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[2013] ZANCT 1
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Barnes v Absa Bank and Others (NCT/3898/2012/148(1)(P)NCA) [2013] ZANCT 1 (17 January 2013)
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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy |
IN THE NATIONAL CONSUMER TRIBUNAL
HELD AT CENTURION
Case No: NCT/3898/2012/148(1)(P)NCA
DATE:17/01/2013
In the matter between:
FAEEZ BARNES...........................................................APPELLANT
and
ABSA BANK AND OTHERS ….................................RESPONDENT
CORAM : P BECK - PRESIDING MEMBER
F SIBANDA - MEMBER
X MAY - MEMBER
JUDGMENT AND REASONS
__________________________________________________________________________________
Introduction
The Appellant is Faeez Barnes, identity number ….., (hereinafter referred to as the Appellant).
The Appellant was represented at the Tribunal hearing by his debt counselor, Hendrik Johannes Nieuwstadt Krige (hereinafter referred to as “Krige”).
The Respondent is Absa Bank and others.
The Appellant brought and application in terms of Section 148(1) of the National Credit Act No. 34 of 2005 (“NCA”) to the Tribunal to appeal the decision of the Tribunal to refuse the granting of a consent order in favour of the Appellant.
The National Consumer Tribunal (“Tribunal”) has jurisdiction to hear this matter in terms of Section 148(1) of the NCA. This section provides that participant in a hearing before a single member of the Tribunal may appeal the decision of that member to a full panel of the Tribunal, in the prescribed manner and form.
6. This judgment and reasons follows the hearing of the Appellant, represented by Krige, held on 7 September 2012 at the offices of the Tribunal in Centurion.
Background
7. On 24 February 2012 the Appellant applied to the Tribunal for a consent order in terms of Section 138(1) of the NCA.
8. Presiding member, Tanya Woker, on 21 May 2012, refused to grant the consent order because the interest rate of 60% per annum, charged by Mafori Finance, the 6th Respondent / Credit Provider, (hereinafter referred to as Mafori Finance) exceeded the maximum amount of interest permitted in terms of the NCA.
9. On 31 May 2012, Krige, the Appellant’s debt counsellor, addressed a letter to the Tribunal requesting that the Tribunal reconsider their decision to refuse the granting of the consent order.
Grounds of Appeal
10. The basis of the Appeal is as follows:
10.1 the credit agreement is a short term credit agreement accruing interest at 5% per month and thus 60% per annum;
10.2 debt review does not change the nature of the credit agreement and therefore the respondent insists upon the maximum interest rate for this class of agreement;
10.3 interest charges are limited in terms of the in duplum rule
10.4 the Tribunal’s decision to refuse the granting of the consent is to the detriment of the consumer and
10.5 other credit providers will only implement a reduced interest rate upon receipt of a consent order from the Tribunal.
Issue to be decided by the Tribunal
11. The critical issue which the Tribunal must decide upon is whether the consent order was refused in accordance with the law and whether it complies with and is enforceable in law.
Maximum permissible interest rate
The issuance of a consent order is regulated in terms of Section 138 (1) of the NCA, as read with the Regulations and the appeal thereof in terms of Section 148(1).
In terms of Regulation 42(1) of the NCA Regulations the maximum permissible interest rate for short term credit transactions is 5% per month.
Regulation 42(1)(b) further provides:
“(b) The interest rate on short term credit transactions and incidental credit agreements must be disclosed as a monthly interest rate, in such disclosure as is required by the Act and these Regulations.”
15. Regulation 42 (1) Table A states clearly that the maximum permissible interest rate for short term credit transactions and therefore for the credit agreement in this matter, is 5% per month and must be disclosed as such.
16. It is not in dispute that the credit agreement between the Appellant and Mafori Finance is a short term credit agreement where the loan does not exceed R8000,00 (eight thousand rand) which is repayable within a period not exceeding 6 months (Regulation 39(2) of the Act.)
17. When the loan is granted, the credit grantor, in this instance Mafori Finance, is entitled to charge 5% interest per month (Regulation 42 Table A). Read with the definition for short term credit agreements this will be limited to six months.1
18. Therefore and as found by the Tribunal in the matter of Motitsoe v Absa Bank and Others2 the maximum amount of interest which the credit grantor can therefore charge is 30% (5% for 6 months).
19. Section 101(1)(d)(ii) of the NCA prohibits that interest be charged in excess of the maximum prescribed rate.
20. Therefore an agreement to pay interest at a rate of 60% per annum constitutes an illegal agreement and can never be endorsed by the Tribunal.
The in duplum rule
21. It is not clear from the Appellant’s appeal what the relevance of the reference to the in duplum rule is. The Applicant however appears to intimate that as a result of the working of the in duplum rule, the agreement will reach the in duplum stage prior to the settling thereof and therefore the specific interest rate charged would then not have an effect on the amount to be paid by the consumer.
22. Section 103(5) of the NCA codifies the common law in duplum rule. Section 103 states as follows:
(5) Despite any provision of the common law or a credit agreement to the contrary, the amounts contemplated in section 101 (1)(b) to (g) that accrue during the time that the consumer is in default under the credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under that credit agreement as at the time that the default occurs.”
23. In the Motitsoe-judgement section 103(5) has been interpreted as follows:
(a) the amount contemplated in section 101(1)(b) to (g) which accrues while the consumer is in default may not exceed in aggregate the unpaid balance of the principal debt when the default occurred;
(b) once the total charges referred to in section 101(1)(b) to (g) equal the amount of the unpaid balance, no further charges may be levied;
(c) once the total charges referred to in section 101(1)(b) to (g) equal the amount of the unpaid balance, payments made by a consumer thereafter during the period of default do not have the effect of permitting the credit provider to charge further interest while such default persists.
24. Clearly the granting of the consent order at an interest rate of 60% per annum would firstly be unlawful and would not be in the interests of the consumer. In as much as it is the debt counsellor’s view that the refusal of the consent order would be to the detriment of the consumer, the Tribunal cannot confirm a consent order wherein the interest rate is clearly unlawful and where the effect thereof would not have the effect of prohibiting unfair credit practices which is the intention of the NCA.
ORDER
Accordingly, the Tribunal makes the following order:
25. 1 The Appeal is dismissed.
25.2 The matter is referred to the National Credit Regulator for investigation into whether there is prohibited conduct on the part of Mafori Finance.
DATED THIS 17TH DAY OF JANUARY 2013
[signed]
_______________________________________
P A BECK
TRIBUNAL MEMBER
Mr F Sibanda, Member and Ms X May, Member concurring
1 Regulation 39(2) define a short term credit transaction as
“(a) means a credit transaction –
(i) in respect of a deferred amount at inception of the agreement not exceeding R8,000; and
(ii) in terms of which the whole amount is repayable within a period not exceeding 6 months.
…”
2 NCT/255/2009(1)(P)[2010] ZANCT 44