---

THE NATIONAL CONSUMER TRIBUNAL

HELD AT CENTURION

CASE NO: NCT/70/2009/57(1 )(P)

DATE:24/11/2009

In the matter between:

NATIONAL CREDIT-REGULATOR.............................................................................. Applicant

And

ZOLILE SENIOR NJOKWENI..................................................................................Respondent

JUDGMENT AND REASONS

|1] INTRODUCTION

[1.1] The Applicant is the National Credit Regulator (NCR) and the Respondent is Mr. Zolile Senior Njokweni, a debt counsellor with registration number NCRDC 41, registered with the NCR in terms of section 44 of the National Credit Act, 34 of 2005 (the Act).

[1.2]-On 10 July .2009 the Applicant commenced proceedings before the National Consumer Tribunal (NCT) for an order to cancel the -registration of the Respondent in terms of section 57 (1) (a) and (c) of the Act on the grounds that the Respondent had -repeatedly contravened the Act.

[1.3] The Respondent was due to life his answering affidavit on 13 August 2009. The Respondent failed to file his answering affidavit although he sent a letter to the National Consumer Tribunal-(NCT) explaining his position. On 24 August 2009 and 3 September 2009 the Acting Registrar of the NCT sent letters to the Respondent informing him of the correct procedures to follow in terms of the Rules for the-NCT, and advising him that he should apply for condonation for not complying with the Rules. The Respondent did not respond to these letters.

[1.4] The Applicant now applies to the Tribunal for a default order in terms of Rule 25 (2) of the Tribunal Rules.

[2] SUMMARY OF THE COMPLAINT

The complaint is set out in the Applicant's founding documents which included an affidavit from Mr. Mark Whale, an inspector employed by the Applicant in terms of section 25 of the Act. Mr. Whale affirmed that he had conducted an investigation into the business practices of the Respondent and he found that the Respondent was not following the procedures regarding debt counselling as set out in the Act and in the Regulations. The Respondent was also not adhering to his conditions of registration as a debt counsellor. Before Mr. Whale's affidavit is discussed it is necessary to set out the applicable law as contained in the Act and the Regulations

[3] THE LAW

Section 86 of the Act deals with an application for debt review. For the purposes of this judgement the relevant sub-sections read as follows:

(1) A consumer may apply to a debt counsellor in the prescribed manner and form to have the consumer declared over-indebted.

(4) On receipt of an application in terms of subsection (1) a debt counsellor must -

(a) provide the consumer with proof of receipt of the application; and

(b) notify, in the prescribed manner and form -

(i) all credit providers that are listed in the application;

(ii) every registered credit bureau.

(6) A debt counsellor who has accepted an application in terms of this section must
determine, in the prescribed manner and within the prescribed time -

(a) whether the consumer appears to be over-indebted;

(7) If, as a result of an assessment conducted in terms of subsection (6) a debt counsellor reasonably concludes that-

- (a) the consumer is not over indebted, the debt counsellor must reject the application, even if the debt counsellor has concluded that a particular credit agreement was reckless at the time it was entered into;

(b) the consumer is not over-indebted; but is nevertheless experiencing, or is likely to experience, difficulty satisfying all .the consumer's obligations under credit agreements in a timely manner, the debt counsellor may recommend that the consumer and -the respective credit providers voluntarily consider and agree on a plan of debt re-arrangement; or

.(c) the consumer is over-indebted, the debt counsellor may issue a proposal

(10) If a consumer in a default under a credit agreement that is being reviewed in terms of this section, the credits provider in respect of that credit agreement may give notice to -terminate the review ...at any time at least 60 days after the date on which the consumer applied for the debt review.

Further details regarding how a debt counsellor is obliged to perform his functions are found in Regulation 24 (Application for debt review). The relevant subregulations of this Regulation read as follows:

(1) A consumer who wishes to apply to a debt counsellor to be declared over-indebted must

(a) Submitto the debt counsellor a completed Form 16; or

(b) Provide the debt counsellor with the following information........................ :¹

(c) Submitto the debt counsellor the documents specified in Form 16......................

(2) Within five business days after receiving an application for debt review in terms of section-86 (1) of the Act, a debt counsellor must deliver a completed Form

17.1 to all credit providers thai are listed in the application and every registered credit bureau.

(3) The debt counsellor must verify the information provided in terms of subsection (1) above by requesting documentary proof from the consumer, contacting the relevant-credit provider or employer or any other method of verification.

(4) in the event that a credit provider fails to provide a debt counsellor with corrected information within five business days of such verification being requested, the debt counsellor may accept the information provided by the consumer as being correct.

(5) A notice contemplated in subregulation (2) must be sent by fax, registered mail or email provided that the debt counsellor keeps a record of the date, time and manner of delivery of the notice.

(6) Within 30 business days after receiving an application in terms of section 86(1) of the Act, a debt counsellor must make a determination in terms of section 86(6).

(9) Any arrangement made by the debt counsellor with credit providers must be reduced to writing and signed by all the credit providers mentioned, the debt counsellor and the consumer.

(10) After completion of,the assessment, -the debt counsellor must submit form 17.2 to all the affected credit providers and all registered credit bureaux within 5 business days.

Chapter 7 of the Regulations deals with record keeping. \n addition to any record that must be kept in terms of the Act, debt counsellors are required to keep the following records in respect of each consumer:

(I) application for debt review;

(ii) copy of ail documents submitted by the consumer;

(iii) copy of rejection letter if applicable);
(Iv) debt restructuring proposal;

(v) copy of-any order made by the Tribunal and/or the court; <vi) copy of clearance certificate.

All records must be kept for a period of three years from the earlier of the date on which - the debt counsellor created, signed or received the document.²

Section 48 of the Act makes provision for the Applicant to set any conditions on the registration of a debt counsellor. In line with section 48 the Applicant set out certain conditions on the registration of the respondent which were accepted by the Respondent.

[4] MR. WHALE'S AFFIDAVIT

Mr Whale's affidavit is summarised as follows:

[4.1] Mr.-Whale conducted an investigation into the Respondent's business practices on 23 March 2009 following complaints received by the Applicant from three of the Respondent's clients. These complaints related to the fact that the clients could not get hold of the Respondent and that, because of this, they were being prejudiced. The clients continued to be-harassed by their creditors and it did not appear as though the debt counselling process was proceeding as it should.

[4.2] Mr. Whale made telephonic contact with the Respondent and arranged to meet him at Parliament as the Respondent was working out of an office in the Parliamentary building. Although the Respondent gave an office number and a-telephone extension Mr Whale had difficulty finding the Respondent. He -eventually contacted the Respondent on his cellular phone.

[4.3] Mr. Whale established that the Respondent did not have a permanent office but operated from any available office in the Parliament. He had closed his own private office for financial reasons. Mr. Whale requested that he be given some of the Respondent's client files to examine. The Respondent explained that he kept these files at his home and so he had to fetch them which he duly did.

[4.4] Mr. Whale inspected 13 fries which were selected on a random basis. These files -contained very little information relating to the debt review process. The inspection revealed the following:

• in most of the files the forms 16 were incomplete;

• the forms 17.1 were not sent to creditors or creditor bureaux within the required time periods;

• no records were-kept of the forms 17.1;

• no information relating to the debtors' financial position was kept in the files;

• in none of the files did the Respondent make a determination in terms of section 86(1) of the Act

• there was no record of any forms 17.2 being sent to any of the creditors;

• In some instances certificates of balance were received from creditors but the debt review process remained incomplete;

• in some instances the creditors had terminated the debt review process in terms of section 86 (10) because no progress had been made and the Respondent had not completed the debt review process for any of the clients under investigation

[5] THE RESPONDENT'S ANSWER TO THE COMPLAINT

Although the Respondent did not file an answering affidavit as required by the NCT Rules, the Respondent did appear at the Application for Default Judgement. He requested that he be given an opportunity to explain his position in the interests of fairness. The Tribunal granted his request and the Respondent gave evidence on his own behalf. The Respondent explained that he was a financial advisor who had been requested by the African National Congress to assist some of its members with their financial problems. -He confirmed that he does not have an office and for a period of time he operated from Parliament. He used empty offices in order to conduct his business. He did not store the client files at Parliament because there was no space to store them so he kept them at home. He did not have any administrative assistance but he relied on some of the secretaries at Parliament to assist him. The Respondent confirmed that the documents which Mr. Whale had set out in his affidavit were the only documents which were present in the client files on the date on which the investigation was conducted. The Respondent explained that his intention was to try and assist people who were in financial difficulty but that his administration was extremely poor. He acknowledged that he had not followed the-correct procedures but explained that this was because he was attempting to establish whether clients would be able to avoid paying their debts, for example, when debts had prescribed or when there was reckless lending. He further acknowledged that he did not understand the legal proceedings surrounding the debt review process however; he had attempted to seek help in this regard. He had contacted the Applicant for assistance and he contacted an attorney who was prepared to assist him. He stated that he had learned a lot from the attorney and that he hoped to-formalise their relationship in the future. The Respondent conciuded his testimony be requesting that he not be punished for his failings by having his certificate, of registration cancelled, fie acknowledged that he had made mistakes in the past but that he hoped that he would be able to do better in the future, particularly if he could continue to work with this attorney.

[6] EVALUATION

The debt counselling process is set out in-detail in the Act (read with the Regulations). The debt counsellor is obliged to follow certain strict deadlines and he is obliged to keep a-record of certain documents. Even on the Respondent's own version he has failed to comply with the Act:

[6.1] The form 16 must be completed properly or alternatively the consumer must supply the debt counsellor with a comprehensive set of documents. In all the files-examined by Mr Whale, the form 16 was not completed properly and there was no record in the files of any documents which consumer may have submitted to substantiate the facts provided to the debt counsellor. In terms of Regulation 55 (a) a debt counsellor is obliged to keep a copy of all documents submitted by the consumer.

[6.2] The debt counsellor must inform all creditors and the credit bureaux that the debtor has applied for debt counselling by sending a form 17.1 within 5 days of the consumer's application for debt counselling. The debt counsellor must keep a record of the date, time and manner of delivery of the notice. There are no records in the files that the forms 17,1 have been sent, when they were sent and how they were sent. It seems from the Respondent's own version that he did not have adequate facilities to send these forms and so relied on other people (such as Parliamentary secretaries) for assistance. Mr Whale, in his affidavit, reported that one-client explained that she was told to complete the form herself and send it to the creditors.

[6.3] The debt counsellor must verify the information which the debtor has supplied to him by obtaining documentary proof and by contacting the various creditors. Then within 30 days the debt-counsellor must do an assessment of the debtor's financial position and must make a determination. There is no evidence in the clienteles that these steps were taken by the Respondent and on the Respondent's own version it appears that the Respondent did not take these steps. The Respondent explained that in many instances he did not -receive the information from the creditors which is also why the process was delayed. However the Act does make provision for such a situation (Regulation 24(5)) and in order to ensure that he is complying with the Act, the Respondent should have kept a record of the attempts made and what procedure was followed if these attempts were unsuccessful. In other instances certificates of balance were supplied by the creditors but the Respondent failed to follow through with the debt counselling process. This led to some creditors terminating the process in terms of section 86 (10).

[6.4] The Respondent did not prepare a determination for each consumer within the 30 day period as required by Regulation -24 -6) and in most instances he simply allowed the process to fall away without taking any further action such as notifying creditors.

[6.5] On his own version the Respondent failed to comply with the conditions which the Applicant had imposed on his registration. In particular the Respondent did not;

• perform debt counselling in a manner which was consistent with the purposes and requirements of the Act;

• act professionally and he did not provide services in a manner that was timely;

• have access to adequate infrastructure with which to provide debt counselling services professionally such as a telephone or-fax;

• maintain adequate records and keep relevant copies of documentation in order to demonstrate compliance with the Act

Taking ali the above into account the Tribunal is satisfied that the allegation that the Respondent has repeatedly contravened the Act is correct.

[7] Conclusion

The Applicant requested that the registration of the Respondent be cancelled and that the files of the Respondent's existing clients be handed to the Applicant so that it could arrange for other debt counsellors to take over the matters. The Applicant also requested that the Respondent be ordered to refund existing clients who had paid debt counselling fees. On the other hand the Respondent requested that he be given a further opportunity to prove that he could provide professional services as a debt counsellor. In arriving at an appropriate order in this matter the Tribunal takes a number of factors into consideration:

(1) The seriousness of the contraventions;

(2)The position of the -Respondent; and

(3) The rights of the Respondent's existing clients.

The Tribunal considers the contraventions by the Respondent to be extremely serious. The Respondent's failure to keep proper records and his failure to comply with the procedures set out in the Act place his -clients at serious risk. This was particularly evident in those matters where the creditors exercised their rights to terminate the debt review in terms of section -86(10).

In his evidence the Respondent requested that he not be punished by having his registration cancelled. However, it is not the function of the Tribunal to "punish" the Respondent. -If the Tribunal was -to accede to the Respondent's request it must be satisfied that the Respondent was in a position to perform the functions of a debt counsellor in a professional manner and in accordance with the purposes and functions of the Act. Taking into consideration both Mr. Whale's affidavit and the Respondent's own evidence it is clear that the Respondent not only contravened the Act but that he -is not in a position to fulfil the duties of a debt counsellor in a manner prescribed by the Act.

With due consideration to the above, the Tribunal issues the following order:

[7.1] The Respondent's registration as a debt counsellor is cancelled with effect from 2 November 2009.

[7.2] The Respondent is ordered to prepare a list of all his existing clients and to hand over their files to the Applicant. The Applicant must arrange for these files to be handed to another debt counsellor.

[7.3] The Respondent is ordered to repay any fees which he has received from existing clients to those clients.

Handed down on this 24th Day of November 2009

Professor B. Durnisa...................................................................................................Ms L. Best

Panel Member............................................................................................................. Panel Member

---