Debt is unfortunately a reality for many South African consumers. As living costs continue to rise, outpacing many individuals’ salaries, and unemployment rates soar, financial instability is increasingly becoming a looming threat for many middle-class South Africans.
Keep reading to get the facts. Let’s debunk the myths surrounding debt-related arrests and give you clarity and solutions to live a more stress-free and debt-free life.
Abolishing Debt Imprisonment
The practice of imprisoning people for debt was abolished in 2004.
There were two legal case rulings that fundamentally changed debt law in South Africa, ensuring that individuals could not be imprisoned simply for owing debt. It also reinforced the importance of fair and reasonable debt collection practices and the requirement for judicial oversight in these cases.
Prior to the rulings in 2004, it was possible for people to be imprisoned for failing to pay their debts in South Africa. This practice was referred to as civil imprisonment.
While you can no longer be arrested for debt itself, you can be arrested for not complying with legal orders related to the debt, like a court order. Also, specific debt-related crimes, such as fraud, can lead to arrest.
Your Rights as a Consumer
The NCA established the National Credit Regulator to regulate the South African credit industry, and it provides guidelines for responsible lending and borrowing. It prevents reckless lending and gives consumers certain rights, including the right to apply for debt review if they’re struggling to meet their repayments.
While these laws protect consumers from abusive debt collection practices and reckless lending, they also establish a legal process for creditors to recover their money. This usually starts with a letter of demand, and if the debt is not paid, it can proceed to a summons, default judgement, and then execution (seizure of assets or garnishee orders on salary). However, all these steps are subject to legal oversight to ensure fairness and legality.
Legal Action Surrounding Debt Collection
There is a massive process included in lawful debt collection. The South African law attempts as far as possible to protect both the creditor and the debtor. As per the Debt Collectors Act 114 of 1998, debt collectors are prohibited from unlawful action, threats, and malpractice. The Act, particularly Section 15, outlines several acts that constitute improper conduct by a debt collector. These prohibited actions include:
Use of Force or Intimidation: Debt collectors cannot use or threaten to use force against a debtor or any person close to the debtor. They also cannot behave in an excessively intimidating manner.
Fraudulent or Misleading Representations: The law forbids debt collectors from using fraudulent or misleading tactics. This includes simulating legal procedures, using fake official or legal documents, posing as law enforcement or court officials, or making unwarranted threats to enforce rights.
Spreading False Information: Debt collectors cannot spread or threaten to spread false information about a debtor’s creditworthiness.
Contravention of the Code of Conduct or the Act: Debt collectors must comply with all provisions of the Code of Conduct and the Act. Any contravention or failure to comply constitutes improper conduct.
Criminal Conduct: Debt collectors found guilty of an offence involving violence, dishonesty, extortion, or intimidation are deemed to have engaged in improper conduct.
Other Improper Behaviour: The Act also recognises other forms of improper conduct not explicitly listed in the above points but defined under regulation.
The Importance of Your Credit Report
To be able to be awarded credit, a credit provider will do a credit check on you. Depending on the health of your credit report, you will either be approved or denied this credit. According to South African law, a credit provider may not approve credit to an over-indebted consumer. Check the health of your credit score here.
Where to Find Help
No person is an island, and every person sometimes needs a helping hand to get back on top of life. Debt can destroy homes and lives if not managed. If you need assistance, contact us to see how we can be of assistance.