Cape Town - Consumer watchdog Summit Financial Partners is at it again - this time regarding attorneys' fees for collecting bad debts, mostly of micro lenders.
In order to protect consumers, the National Credit Act (NCA) applies the so-called in duplum rule to the collection fees money lenders may claim from debtors. This rule means interest, fees and costs - including collection costs according to article 101(g) of the NCA - charged on a loan can never be more than the original capital amount involved. If someone, for instance, borrows R500, then the total interest, fees and costs charged in terms of the loan agreement, cannot be more than an additional R500 in the end.
"Legal fees are an instruction by a lender to a third party to collect a debt on his behalf, so, in Summit's view, it should fall within the domain of the NCA and very specifically that of section 101(g)," Clark Gardner, CEO of Summit, told Fin24. "Even big banks stick to the in duplum rule regarding debt collecting on money they have lent out."