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Cape Town - The In Duplum rule means your interest can never be more than the amount outstanding at the time of default.
If you owed the bank R5 000 on the date of default, the maximum interest and all other costs ( admin fees, default and collection costs etc) can collectively accumulate to the same amount of R5 000 making the balance outstanding R10 000.
However, once your account has been handed over to an attorney, they will start adding their legal fees. They are allowed to do this. High legal costs can see you easily end up with an outstanding debt being double or triple your original debt amount.This is a position many consumers find themselves in.
Kem Westdyk ,head of garnishee solutions at Summit Financial Wellbeing said: Section 103(5) of the National Credit Act states that certain costs may COLLECTIVELY not exceed the capital amount. The items are interest, initiation fees, service fees and also “collection costs”
.
The definition of “collection costs” within the NCA is very unclear. Attorneys argue that “collection costs” excludes their legal fees and only includes the creditors collection costs. Those in the debt management industry argue that “collection costs” includes legal fees - and therefore those legal fees must be included in any In Duplum calculation.
Until there is clarity on this rule, consumers will end up with huge interest, costs and even higher legal fees being added onto their bad debt.
According to debt expert Moeshfieka Botha, there is a serious misconception around when the In Duplum rule comes into effect. "According to the In Duplum rule , the interest and costs added to an account in default, may only equal the amount of the debt, at the time of default. In Duplum has very little to do with the initial capital amount."
If you have a loan of R10 000 and you default on that loan with an outstanding balance of R2 000, the interest and default costs on the loan may not be more than the R2 000. Botha urged consumers to avoid defaulting on their debt repayments - as costs soar and the debt grows dramatically, once an account is handed over to an attorney.
If you owed the bank R5 000 on the date of default, the maximum interest and all other costs ( admin fees, default and collection costs etc) can collectively accumulate to the same amount of R5 000 making the balance outstanding R10 000.
However, once your account has been handed over to an attorney, they will start adding their legal fees. They are allowed to do this. High legal costs can see you easily end up with an outstanding debt being double or triple your original debt amount.This is a position many consumers find themselves in.
Kem Westdyk ,head of garnishee solutions at Summit Financial Wellbeing said: Section 103(5) of the National Credit Act states that certain costs may COLLECTIVELY not exceed the capital amount. The items are interest, initiation fees, service fees and also “collection costs”
.
The definition of “collection costs” within the NCA is very unclear. Attorneys argue that “collection costs” excludes their legal fees and only includes the creditors collection costs. Those in the debt management industry argue that “collection costs” includes legal fees - and therefore those legal fees must be included in any In Duplum calculation.
Until there is clarity on this rule, consumers will end up with huge interest, costs and even higher legal fees being added onto their bad debt.
According to debt expert Moeshfieka Botha, there is a serious misconception around when the In Duplum rule comes into effect. "According to the In Duplum rule , the interest and costs added to an account in default, may only equal the amount of the debt, at the time of default. In Duplum has very little to do with the initial capital amount."
If you have a loan of R10 000 and you default on that loan with an outstanding balance of R2 000, the interest and default costs on the loan may not be more than the R2 000. Botha urged consumers to avoid defaulting on their debt repayments - as costs soar and the debt grows dramatically, once an account is handed over to an attorney.
