How to save your house from bank repossession
CIARAN RYAN: This is CFO Talks and today we’re very happy to welcome Leonard Benjamin to the studio. Leonard is the former head of legal personal benefits at Liberty Life, he’s also a former high level judoka, and for those of you who don’t know, that’s a judo practitioner, and in more recent years Leonard spends his time consulting on all things related to consumer law, litigation and the rights of the consumer. So welcome, Leonard, you and I have known each other for quite a few years and I think more than anyone you have educated me on various aspects of consumer law that generally escaped the public’s attention. I think this is a subject that’s extremely relevant to the lives of financial executives and CFO’s because at the end of the day they are responsible for the financial wellbeing of their employees. We see so many cases emerging in recent years of employees getting to the end of the month with virtually no income, they’re surviving on month-end loans to carry them over and to buy food. This puts them in the hands of loan sharks, who ensure that they get repaid by way of emolument attachment orders or what are more commonly known as garnishee orders. Can you kick off my explaining how big a problem is this in South Africa and how it’s being abused?
LEONARD BENJAMIN: I think it remains a problem because the Stellenbosch University Law Clinic case didn’t apply retroactively. So you can have literally thousands of garnishee orders that are actually nullities, for instance, where they were granted in the wrong court and employers are still deducting money from their employees and paying over to creditors on these invalid orders. The big problem for employers is that if the garnishee is a nullity the employee has actually got recourse against them because they’re acting illegally. So it remains a massive problem.
CIARAN RYAN: You’re talking about a case that was brought by the University of Stellenbosch Law Clinic, I think it was in 2015, where they brought about a dozen credit providers before the Western Cape High Court and it was found that I think there were 12 out of 16 of these cases where they found that these garnishee orders were actually unlawful because what they were doing was they were going to a Magistrates Court, say, for example, the loan was granted in the Western Cape, when the person defaulted they would then approach the Magistrates Court for what they would call a garnishee order but they would do it in Randburg or some other parts of the country. Now, that’s illegal as far as I understand, is that correct?
LEONARD BENJAMIN: That’s correct and that was confirmed by the Constitutional Court, the Stellenbosch University Law Clinic case ended up in the Constitutional Court and it confirmed what the high court had basically said. The real issue is because of the way the order was expressed by the Constitutional Court it didn’t mean that garnishees can automatically be disregarded, active steps have to be taken to set them aside. So if that hasn’t happened and they were issued in a court that didn’t have jurisdiction that then leaves the employer liable because they are attaching money in terms of an illegal order.
CIARAN RYAN: So the employer is actually liable if…
LEONARD BENJAMIN: To the employee.
CFO’s need to know their liabilities
CIARAN RYAN: To the employee if the garnishee order is unlawful. Now, if we extrapolate that particular case, and why this is important for chief financial officers is they really need to know what their liabilities are, if we extrapolate that case where 12 out of 16 garnishee orders in this case were found to be unlawful, and we’re looking at millions of garnishee orders that have been issued across the country, this could be a huge problem, it could be a huge liability for companies, not so?
LEONARD BENJAMIN: Correct and not only so, there is no measure of how much money when the debt is repaid and when it ends. So you get a situation where the employer is deducting money from the employee every month and paying it over without knowing whether that debt has actually been settled. There is no way of absolutely basically establishing that, except in calling for a detailed statement of account and knowing what to look for to establish whether the debt has been settled. So all types of things can happen, legal costs can be added, which aren’t due, so you get this never ending escalating debt that takes forever to be repaid and it’s actually never been repaid. I’ve had cases where that’s happened, where the debt was repaid years before and the employers basically paid money over to the execution creditor, without questioning A. the validity of the order and B. whether the debt has actually been settled.
CIARAN RYAN: So these creditors, these loan sharks, will sit there and they will accept this money month after month even though the debt might have been repaid two years ago and employers are continuing to pay that over.
LEONARD BENJAMIN: Correct.
CIARAN RYAN: What advice do you have for, first of all, employees and also for chief financial officers who have employees who are having their salaries garnished every month, what should they be doing? How should they be looking at this?
LEONARD BENJAMIN: I think a lot of big organisations have been quite proactive about that and they have done an audit of the garnishees to see if A. they are valid and B. whether they’ve put in some guidelines or controls in place to make sure that when they are repaid the deductions stop. If they haven’t done it then that’s the obvious way to go, get the garnishee order, ensure that it is a valid order, get an account from the creditor to make sure that you know when the debt is repaid.
CIARAN RYAN: Right and I think one of the ways to check whether it’s a valid or an invalid garnishee order is just to look at where was the loan taken out and where was the garnishee order issued. So, for example, if the loan was granted in the Western Cape but the garnishee order was granted in Randburg in Johannesburg that’s unlawful.
LEONARD BENJAMIN: Not necessarily, the garnishee follows the employer, now obviously where it’s a small company located in one area that’s quite easy to establish but what about a corporate that has numerous branches, for instance the bank, theoretically you should be serving that on the bank’s head office because that’s where the personnel files are kept and so on. Just remember that it’s a personnel, HR issue and a payroll issue, the deduction, so that doesn’t necessarily mean that that garnishee order is illegal if the employer actually has a presence in the area where it was issued.
CIARAN RYAN: Okay, so it can be the place of employment or it can also be the residence, where the person actually lives…
LEONARD BENJAMIN: The employer.
CIARAN RYAN: The employer.
LEONARD BENJAMIN: Correct.
Courts have been inflexible
CIARAN RYAN: From my years of reporting on consumer issues I come across a lot of very sad stories, as do you, particularly where people lose their jobs and can no longer afford to keep up with their mortgage payments, losing your house is one of the most traumatic experiences in anyone’s life. It breaks up families, it makes it more difficult for them to reintegrate into the formal economy. I know of several cases where people were thrown out of their houses after the bank repossessed the property and they ended up in shanty towns. The courts in South Africa have a reputation for being the debt collection agents of the banks, is this a deserved reputation and if so, why?
LEONARD BENJAMIN: I don’t necessarily agree with that, I think that it is a bit of a hit and miss situation and I think that at times the courts have been very inflexible in how they’ve dealt with matters but generally what you’ve got to realise, and I don’t know how you actually work out the precise percentage, but the majority of cases, and I have heard that it’s as high as 90%, of matters aren’t opposed, so the bank gets default judgement. Under those circumstances all the court has before it is what the bank says.
CIARAN RYAN: Let’s just clarify what is a default judgement, you get issued a summons, you’re in default on your mortgage payments, the first thing that the bank must do is what?
LEONARD BENJAMIN: The start of the process is to send you a registered notice to tell you that you are in default.
CIARAN RYAN: That’s what they call the Section 129 notice in terms of the National Credit Act.
LEONARD BENJAMIN: Correct. Once you haven’t responded to that and there’s a period of ten days to respond, they can then issue summons. When you get the summons and it isn’t necessarily served on you, which is another problem, and you don’t oppose the matter, the bank is in the position to enter default judgement. Now, a default judgement in the case of foreclosures has become quite a protracted process for the banks because, unlike other debts, the bank has to formally serve an application for default judgement, what they call a Rule 31 application, on you to give you another opportunity to defend. The reason why I am sketching this is because despite this and despite the attempts that the courts are going to to involve the debtors, the consumers, people aren’t taking advantage of this. So really when the court gets to consider the matter, all it has before it is what the bank tells it and unfortunately the banks have manipulated information and details and facts.
CIARAN RYAN: In other words, lied.
LEONARD BENJAMIN: I can’t basically say that emphatically, they either don’t understand their business or they do and they are misleading the court. It’s only one of the two.
CIARAN RYAN: So as a general principle somebody who’s in default…because everyone when they hit…you have a mortgage loan that has a 20-year life, I think it’s actuarially certain that you’re going to hit some financial wobble in that 20-year period. So you’re likely to fall into default at some point. Now, there are various ways that you can overcome that, you can approach the bank and you can ask for a mortgage payment holiday, you can ask for an extended term of the loan and you can come to some arrangement with them to pay off that arrears. But if you are served with summons, what you seem to be suggesting is that you should always defend it?
LEONARD BENJAMIN: It’s not so much defending it, if you don’t have a defense to the claim it doesn’t help defending it but the courts must exercise judicial oversight. What that means is that they’ve got to take your circumstances into account. So even though you might not be able to defend the matter and the granting of the judgement because you owe the money and you are in arrears. If your personal circumstances are such that the court cannot order an eviction, a court that is basically faced with an eviction application will not evict you. Then that information must be brought to the court’s attention. So it’s not a question of defending it, it’s a question of giving the court enough information so that it can exercise its discretion. So, for instance, if you’ve got a household with disabled people, old people and children, the court needs to know about that and how it’s going to affect them. I think the biggest problem and why the banks are getting away with what they get away with is because the practitioners who defend or assist consumers are steeped in these adversarial ways. So they raise a couple of defenses almost by rote, so they will basically challenge the authority of the person deposing the affidavit on behalf of the bank. If there is no documentation attached they will trot out a defense that the documentation is not attached and the proceedings are irregular. But they don’t really engage with the substance and the substance is these are my client’s personal circumstances, there are children in the house, get a social worker’s report to emphasise to the court what impact evicting this family has because that’s the test for granting the executability order, this is what the consequences are going to be for the children or the old or the disabled because that allows the court to sit back and say under these circumstances we cannot, in all honesty, grant this order. The biggest issue has been, and I have been going on about this for two years, as you know, about how the banks calculate the arrears, the arrears are the single most important factor that the court takes into account…
Banks incorrectly calculating arrears
CIARAN RYAN: And in many instances that you’ve seen it’s been incorrect, the bank has been incorrectly calculating the arrears.
LEONARD BENJAMIN: Correct. So if you come to court and the arrears are R200 000, as an example, the court, despite everything, will not agree to postpone the matter, they will not grant the judgement because the prospect of catching up R200 000 of arrears when you are a couple of months or even years in arrears is really, really remote. So the court will grant the order. But if your arrears are three months, four months, the court will inevitably postpone the matter to give you an opportunity to catch up the arrears. The cases that I have been involved in and the banks had been over-calculating, overstating the arrears for various reasons…
CIARAN RYAN: Just explain what some of those reasons are?
LEONARD BENJAMIN: The first thing is that when they go to court they base it and they sue you for the full amount outstanding, they base it on…
CIARAN RYAN: That’s called accelerating the debt.
LEONARD BENJAMIN: Correct, the full amount, even though you are only a couple of installments in arrears. That’s got the effect of making the whole amount outstanding and balance due, owing and payable. Once that acceleration occurs, they cannot add further installments to the arrears but the banks have been doing that consistently and nobody has addressed them on this.
CIARAN RYAN: So if you are two months in arrears and the bank then calls up the loan or accelerates the loan, as they say, from that moment on they cannot then be charging you as well as the accelerated loan additional monthly installments?
LEONARD BENJAMIN: That’s my view, correct.
CIARAN RYAN: Is this about to be tested in court to see if we can get some case law on that?
LEONARD BENJAMIN: It’s a cause of frustration because although we’ve been raising this it’s never got to the point where it actually has been argued before a court. We recently got a concession from one of the major banks that they were calculating incorrectly and what I maintained is that the arrears cannot increase after the date of acceleration and they’ve conceded that that’s correct. Whether the rest of the banking fraternity feels the same is a question of testing it.
CIARAN RYAN: Do you think that will ever get a hearing in court one day or do you think the banks would avoid that because that would have huge importance for them?
LEONARD BENJAMIN: We are working with consumer activist groups to try and get these cases before court, it’s a question of the appropriate case and pushing the envelope and basically getting the matter determined with legal argument. At this stage there has been absolutely no legal argument on this point, absolutely none.
CIARAN RYAN: You’ve been very critical of the banks over the years and the way they go about recovering money from defaulting clients and I think it’s worth pointing out here that roughly 40% of the 20 million South Africans with credit accounts are in some form of distress, meaning that they are at least two months behind on one or more credit payments. This figure is so staggering that surely that points to a pattern of reckless lending, would you agree with that?
LEONARD BENJAMIN: I think reckless lending still takes place but I think that’s more reflective of what the economic situation is in the country, where a lot of people are losing their jobs, where people are buying food on credit. It’s just a matter of time, one emergency away from a person basically defaulting and being unable to pay their debt. So I think that there is reckless credit being extended but I also think that a large, large factor is the state of the economy.
How the Prescription Act benefits consumers
CIARAN RYAN: One of the major points of stress for borrowers in default is the fact that they get harassed by debt collectors telling them that they have to pay up on old loans. Well, it turns out that many of these loans that they are trying to collect on are not recoverable in law, thanks to a beautiful piece of legislation called the Prescription Act. Please explain what is the Prescription Act and how it benefits consumers?
LEONARD BENJAMIN: The whole rationale of the Prescription Act is that if the creditor knowing, with all the factors in place, to sue you, doesn’t take the necessary steps to promptly expedite its claim against you, it almost amounts to a waiver of its right to sue you. Now, most debts prescribed after three years, if you’ve got a mortgage bond…
CIARAN RYAN: Just give an explanation, what kind of debt would prescribed debt be?
LEONARD BENJAMIN: Credit card, store card, overdraft. However, if the debt is secured by a mortgage bond, for instance a home loan, that’s 30 years.
CIARAN RYAN: Thirty years for a mortgage loan but three years for most kinds of other common debt.
LEONARD BENJAMIN: Correct.
CIARAN RYAN: So in other words, if you have defaulted on a debt that is more than three years ago and a guy phones you up and says, hey, do you remember that Truworths account that you took out five years ago and you say yes I do but I can’t afford to pay it. Well, you’ve just actually admitted that you owe the debt.
LEONARD BENJAMIN: Correct.
CIARAN RYAN: So give some advice on how you should actually handle these calls from debt collectors.
LEONARD BENJAMIN: What you’ve got to realise is that the Prescription Act allows for interruption of prescription, so if you acknowledge the debt, as you just said or the example you’ve just given, the prescription starts running again. If you pay that’s an acknowledgement of the debt, no matter what circumstances and that’s what the Prescription Act says. Now, the National Credit Act itself has got provisions that were introduced in 2014, I think, relating to prescribed debt. So the change wasn’t to the Prescription Act, there were exceptions created in the case of credit agreements in the National Credit Act and what these basically say is that if you would have raised prescription when the person contacted you and you weren’t aware that you could raise it, you would still basically be able to rely on prescription. So in order to collect these prescribed debts, these collection agencies would have to get you to acknowledge that you know that the debt is prescribed and that you don’t have to pay it. Despite that, maybe for some sense of misguided morality, you are still going to pay it and that’s the lengths that they are going to have to go to. If they haven’t done this and even if you’ve paid it’s not a proper interruption of prescription for purposes of the National Credit Act and you can recover that money. So if people phone you and you know you haven’t acknowledged the debt or made any payment for more than three years, you essentially can tell them to get lost. There is an important distinction though, if it’s a judgement debt, so they have sued you and they’ve got a judgement against you that also takes 30 years. So if you haven’t heard from somebody for five years but a judgement has been granted that doesn’t work.
CIARAN RYAN: Okay, so let’s run through a little drill here, I’m a debt collector and I’m going to phone you and I’m going to try and recover this debt. Good morning Mr Benjamin, my name is Ciaran Ryan and I’m from the debt collection agency, do you remember that overdraft that you had with Nedbank a few years ago?
LEONARD BENJAMIN: I don’t know why you are phoning me about that debt. That debt is prescribed, please don’t phone me again.
CIARAN RYAN: Oh, do you remember though that you did have a debt?
LEONARD BENJAMIN: Goodbye. Short and sweet.
CIARAN RYAN: So that’s how you handle it.
LEONARD BENJAMIN: You don’t get into discussions about the debt. If you know for definite that that debt is prescribed, don’t entertain any discussion, none. You don’t have to discuss this with them.
CIARAN RYAN: It’s also clear that people are trying to phone you and get you to admit things, which they are recording, and it can be used in a court of law against you. So you do not get into any conversations with any debt collectors. If they want to communicate with you they must put it in writing.
LEONARD BENJAMIN: Correct.
CIARAN RYAN: Research by Advocate Douglas Shaw suggests that South Africa is one of the most abusive countries in the world in terms of its home repossession practices. Can you run us through why this is and, more importantly, some recent court cases that make it more difficult for banks to foreclose on residential properties?
LEONARD BENJAMIN: I think it’s very difficult to say that we’re one of the most abusive, maybe that’s correct historically…
CIARAN RYAN: It’s improved in recent years.
LEONARD BENJAMIN: Quite a lot since the National Credit Act and some of the developments I am going to talk about. Just to give you an idea of where we are not at, in the UK, for instance, under certain circumstances a mortgager can repossess your property without going to court.
CIARAN RYAN: Really?
LEONARD BENJAMIN: Correct. So we are not at that stage, every repossession needs judicial oversight, the court must be involved. So when you talk about abusive practices maybe there are other practices overseas that are more abusive. However, I think it’s very, very clear that for many, many years the banks have basically had their way with repossessions and foreclosures and they’ve done practically whatever they have wanted to. The National Credit Act, in theory, did put some obstacles in their way, for instance the prior notifications in terms of Section 129.
The value of the National Credit Act
CIARAN RYAN: In other words, they’ve got to notify you that you’re in default and you’ve got ten days to catch up or we are going to go to court.
LEONARD BENJAMIN: Correct. Debt review wasn’t something that basically could help a lot of consumers under debt review and so on but it really took the courts to develop and highlight the value of the National Credit Act. I’m going to just talk about two examples, the first one was the Nkata case, the Constitutional Court, where the court said that you only have to pay your arrears and that’s why the arrears are so important and that they are properly determined. As soon as you catch up your arrears, even though judgement has been granted against you, provided those arrears are caught up before the house physically gets transferred to the new owner or the purchaser, in the deeds office you can catch up those arrears. There are other prescribed amounts that need to be paid, such as reasonable legal costs but this is a very, very important departure from what the common law is. In the common law you could only save your property by paying the full judgement debt, it’s called redemption, so you had to pay off the amount that you owed in full before the property was transferred to be able to get your house back, now you only have to pay the arrears.
CIARAN RYAN: I think it’s important that people understand that when we talk about the Nkata case that it’s usually taking about two to two-and-a-half years for this whole legal process to run its course through the courts. So you’ve been summoned by the bank over an arrears amount, it may have been three months or six months that you were in arrears, whatever it was, as long as you pay just that arrears amount before the property is transferred to a new owner, even though there’s judgement issued against you and they’re trying to evict you from the house, you stay put, you pay your arrears and your mortgage bond is automatically reinstated.
LEONARD BENJAMIN: Correct.
CIARAN RYAN: And you remain in possession of the house.
LEONARD BENJAMIN: You’re still the owner.
CIARAN RYAN: You’re still the owner. What then does the bank do at that particular point because they’ve got judgement against you?
LEONARD BENJAMIN: The judgement falls away once you’ve caught up your arrears, it’s incredibly significant. The judgement falls away, your attachment to the property falls away, the warrant of execution is no longer valid, so you start from scratch. What the bank should be doing is telling you what your new installment must be. So even if there’s a gap and I think this is the difficultly in people appreciating how valuable this is that if it’s taken you two years before you’ve paid off the arrears that you’ve been sued for, it seems to be quite strange that then you can just resume payment as if nothing’s happened but, in fact, that’s the effect of it. It’s up to the bank to come to you and say to you, based on this balance and the outstanding amount at this stage, this is how much you need to pay from now on.
CIARAN RYAN: That’s an astonishing benefit to South Africans who are in some sort of financial distress, particularly on their houses, nobody wants to lose their house but if they understand that all they’ve got to do is catch up on the arrears amount before the property is transferred, which can be two or two-and-a-half years away from the time that they defaulted, they can actually retain the house but people don’t know this.
LEONARD BENJAMIN: The whole point is that it doesn’t make sense to defend legal proceedings, throw money at trying to defend it with these very, very spurious technical defenses that I mentioned previously. Rather take your money and dedicate yourself to paying the arrears. The problem has been that because of the way the banks have interpreted this section that the arrears keep on escalating. So you’re getting into a situation where you’ve got to pay your current installment, according to them, plus catch up your arrears. Now, that argument is a fallacy. That’s not what you have to do, you only have to catch up the arrears on the date of acceleration. So that makes it instantly attainable for people. If you know that those arrears are correct and we are going to talk about why those arrears aren’t necessarily correct just now, you will devote your resources to catching up those arrears. But there’s a massive ignorance about it and the banks are using that ignorance. The number of cases that I get where people are battling to catch up their arrears and they get this ever-escalating or changing target with extra arrears added on and the banks do this. Now, they either don’t understand the law or they are misleading these people and that’s the biggest objection that I’ve got.
Four out of ten people are in financial distress
CIARAN RYAN: I think finance executives in companies and chief financial officers need to know this because this is happening to their employees. We’ve already mentioned the fact that 40% of South Africans with some credit account are in some form of distress at the moment. That’s a catastrophe, four out of ten people in this country are in financial trouble and those are employees. Now, one case in which you are advising involves what they call double-dipping by the banks. In its simplest form double-dipping means charging twice for the same thing, we don’t want to get too technical and we are running out of time but can you explain this in simple terms and how this is a violation of the law?
LEONARD BENJAMIN: It’s not so much a violation of law, what’s an issue is that double-dipping is essentially where the bank is increasing the installment to cover your arrears and holding you liable for the same arrears, and then going to court to foreclose on those arrears against your property. That’s essentially the double payment that they’re talking about. The whole point is that when the banks approach the court, though, and tell the court that you are R200 000 in arrears, if you apply the principles to how an instalment is calculated and so on, you will find that the amount actually in arrears might be one or two months. For the court to then grant a postponement so that you can catch up the arrears, bearing in mind that once acceleration takes place the arrears can’t grow, so that makes it instantly attainable. So the banks are getting away with misleading the courts on what the extent of the arrears is.
CIARAN RYAN: You’ve shown me a couple of cases where the bank was claiming a certain amount of arrears, R50 000, when you investigated it and you stripped away these unlawful charges you found out that the client wasn’t, in fact, in arrears.
LEONARD BENJAMIN: Correct.
CIARAN RYAN: And yet had judgements issued against them.
LEONARD BENJAMIN: Correct.
CIARAN RYAN: So this is going on, this is not uncommon.
LEONARD BENJAMIN: Well, it happens in every single case and the problem is that – and there again I blame the practitioners – nobody has challenged the banks on it, nobody has thought of asking the bank that you’re saying we’re in arrears, give us a breakdown of the arrears. Then looking at those arrears and seeing if they make sense. Nobody has done it. I was guilty of that initially as well and it was very fortuitous how I chanced across this thought that the arrears were incorrect. So it calls for a complete change in mindset from practitioners, from very technical stuff, this is real, real stuff and real, real issues. I just keep on emphasising how valuable this right to reinstate is to the consumers but you’ve got to challenge the arrears and understand if those arrears are incorrect.
CIARAN RYAN: Right, so they do need to approach somebody like you, who understands what they are looking at because the ordinary person inspecting their monthly mortgage bond statement won’t know what to look for. How can people reach you?
LEONARD BENJAMIN: Through your office.
CIARAN RYAN: Okay, so they should contact CFO Talks and we’ll connect you and we’ll leave an email address at the end for people who do want to reach Leonard Benjamin. Just before we end off, are we finding the same kinds of practices going on when it comes to vehicle finance, incorrect charging?
LEONARD BENJAMIN: Correct and if you don’t know what to look for it’s not as in your face just in the way that a vehicle account is set out, as opposed to a home loan account, where it’s frontend loaded and then you pay down the debt. But it happens, so what you’ll see is, for instance, when the interest rate changes there will either be a reduction in the amount of the interest, credit passed for the interest or there’s going to be a debit if it goes up. So you need to understand what the account is. Let me tell you now, I’m probably as financially illiterate as anybody and for me to make sense of this and to understand what’s going on, anybody can basically do that with a bit of financial savvy.
CIARAN RYAN: It’s almost like we need a tutorial to understand how do we interrogate our own monthly statements, whether it’s for vehicles or mortgages.
LEONARD BENJAMIN: Correct.
CIARAN RYAN: Finally, what advice do you have for people who are being hounded by debt collectors? I think we may have already handled that but you may have something more to say on that. But I think one of the most important things is never to admit that you owe anything on the phone, even though, as you said, you morally feel that you have an obligation to repay that debt, you could get yourself into legal trouble by admitting to a debt, am I correct?
LEONARD BENJAMIN: Yes, of course, if there’s a possibility that you could have relied on prescription or queried any aspect of the debt that falls away. I’m not advocating that people should ignore their financial responsibilities and when they borrow money that they don’t repay it. But things happen, people get sick, people lose jobs, divorces, when you are divorced you basically spilt your house, you’ve got two houses with expenses, you can’t afford the debt. The debt collectors cannot possibly force you to pay towards this debt if you are battling to put food on your table. You cannot be expected, and the courts don’t expect that, you cannot be expected to pay a debt at the expense of sending your children to school or paying for your electricity. So I’m just saying that if you are not in a position to pay and don’t make the promises they are going to harass you, that’s their modus operandi, don’t deal with them telephonically, deal with them in writing.
CIARAN RYAN: I think in terms of the Magistrates Court Act, is it Section 65…
LEONARD BENJAMIN: That’s correct.
CIARAN RYAN: Where you can go in there and this is something I often come across, people say I’ve put myself under debt review. Debt review is where all your debts are frozen, they’re lumped together and they work out what is the monthly amount that you can afford. Now, you can go to the Magistrates Court and say I can only afford to pay R100 a month. You don’t have to go under debt review; you can do this much more simply.
LEONARD BENJAMIN: If you are unemployed you can’t go under debt review because it’s based on you earning a salary and being able to pay towards your debt. Section 65, just remember, the creditor can only approach the court in terms of Section 65 once it’s got a judgement against you. So that’s the downside but it will happen in any event if you are not paying. But yes, you’ve got a right and the court will interrogate your expenses and you’ve got a right to eat, medicine and so on before it makes a court order for recovery of a certain amount and if it finds at the end of that exercise that you can’t pay the creditor, the creditor must go away and come back in six months’ time again. So there’s nothing forcing you, if you cannot afford it, genuinely cannot afford it, you can’t afford it. Don’t make promises and don’t pay.
CIARAN RYAN: That’s quite good news to hear that there are some decent protections in law for people in some kind of financial distress in South Africa. I think we are going to have to leave it there, we are out of time but thank you very much for coming into the studio. That was Leonard Benjamin, our resident legal expert on consumer law. If you want to contact Leonard you can do it through me, here’s my email address: email@example.com
Postscript: When Leonard is talking about catching up on arrears (rather than paying lawyers' fees) to retain your house, the arrears referred to are those claimed by the bank when it serves you with the Section 129 notice. This is incredibly significant. It does not refer to any arrears accumulated after this point. So even if you stopped paying for two years after receiving your Section 129 notice of default, you only have to pay the arrears claimed in the 129 notice, not the arrears accumulated thereafter.