCA which include interest. This should also be read with S100 to S103, which deals with charges and fees. It is important to note the Act only allow for rearrangement of the Total Balance outstanding by reducing instalments, extending payment periods or postponement of payment dates. Additional Argument: Debt review rearrangements do not include or allow additional interest over and above the contractual terms and obligations It is important to note that proposals should be based on the Total Balance Outstanding, which includes all future interest and fees in terms of the contract as well as the contractual terms and obligations of the original contract. It is common course that a credit agreement may not be changed or altered under rearrangement and has so been confirmed in more than one judgment. 7 P a g e

8 The consumer who applies for debt review is not in default because he is merely upholding his rights set out in the NCA. Regulation 24(1)(iv) also include the arrears to be included should a consumer be in default at the time he apply for debt review and the credit provider has not yet taken any legal steps to rectify the default. A consumer cannot be both in default and not in default at the same time. Debt Review does not constitute a default of the original credit agreement and S86(10) and S88(3) confirms this position since there would be no need to specify that there needs to be a default on the original agreement and debt review arrangement if an application for debt review constituted an automatic default. In terms of the contractual terms and obligations of all credit agreements additional interest may only be charged if the consumer is in default. CURRENT DEBT REVIEW REARRANGEMENTS ARE TO THE DETRIMENT OF CONSUMERS Prior to the Task Team Agreements of 2010 creditors correctly verified the Total Balance Outstanding (Proof thereof are Annexed to this letter as Annexure A1 to A7) What is very concerning is that debt counsellors then added additional interest on the Total Balances which already included all future interests and fees in terms of the contractual obligation and or original agreement. As an example I herewith attach a case currently under investigation Confirmed by the Contractual Agreement (Annexure B1):- Principle Debt R Interests and other fees R TOTAL COLLECTABLE R The consumer applied for debt review five months after the agreement was concluded. The COB verified the Total Balance Outstanding in terms of Regulation 24(1)(iv)(ii) to be R (Annexure B2) The principle debt when the agreement was entered into was R The COB also confirmed the consumer was not in default. It safe to conclude that the balance of R five months later is the Total Balance Outstanding which included all future interest and fees payable in terms of the contractual agreement. Due to software programs and training provided by the NCR the Total Balance was used as the basis for the calculations and additional interest at the contractual interest rate was calculated and added on a monthly basis. This constituted a refinance and not a rearrangement. From month six additional interests over and above as determined by the contractual agreement - was added on a monthly basis. Eight years later:- The consumers statement dated 16 January 2016 confirmed that the consumer in total has paid back an amount of R (Annexure B3). Note this is already R more than the contractual obligation. However; according to this Statement the consumer still has an outstanding balance of R If the consumer continues with payments the total payments made on this agreement will calculate to R P a g e

9 Keep in mind the principle debt is R and in terms of the contractual agreement the total collectable amount is R Under the debt review rearrangement the collectable amount has spiraled to R due to the incorrect interpretation of the provisions of this Act. I respectfully submit that this is why Judge Tuchten ruled these proposals to be irrational in several material aspects (Point 47) and that it also grant the consumer perpetual credit at the expense of the creditor and that such action violate the purpose of the legislation to achieve eventual satisfaction of the debt (Point 33) 6 We have a very serious problem at hand because over indebted consumers who applied for debt review during period 2007 to 2010 when credit providers verified Total Balance outstanding have been exposed to unlawful practices; and instead of finding relief as provided by the Act have been penalized by having additional interest added above their contractual agreement. End Balance Differences All debt counsellors and consumers under debt review, are challenged by end balance differences on a daily basis. Although the consumer has fully satisfy all the obligations under the credit agreement in accordance with the order or agreement the creditors still claim an outstanding balance, and demand payment thereof. (Refer to S71(2)(b)(i) of NCA) How does the National Credit Regulator deal with this serious problem? They allowed the Credit Industry Forum to issue Guidelines (Proposed Process For End Balance Differences Number 4/2015) which again are a violation of the Act in terms of S2(1) and S3 which clearly state that credit at all times must be transparent. I also submit that this is a violation of S66 as the consumer is penalized because this solution constitutes changes of the contractual agreement. I quote from this Guideline:- The Debt Counsellors must request an updated cob and it is concluded that If the discrepancies between credit providers and debt counsellors/pda balances are less than the sum of 3 months instalments, consumers will continue to pay these in accordance with the final proposal/court order until the balance, as reflected on the credit providers statement are paid in full. If the discrepancies are greater than the sum of 3 months instalments, these accounts must be flagged as exceptions and dealt with as per the reconciliation procedure which constitute an investigation. This guideline contradicts the Act and is to the detriment of the consumer. Apparently the Credit Industry Forum and the National Credit Regulator are not aware of S111 of the National Credit Act which specifically deals with Disputes and S139 and S140 allowing for a complaint procedure to be adjudicated by a body who has been appointed to deal with these disputes such as the National Consumer Tribunal or the Consumer Courts. I fail to understand why the Regulator want to burden itself with the adjudicating of disputes. DEBT REVIEW FEE GUIDELINES Attached Annexure C NCR Fee Guideline and Annexure D Green Gazette on Debt Counselling Fees 6 Appeal Court Judgment Barnard/Coetzee vs MFC /FNB Case A801/ P a g e

10 Although Debt Counsellors Fees were first prescribed by a debt counsellors association called DCASA; the NCR issued a letter in 2011 informing all debt counsellors that the NCR will prescribe the fees and the way these fees may be collected. The prescribed fees were published in the Green Gazette in 2011, however for unknown reasons it was never proclamated to be lawful and never published in the National Government Gazette as prescribed in S171 of the Act. During the hearing of the appeal case the counsel of the credit providers state that these fees were unlawful. Judge Tuchten ruled that the debt counsellor entered the dispute between the parties when she sought the order which give her fees and expenses preference over the claims of the creditor respondents. She perpetuated her personal involvement in the dispute in the matter in which she made the case of the consumer her own 7 (Point 44) For this the Honourable Judge ruled that my actions were male fide and ordered that I pay the costs in this application Based on the fact that as a debt counsellor I merely followed the Guidelines of the NCR, I and many other debt counsellors brought this to the attention of the National Credit Regulator and requested guidance on the way forward. CONCLUSION As early as January 2009 the Law Clinic of the University of Pretoria was commissioned by the National Credit Regulator to conduct an assessment on the reasons for the ineffectiveness of the debt counselling process. The research report indicated that credit providers are not cooperating in the process and not complying with the NCA and Regulations and the so-called work stream agreement reached between major credit providers, established debt counsellors and the National Credit Regulator, were the main reason for the ineffectiveness of the debt counselling process. Second on the list of so-called obstacles were the vagueness and insufficiency of the NCA and Regulations. 8 It is my submission that the situation has grown worse and has not improved as the Industry has moved even further away from the provisions of the Act. Please note that the Credit Industry Forum (CIF) is not a court of law and only acts as advisory committee with no jurisdiction on the adjudication of the interpretation and application of law. Please note in terms of Section 16(1) The National Credit Regulator is responsible to increase knowledge of the nature and dynamics with regard to the consumer credit market and industry; and to promote public awareness of consumer credit by (b) providing guidance to the credit market and industry by i) Issuing explanatory notices outlining its procedures, or its non-binding opinion about the interpretation of any provision of this Act. ii) Applying to a court for a declaratory order on the interpretation or application of any provisions of this Act. 7 Appeal Court Judgment Barnard/Coetzee vs MFC /FNB Case A801/ The debt counselling process closing the loopholes in the National Credit Act, 34 of 2005 by M Roesstoff, F Haupt, H Coetzee, M Erasmus 10 P a g e

11 The National Credit Regulator has issued many Guidelines/Circulars over the past eight years and it is my submission that guidelines which had no relevance to any provisions of the Act are unlawful. TO RESOLVE THIS SERIOUS SITUATION TO INVESTIGATE AND ADDRESS NCRDebtHelp PROGRAM National Consumer Tribunal applications are based upon section 86(7)(b) when a consumer is confirmed not to be over indebted but experiencing financial problems. It seems that this process is now being abused by some debt counsellors who choose to refer all their applications to the Tribunal instead to the Magistrate Court when a consumer is actually over indebted. This scenario allows for negotiations which cannot be to the benefit of the consumer when they under advice of their debt counsellor agree to concession periods. Instead of bringing relief to the consumer these proposal may lead to a consumer who cannot satisfy his obligations. NCRDebthelp should also be reprogrammed to include the correct status updates regarding consumers with consent orders to distinguish between consumers who are only experience financial problems, from consumers who are declared to be over indebted. REQUEST TO REVIEW AND WITHDRAW FOLLOWING GUIDELINES :- Based on the above information and facts stated I respectfully request the following Guidelines/Circulars to be withdrawn with immediate effect as it poses a serious threat to the general public and all debt counsellors. Task Team Agreements reasons being :- 1) Proposals are incorrectly based on recalculations instead of rearrangements. 2) Proposals are based on the Capital Balance instead of the Total Balance Outstanding and contravening Regulation 24(1)(iv). 3) Interest and Fees are calculated without any provision of the Act allowing such calculations. 4) Key futures of these guidelines constitute agreements which reduce the contractual interest rates and fees which are in contravention of S86(7)(c) of the Act. When agreements are made which create an alteration or amendment of the agreement it must be done in terms of S116 and not S86(7) and S87 which do not make provision for any amendments but only re-arrangements. It is my submission that debt counsellors are set up for failure when these proposals are challenged by creditors in higher courts. 5) Proposals including cascades where monthly instalments escalate to much more than the original contractual instalment which is a contravention of S86(7)(c)(ii)(aa) which specifically state that when a consumer is over indebted each payment must be reduced. It is my submission that task team agreements do not uphold S3 of the NCA to be transparent or providing mechanisms for resolving over- indebtedness on the principle of satisfaction by the consumer of all responsible financial obligations. Instead it allows creditors perpetual credit. I 11 P a g e

12 quote the terms and conditions of such an agreement which forms the basis of these concept orders:- The above re-arrangement proposal will only be effective for the concession period. The number of instalments and the instalment amount may not lead to the eventual satisfaction of the outstanding balance. Any outstanding balance remaining after the expiration of the concession term must be recorded in accordance with and in the terms and conditions as contained in the original agreement. Accordingly once the concession term has ended, the above re-arrangement will come to end and the instalments and interest rate as contained in the original agreement will be enforced. How can the above be viewed to uphold the law when a consumer is over indebted? This is grossly in contravention of the Act; and parties agreeing to these agreements should take note of Section 157 of the NCA that state It is an offence to hinder, oppose, obstruct or unduly influence any person who is exercising a power or performing a duty delegated, conferred or imposed on that person by this Act Circular 04 Proposed Process for End Balance Differences If the discrepancies between credit providers and debt counsellors/pda balances are less than the sum of 3 months instalments, consumers will continue to pay these in accordance with the final proposal/court order until the balance, as reflected on the credit providers statement are paid in full I can only ask how this can be lawful. It is a violation of the Act terms of S2(1) and S3 which clearly state that credit at all times must be transparent. It is a violation of S66 as the consumer is penalised and also allow changes of the contractual agreement. If debt review is done as per the provisions of the Act there will be no end balances. Guideline 004/2015 Guidance and Explanation notes for the interpretation and application of Section 103(5) of the National Credit Act 34 of 2005 issued in terms of Section 16(1)(b) of the National Credit Act 34 of 2005 These guidelines are wrong and confusing; and do not reflect how the rule actually operates. What is more concerning is that the Supreme Court of Appeal already confirmed the declaration made by the Declaratory Order as to how this provision should be applied. It is also my submission that the National Credit Regulator did understood it correctly and in September 2011/ Issue 2 confirmed the correct guidance to the interpretation of this provision in the Communique on SCA Judgments Yet again the NCR find the interpretation to be unclear because: The application and interpretation of section 103 (5) of The National Credit Act ( the Act ) is held in abeyance pending urgent guidelines by the CIF and on the agenda for the next meeting. The mere fact that the interpretation has once again been referred for guidance one year after issuing the above guideline is proof that there is a very big problem with this guideline and the NCR is aware of it. It is very concerning that the NCR fail to take note of guidance from legal professionals like Professor Michelle Kelly-Louw who has provided us with a 24 page legal opinion: The Statutory In Duplum Rule as Indirect Debt Relief Mechanism. Circular regarding jurisdiction and fees 12 P a g e

13 The latest Circular 6 on Debt Review Fees is supposedly only binding on North Gauteng but the Guidelines to Court Documents based on the Van Der Hoven Declaratory delivered in the same court is binding on all debt counsellors in all Magistrate courts. This is a contradiction to each other. This is untenable and confusing. Even though we have case law in Appeal Court Judgment Barnard/Coetzee vs MFC /FNB Case A801/2014 the NCR continue to instruct debt counsellors to comply with the Debt Review Fee Guideline. This is yet another example of the NCR stumbling from one crisis to the next one. To suggest that all debt counsellors should abide by the Fee Guidelines especially those debt counsellors in Gauteng is a direct contravention of Judge Tuchten s ruling. To revise all Guidelines and Circulars and to withdraw guideline or explanatory notice that has no relevance to any provision of NCA REQUEST TO APPLY FOR A DECLARATORY ORDER:- As resolution I urge the National Credit Regulator on the basis of the Barnard/Coetzee Judgment to apply for a Declaratory Order in terms of Section 16(1)(b)(ii) for the correct interpretation and application of Regulation 24(1)(iv) read with Section 86(7)(c) confirming the correct application and procedures when drafting a rearrangement proposal for a consumer who has been found to be over indebted. Ensuring that no consumer will be dealt with unlawfully in the future. We also need clarity on how to deal with orders of the past eight years that were made to the detriment of the consumers. The correct interpretation for Section 88(1). Does the term charges also include interest and if not on what should the calculation for interest be based as the Act currently do not allow for any interest calculations when preparing a debt review proposal. Because the Act does not require from a debt counsellor to verify interest rates on a Credit Facility the Prescribed Rate of Interest Act (Act 55 of 1975) may be considered where the rate of interest is not prescribed by any other law should a court determine that interest may run under a debt review re-arrangement It is my humble submission that the National Credit Regulator can provide guidance by applying to court for a declaratory order in terms of S16(b)(ii) Section 15(a) read with S139 and S140 to ensure that all parties involved when raising a dispute or complaint with the NCR understand that the NCR may not adjudicate or intervene in any disputes. Currently complaints are not dealt with in accordance with S140 of the Act and this prohibits us from resolving and preventing future complaints. Take necessary steps to legalise Debt Review fees or abstain from enforcing guidelines on debt counsellors that has been viewed in court to be unlawful. The correct procedure will be for the Minister of Trade and Industry to publish it as part of the Regulations. 13 P a g e

14 The above concerns and problems are snowballing into a disaster for our economy. The current sosio economic milieu of South Africa demand clarity on the issues as set out above to prevent a disaster. Thousands of consumers who are over indebted who desperately need the relief intended by the Act refrain from applying for debt review because it is common knowledge that the industry is under pressure and fail to provide the relief it should. The debt counselling process was implemented 9 years ago, and it is hard to believe that the industry is still in turmoil. It is our humble submission that the NCR has fallen short of their mandate of being a true regulator in the true sense of the word. Yours faithfully Michelle Barnardt Registered Debt Counsellor NCRDC94 On behalf of Concerned Debt Counsellors 14 P a g e