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Johannesburg - Eve, a Fin24.com user, writes:
I made a terrible mistake in February 2007 when I lent a substantial amount of money to a "friend". She promised to repay the money within a few days. The few days became a month, then a year. I extended my bond to give her the money. I have to pay the increased payments every month, including interest.
We have signed a contract and she has been paying the monthly instalment on and off.
She has now applied to be placed under debt review.
I was first contacted by the agency in January 2010, although she applied for debt counselling in October 2009.
I could not agree to the offer that they made - it was far below the interest I pay on my bond, and the amount offered was much lower than what I have to pay.
I told them this and they said that the matter will have to be referred to court. To date I have not received a payment for January or February, and only a partial payment for December.
I am a single mother battling financially and cannot afford legal fees for a lawyer to assist me in this regard.
Is there anything I can do? Can they just refuse to pay me anything until the matter is settled in court? Do I have any rights in this regard?
Alan Manshon of the debt counselling and financial coaching practice The Money Clinic:
Based on the information supplied by Eve, the critical issue would be the exact nature of the relationship between her and the person she lent the money to.
If the money was lent based on a friendship, in other words Eve only entered into the agreement to assist a friend and was not looking to gain beyond what entering into that agreement cost her (ie the increased bond and the interest and fees it attracted for Eve's account), the agreement would be considered not "at arm's length".
Section 4 of the National Credit Act (NCA), infers that the act is not applicable to agreements entered into which are not at arm's length and where the parties do not necessarily strive to obtain the utmost possible advantage out of the transaction.
Therefore, if Eve had entered into this agreement purely to assist a friend and was expecting only that the borrower pay back the capital amount plus interest and fees that Eve herself became liable for, that agreement is not subject to the NCA and by extension not subject to debt review.
On a logical level, the concept of debt review was created to provide a measure of protection to a consumer while still addressing the rights of the credit provider. Where the credit provider benefits from the interest and fees charged, it stands to reason that by extending the period of the loan, they would still be receiving interest.
Where, however, a person who is not a credit provider is not repaid in terms of the agreement, that person might well face financial difficulty or ruin in their own right. The act was never designed to protect one party to the detriment of another.
Eve's other issue was that she had been contacted by a debt counsellor who is acting on behalf of the borrower.
As indicated above, I do not believe this matter falls within the debt review process, although Eve needs to decide whether debt review may be her best chance of recovering the money owed.
She may therefore choose to participate, without prejudicing any of her pre-existing rights.
She is under no obligation to accept the offer made by the debt counsellor. When the debt counsellor presented her with a proposal, she indicated that she had rejected the offer as it did not meet her requirements in terms of what she is obligated to pay as a result of this loan. She was fully within her rights to do so.
Civil proceedings an option
This does force the matter to court but she should still be receiving payments in line with the debt counsellor's proposal until the court date.
In terms of the court proceeds, Eve must also be listed as a respondent in the court matter and notice of the hearing must be served on her at least 10 days prior to that court date.
Because legal costs are a concern, she does also have the right to represent herself in court.
This is an opportunity for Eve to present her side of the matter to court without having initiated the matter. The court has just as much an obligation to hear Eve's side as the person who applied for debt review.
If Eve chooses not to participate in the debt review process, she may wish to institute civil proceedings against the debtor.
If the amount is less than R7 000, she may approach the Small Claims Court closest to where she lives for assistance.
If the amount exceeds R7 000, she could approach the Cape Law Society in the hopes of being referred to an attorney who would be prepared to take her case on a pro bono basis.
In fairness to the debt counsellor though, I would like to point out that as a practising debt counsellor I too look to include agreements which are not at arm's length.
This is done to ensure that people who find themselves in a similar position to Eve's also enjoy the same consideration for repayment as much as any bank or other credit provider. The repayment of that debt also becomes an order of court.
One should therefore not automatically assume that the debt counsellor is motivated by malice or caprice; he or she may very well be attempting to find a fair and equitable solution for all parties concerned.
- Fin24.com
The Money Clinic is a debt counselling and financial coaching firm in the greater Cape Town area.
(The Money Clinic and Fin24.com's Money Clinic are not associated.)
