Cape Town - Debt has been around as long as money has – and so have
Today, the worst – apart from the stress - that can happen to a defaulting debtor are
three things: a bad credit record, repossession of goods and possible
bankruptcy. That is if you are dealing with a legal lending institution.
There is no telling what the bully boys of a loan shark
might do to you – it’s probably closer to what happened to defaulting debtors
over the last 2000 years of human history.
If however, there is fraud committed on the part of the
defaulting debtor, charges may be laid for fraud. That would include things
such as false declarations of income on loan applications, identity theft, or
the use of bank accounts to defraud other consumers.
The SA National Credit Act of 2005 puts the onus of checking
whether the borrower can afford to repay a loan squarely on the lender. If the
lender has not clearly explained the terms of the loan, and has not taken steps
to check affordability, the loan agreement can be cancelled by the courts.
Debt slavery in Rome
Debt bondage is when someone borrowed money and pledged
their labour or their services as security for the loan. This debt could, in
Roman times, be passed onto the next generation. Imagine how concerned children
must have been if their parents took out loans. Although not technically a
slave, a debt defaulter had no more freedom of movement and choice than a
slave, so the distinction was academic.
Debt slavery was the only way to solve unpaid debts in
societies where there was not the legal option of bankruptcy. But in many Greek
city states, there was a time limit of five years on the time you could be
required to work for a creditor.
The Romans had a name for this practice: Nexum. This was
aimed at preventing corporal punishment of debtors, but their situation was
still not enviable. It was technically abolished in 326 BC, but remnants of
this practice were still found in the time of Cicero, 300 years later.
Debtors in the reign
of Gengis Khan
One did not expect mercy for anything during the reign of Genghis
Khan – and rightly so. Anyone who was declared bankrupt three times was given a
mandatory death penalty. You could also be hanged for stealing a horse or
sleeping with your neighbour’s wife.
In the early Middle Ages, punishments were harsh for most
transgressions. One of the reasons for this is that there were very few prisons
(the majority of the buildings were made of wood and thatch and could not
really hold a prisoner) and punishments for a wide variety of crimes were
mostly physical and immediate. This could include being branded and flogging or
Defaulting debtors were often put in the stocks or pillories
at the fairs and markets, where they could be pelted by passersby. This was not
only humiliating, but could also be dangerous, as there were no restrictions on
what could be thrown at people in the stocks. These displays were meant to
discourage other citizens from defaulting on their loan repayments.
Another rather odd rule was that a responsible debtor (one
who acknowledged his debts, but could not necessarily pay them) could be placed
under house arrest – in his own home, or in that of his creditor. What was
more, the creditor was obliged to feed the defaulting debtor for a period of
three months. Debtors’ prisons existed, but were few and far between.
In medieval France, debtors could be excommunicated (banned
from the church) at the request of their creditors. It was a serious punishment
that effectively isolated debtors economically and socially.
The Cape Colony
Under the rule of the Dutch East India Company, debt bondage
was not uncommon. Slavery and the practices associated with it was only
abolished in 1834. Slaves could be used as security for loans, and if the
debtor failed to pay, the slave became the property of the creditor.
Slaves could not take out loans, so could not default on
them. Soldiers and sailors were paid very badly in the seventeenth and
eighteenth century at the Cape, and often had to resort to borrowing money to
buy food to get through the month. Defaulters were often sentenced to company
labour and fines and floggings – sometimes deportations.
It is thought that a few of the early Dutch settlers at the
Cape were fleeing creditors in the Netherlands.
The debtors’ prisons, made so famous by the novels of
Charles Dickens, confined debtors until their debts had been paid. But, behind
bars, they were unable to earn any money, and so the sentence could technically
carry on forever. Debtors were kept separately from other prisoners, and,
although they sometimes did some work in the prison, it was not the hard labour
the other prisoners did.
Dickens’ father was imprisoned in the Marshalsea debtors’
prison where he stayed for several years until he could pay his debts with an
inheritance he received.
Hanging or transportation to Australia was mostly used for
more serious crimes in Victorian England. People kept in ordinary prisons,
where conditions were harsh, could sometimes be released early – but only if
they had no debt.
for debt defaulters
In most developed countries you cannot be sent to prison for
unpaid debts. Punishments mostly consist of being hounded by your creditors,
being made to pay penalties, getting a bad credit record, having your goods
repossessed, and being declared bankrupt. All stressful enough, but still a lot
better than being flogged or branded, or becoming a slave.
- Victorian crime and Punishment: http://vcp.e2bn.org/justice/page11361-types-of-punishment-imprisonment.html
- South African History Online: http://www.sahistory.org.za/article/history-slavery-and-early-colonisation-south-africa
- Medieval histories: http://www.medievalhistories.com/debt-late-medieval-france/
- Wikipedia: https://en.wikipedia.org/wiki/Debt_bondage