DO 95% OF DEBT RECOVERY AGENTS GIVE THE OTHER 5% A BAD NAME?
During early 2013 one of my co-Directors came up to me wide-eyed and said that he had heard that Emolument Attachment Orders were no longer permitted. He was informed that this so-called prohibition was a result of the fact that the Act had been changed.
Years of legal experience has taught me that things do not change that suddenly, especially not without warning. A change to the Act (be it the Debt Collectors Act or the Magistrates Court Act) will not take place without due process; not to mention all the dust that it normally kicks up into the air. It was therefore with a lot of conviction that I was able to express that it seemed more likely to be linked to instructions issued by certain clients.
This turned out to be the case, as; soon afterwards, we obtained the joint statement issued by the Minister of Finance and the Banking Association of South Africa (representing Absa, Standard Bank, FNB, Nedbank, African Bank and Capitec). What flows out of the joint statement is a series of points agreed upon between the signatories, amongst others the fact that the signatories are committed to refrain from making use of garnishee orders as a collection tool.
In addition, certain restrictions will be formalised in due course relating to the use of debit orders.
Many of our colleagues in the debt collection industry will react with outcry, blaming everyone from the politicians to the bankers. In reality, we have no one to blame but ourselves. A week or two before the joint statement, some of our local newspapers published articles on how debtors were exploited and overcharged. Many of our colleagues would react to such an article with dismay, blaming the debtors for getting themselves into the position they are in.
The truth of the matter is that there are MANY debt collection companies who are overcharging the debtors they collect from and even more that disregard the correct calculations envisaged in Section 103 of the National Credit Act (those of us who are unsure of the workings of Section 103 must acquaint themselves therewith urgently as it is the replacement mechanisms for the old In Duplum Rule).
Furthermore, many debt recovery agents are so arrogantly blatant in their disregard for the laws that I cannot assume that it is done purposefully. I believe it may have a lot to do with stupidity. Here’s a scenario: recently I explained to a debt recovery agent how our software calculated interest and capped fees. During this discussion I explained how it dealt with receipting fees and I was stunned to hear that the debt recovery specialist insisted on issuing multiple receipts for a single payment if the payment amount was so big that it would have capped the receipt fee. [Remember that item 9 of Annexure B provides that a fee of 10% of the installment received subject to a maximum amount of R368 may be charged]
Here was a respected member of the debt collection industry who was so blatant about disregarding the law in order to overcharge the debtor, that I believe it was done out of pure stupidity. No one, I believe, can be that dishonest and still be proud of it.
Here is the crux of the matter: Each participant in the debt collection industry has a duty to preserve our industry, not to exploit and destroy it. The bad guys are destroying the industry and the good guys will suffer as a result. This cannot be allowed.
It is the overcharging and the dishonesty of numerous debt recovery agents that has given rise to the joint statement and the banning of the use of garnishee orders; not the Minister of Finance nor the Banking Association. This leaves each participant in the collections industry with an obligation to check if his or her business is operating within the boundaries of the law.
Your software plays a critical role. Make sure that your software applies the maximum caps to all relevant transactions. Ensure, further, that your software complies strictly with the provisions of Section 103 of the NCA. Furthermore, does your software calculate interest daily, store is daily and capitalise it monthly? If it doesn’t, you are in contravention of the NCA.
While you are investigating whether or not you are well within the boundaries of the law, broaden your investigation and check if you are now charging for the limited number of SMS messages and traces (as was very recently allowed with the latest edition of Annexure B).
Go further and investigate whether your software is compliant with the provisions of the upcoming POPI Act (currently the Protection of Personal Information Bill). Do you deal with debtor data correctly? Do you archive the data when the Bill requires you to do so? Do you obtain the debtors consent to use the data? Do you inform every debtor about new data obtained on him or her when you do?
Every participant in our industry who doesn’t adhere to our laws and regulations will contribute to a state where we will be regulated more and more; and our work will become more and more impossible. It is time to get it right, or to get out.