The In Duplum Rule is dead!
– Long Live the In Duplum Rule!
In the recent Nedbank v The National Credit Regulator, Judge Malan clarifies the position around the In Duplum Rule and confirms the declaratory order previously given by Judge du Plessis relating to it.
Firstly, Malan makes a strong point to tell us that the In Duplum Rule has not simply been enacted (and slightly amended) in the NCA. He tells us that the In Duplum Rule does not exist at all in the NCA. Instead, it has been replaced by Section 103 of the NCA, which functions similarly in some respects and completely differently in others.
Thousands of very smart people have previously written about the In Duplum Rule and this note does not attempt to do so as well. This note merely attempts to highlight what Section 103 expects from us after the Nedbank declaratory order; i.e. it looks at the future … not the past.
In the abovementioned Nedbank-case, at paragraph 49, Malan writes:
Once the amounts referred to in s 101(1)(b) to (g) that accrue during the period of default, whether or
not they are paid, equal in aggregate the unpaid balance of the principal debt at the time the default
occurs, no further charges may be levied.
Gone are the days that payments made by the debtor would reduce the already-limited interest, and by doing so, allows the Creditor to run up further interest to the cap again.
Assume that a debtor defaults on his payments on 1 April 2011. However, the Creditor attempts to rehabilitate the debtor through a series of calls made by its own staff for the next 60 days. Interest accrues in the Creditors system and is added to the outstanding balance.
On 1 June 2011 the Creditor ceases his attempts to rehabilitate the matter and extracts the data from its system. The data extract contains an outstanding balance as at 1 June 2011 and not 1 April 2011. The extract furthermore includes interest that accrued since 1 April 2011, which forms part of the default period.
Assume further that red-tape prevents the actual handing over of the instruction to a Law firm or Debt Collector for another 30 days and that the extract finally only reached the outsourcee on 1 July 2011.
The Nedbank-case clarifies that when the outsourcee calculates whether the In Duplum Rule (or should we say Section 103) is exceeded or not, it needs to take into account the following:
- The outstanding balance at 1 April 2011 and not 1 June 2011 or 1 July 2011;
- The interest and costs that may have accrued in the Creditors system between 1 April 2011 and 1 June 2011; and
- The interest that accrued in the outsourcees system as from 1 June 2011 (asn not 1 July 2011)
Simply put, all initiation fees, service fees (like bank charges), credit insurance costs, default administration charges and collection costs that have accrued since 1 April 2011 must be added to all interest that have accrued since then.
This total figure may not exceed the outstanding balance as it was at 1 April 2011.
Two questions remain:
- Can the Creditor supply this information? and
- How fast will the Creditors change their systems to allow for the supply of this information when the Courts start declining their Default Judgments?