Does your software distribute money collected correctly and what are your risks?

Section 126(3) of the National Credit Act deals with the allocation of payments received from debtors and expressly provides as follows:

(3) A credit provider must credit each payment made under a credit agreement to the consumer as of the date of receipt of the payment, as follows:
(a) Firstly, to satisfy any due or unpaid interest charges;
(b) secondly, to satisfy any due or unpaid fees or charges; and
(c) thirdly, to reduce the amount of the principal debt.

How does Section 126(3) affect your business? What impact does this section have on the way in which you distribute funds collected to your client? Many lawyers and collection agents have clients, who insist that capital must be paid first, then interest and lastly collection costs. The provision of above section clearly makes such a practice illegal … or does it?

It all comes down to understanding the different relationships between the various parties in a collections environment.

Does your software vendor understand the different rules governing the various relationships in your business?