Making the right choice is vital for your debt review.

This week’s blog topic we want to share with consumers the problems you can expect when an account in debt review is in arrears, this week is the home loan account. In most cases the consumers bring the arrears up to date immediately, but when the bank proceeds with legal action, after the home loan account in debt review was no longer in arrears. We at CDS(Consumer Debt Support) want to share the value of debt review and the services of the registered debt counsellor understanding the NCA(National Credit Act) specifically when in default of  debt review restructuring consent order.

When the bank proceeds with legal action on a credit agreement in terms of Section 88(3) on grounds of a default or short payment on a debt review. What is important to know, when the account is brought up to date with immediate effect  from the moment of notification of the default, which means the account is no longer in arrears.

The question is: Can the bank proceed with legal action against your property, when you are no longer in arrears with your debt review order?

Let us investigate the problem(we will take a look at case study of a high court case) as in this case was the reason the bank (applicant) proceeded with a summons without notice. For the following reasons the bank took legal action in the High Court against the consumer because the consumer paid short on the restructured payment arrangement in debt review, as was granted by the Magistrates court in Bellville, Western Cape.

We are referring to a High Court application brought by applicant First Rand Bank referring to the matter: Case number 3027/ 2017.

This whole case is about a consumer that payed the home loan account short to the amount of R50.00 pm since 2012, which placed the consumer in default of the debt restructuring consent order.

When Receiving the news that a home loan account is in breach of the restructuring court order, it can be devastating news  to anyone who is currently under debt review. Most of the time consumers are sure the debt review payments are up to date. This comes back to the blog of last week, consumers must ensure they take responsibility together with the debt counsellor to stay on top of their debt review payments.

In this case the immovable property which was subject to a mortgage loan agreement, being a credit agreement as defined by the National Credit Act 34 of 2005 (“the NCA”) and which credit agreement was secured by two mortgage bonds registered over a property in favour of the plaintiff FNB ( First Rand Bank), who took the matter to court.

The Plaintiff’s (FNB) case was essentially that the defendants defaulted on the obligation of the debt review restructuring consent order, which then entitled FNB to proceed with legal action and enforce their rights as per the original contractual agreement.”

The consumer realised the default:

When the consumer realised FNB was within their right to notify the consumer of the default. The consumer took immediate action and was advised to correct the error and bring the payments up to date with immediate effect. The arrears which amounted to R1,484.32 was paid up to date. What is important is to ensure payment is made as per the court order, to the PDA or if you are managing you own payment direct to the creditor. Consumer X is a good example that acted in good faith to repay the amount that was in arrears immediately, but the bank proceeded with legal action none the less.

The question was. Did the bank have a claim to proceed against the debtor’s default under a rearrangement order?

No, the bank did not. So let us have a look at how this debt review application benefit the consumer who is over-indebted. The contractual payment on the bond was R6516.92 and was restructured to a more affordable payment of R4 648.53 by a consent order.

When the bank proceeded with legal action against the consumer X in the High Court was consumer X in arrears?

In this matter, the consumer was clearly not in default, the arrears or shortfall was paid before the bank took legal Action therefore, the matter was settled and resolved. The court was asked to dismiss the matter on these grounds.

The Defendant (consumer) legal position is further borne out by the Plaintiff’s (FNB) papers in the matter is that, if Section 88(3) THE TERMINATION NOTICE of the NCA applied since the first short payment in October 2012. A further question was, then why did the Plaintiff wait a further five years before commencing with legal action on this arrears of R50.00 pm for a period of five years. The Home loan was no longer in arrears of R1,484.32 aggregate over the entire period, as opposed to separate defaults that automatically bars the Defendants from subsequently remedying such shortfalls. Quoted from the actual apposing papers filed by consumer X.

Since the credit agreement was subject to a debt re-arrangement order and the Defendant (consumer) complied with that order, the above Consumer X argued that it must dismiss this application for Summary Judgment.

Understanding the NCA when in you are in default and what it means to you:

Section 88(3) of the National Credit Act provides that a credit provider who has received notice of an application for debt review:

“. . . may not exercise or enforce by litigation or other judicial process any right or security under that credit agreement until ─

(a) the consumer is in default under the credit agreement; and

(b) one of the following has occurred:

(i) . . .; or

(ii) the consumer defaults on any obligation in terms of a re-arrangement agreed between the consumer and credit providers, or ordered by a court or the Tribunal.”

The Judge Nuku J. reserved judgment and ruled the following on 25 April 2017:

Could the credit agreement be excluded from a debt review application? Or must the court dismiss the matter on the grounds the bond is not in arrears as per the restructuring consent order?

Honourable Judge NUKU, J ruled in favour of the consumer X. The application for summary judgement was dismissed.

Our legal representative Liddle and Associates, Lawyer Quintin Zimmermann(BA LLB) defended this matter in the High Court. He is the debt review expert. Another consumer whose home is safe in debt review.

Are you are finding yourself in a similar situation and afraid of losing you home in debt review? Here is our email, please contact us at cds_dc@debtcentre.co.za

Ensure you provide all your contactable information, along with your area of jurisdiction and a copy of your debt review consent order, as well as your PDA proof of payments attached. We will ensure your email is forwarded to Liddle and Associates to contact you.