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IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

Case number: NCT/6550/2012/141

DATE:26/08/2013

In the matter between:

DENISE PAULSE............................................................................................APPLICANT

and

DEBT QUEST................................................................................................ FIRST RESPONDENT

NATIONAL CREDIT REGULATOR............................................................SECOND RESPONDENT

Coram:

Prof T Woker – Presiding member

Prof B Dumisa – Member

Ms L Best – Member

Date of Hearing – 20 June 2013

JUDGMENT

APPLICANT

1. The Applicant is Denise Dawn Paulse (“the Applicant”) an adult female with her place of residence at Wynberg, Cape Town, Western Cape Province.

FIRST AND SECOND RESPONDENTS

2. The First Respondent is Debt Quest, a debt counselling concern with its principle place of business at Wynberg, Cape Town, its further particulars unknown (“the First Respondent”).

3. The Second Respondent is the National Credit Regulator with place of business in Midrand, Halfway House (“the Second Respondent”).

APPLICATION TYPE

4. This is an application in terms of Section 141(1)(b) of the National Credit Act 34 of 2005 (hereinafter referred to as “the Act”) following the Regulator’s non-referral of a Section 136 complaint.

BACKGROUND

5. In November 2009 the Applicant was retrenched from her employment. The Applicant began experiencing difficulty repaying her debts including the mortgage bond on her house and so she decided to approach a debt counsellor.

6. On 5 January 2011 the Applicant applied for debt review with Credit Matters, an entity specialising in debt counselling. The specific debt counsellor which she dealt with was Mark Minnies. After paying an amount of R3 500.00 (Three Thousand Five Hundred Rand) the Applicant was placed under debt review.

7. In May 2011 the Applicant was informed by Joy Minnies that she and Mark Minnie had left Credit Matters and intended forming their own debt counselling practice which was the First Respondent. At the request of the Minnies, the Applicant transferred her debt review to them.

8. Unbeknown to the Applicant, the Applicant’s creditors were not correctly informed regarding the transfer process and this led to further action being taken against the Applicant by her creditors. For the purposes of this judgment it is not necessary to set out the details regarding the confusion, suffice to say that the Applicant accepted that the creditors were entitled to proceed against her in the manner in which they did because they had received incorrect information from her debt counsellor.

9. Because of the problems experienced by the Applicant (again the details are not necessary for this particular judgment) the Applicant ended up cancelling the debt review process. She had to sell her home to pay her debts, she incurred far greater debts through the whole process than she should have incurred, had the debt counselling process been conducted correctly and her previously clear credit record was adversely impaired.

10. On 15 August 2012, the Applicant lodged a complaint with the Second Respondent regarding the manner in which her debt counselling process had been handled by her debt counsellor. In her complaint she advised the Second Respondent that she was seeking to have her credit record cleared and for her debt counsellor to repay her the legal costs and other costs which had been incurred by her during the debt counselling process.

11. On 4 September 2012 the Second Respondent advised the Applicant that it had no authority to instruct the debt counsellor to repay the legal costs incurred in the debt counselling process and that she was not entitled to a clearance certificate because her debts had not been settled through the debt review process. (She had in fact cleared her own debts by selling her house). The Applicant was advised to approach the courts for re-course and she was informed that the Second Respondent regarded the matter as being closed. The Applicant was also advised verbally, when she contacted the Second Respondent that she should approach the Credit Ombudsman if she had a problem with her credit listing.¹

12. The Applicant then approached the Tribunal for assistance.

13. The Second Respondent, in its answering affidavit and at the hearing raised the point that the Applicant’s application for review was premature since the Second Respondent has not issued a certificate of non-referral. The Second Respondent therefore prayed for an order in the following terms:

13.1 Declaring the Applicant’s application for review as premature;

13.2 Ordering the Applicant to finalize the complaint with the Respondent’s Complaints Department;

13.3 Granting the Respondent such further or alternative relief as the Tribunal may consider appropriate to give effect to the consumer’s rights in terms of the Act.

THE HEARING

14. The hearing was held on 20 June 2013.

15. The Applicant represented herself, the First Respondent did not appear and the Second Respondent was represented by Ms Soobrayan.

16. The Applicant re-told the events leading to her complaint regarding the debt counselling process. In addition she informed the Tribunal that she earned about R4 500 per month from running a small crèche but that times were difficult because parents often did not pay their fees. She stated that, as a result of the problems she had experienced with the debt counselling process, she had incurred further costs of approximately R54 000 which she wanted her debt counsellor to pay and that her credit record was impaired in such a manner that she could not renew her cell phone contract nor obtain rental accommodation for herself and her son, upon selling her house. She stated that she hoped that her credit record would be cleared in the near future because, after selling her house, she had paid off all her debts. The two year period for which the information would be recorded against her name would be completed in early July (2013) and she was hoping that after this period the information would be removed. Therefore, this aspect of the remedies she was seeking from the Tribunal was probably no longer necessary.

17. The Second Respondent replied by re-iterating its view that the application was premature because the Second Respondent had not issued a certificate of non-referral. In response to a question from the Tribunal regarding what the Applicant was supposed to do in light of the letter she had received from the Second Respondent, the Second Respondent argued that in its view the matter is regarded as still open because the Applicant had referred the matter to the Tribunal. The Second Respondent also explained that there was a Complaints Department which received complaints and another department, the Investigations Department which investigated complaints and that the Second Respondent does not investigate complaints of this nature. It only investigates complaints when it believes that there are systemic problems in the industry. The Second Respondent however confirmed that if the Tribunal wished to do so, it should refer the matter back to the Second Respondent for further investigation. In response to a question from the Tribunal regarding the damages that the Applicant had suffered as a result of the problematic debt counselling process, the Second Respondent argued that if the Tribunal wished to do so, and because the matter was already before the Tribunal, it should issue a notice in terms of Section 164 of the Act so that the Applicant could approach the civil courts in order to claim her damages.

ISSUE TO BE DECIDED BY THE TRIBUNAL

18. The Second Respondent raised the issue that this application is premature because it has not issued a certificate of non-referral.

19. This then raises the question of what the Applicant is supposed to do, particularly in light of the letter which the Applicant had received from the Second Respondent informing her that it did not have a mandate to investigate the matter, that the Applicant should approach the courts and/or the Credit Ombudsman for relief and that it regarded the matter as being closed.

20. In order to resolve this problem, it is necessary to consider the process which must be followed when a complaint is laid with the Second Respondent.

APPLICABLE SECTIONS OF THE ACT

21. It must be noted at the outset that a debt counsellor is required to be registered with the Second Respondent and that his or her conduct in carrying out the debt counselling process must be assessed by the Second Respondent in the light of the Act.² When a debt counsellor fails to comply with the requirements of the Act and/or his or her conditions of registration the Second Respondent can issue a compliance notice, refer the matter to the Tribunal for a hearing into possible prohibited conduct or apply for the cancellation of the registration of the debt counsellor. The Tribunal has dealt with a significant number of matters where the registration of a debt counsellor has been cancelled because that debt counsellor has conducted himself or herself in a manner which is prejudicial to consumers.

22. Part B of Chapter 7 of the Act (sections 136-141) deals with the process that is followed when the Second Respondent initiates a complaint itself or when it receives a complaint from a consumer.

23. If the complaint is frivolous or vexatious or does not allege facts which are governed by the Act, the Second Respondent may issue a certificate of non-referral which means that the Second Respondent does not intend to take the matter any further.³

24. If however, the Second Respondent is of the view that there is merit to the complaint it may -

(1) refer the matter to a debt counsellor, if the matter appears to concern either reckless credit or possible over-indebtedness of the consumer; or

2) refer the complaint to an ombud with jurisdiction, a consumer court or an alternative dispute resolution agent for the purposes of assisting the parties the parties to resolve the dispute in terms of section 134,⁴ or

3) in any other case (our emphasis), direct an inspector to investigate the complaint as quickly as practicable.⁵

25. After concluding an investigation into a complaint, the Second Respondent again has a number of options available to it which includes issuing a notice of non-referral⁶ or referring the matter to the Tribunal, if the Second Respondent is of the view that a person has been engaged in prohibited conduct.⁷

26. What is important to note from these sections is that the Second Respondent must make a decision to issue a certificate of non-referral or it must refer the matter on for further investigation or a hearing. It cannot simply make a decision not to take the matter further. The Tribunal dealt with a similar issue in City of Johannesburg v The National Consumer Commission⁸. This matter dealt with Section 72 of the Consumer Protection Act (2008), which is very similar to Section 139 of the Act and deals with the procedure which the Commission must follow when it receives a complaint from a consumer. In this case the Tribunal held that although Section 72 of the Consumer Protection Act uses the word “may”, it concludes with the words ‘in any other case’ which is a clear indication that the Commission (and in this case the Second Respondent) must choose from one of the options provided for in the section when it receives or initiates a complaint.

27. This conclusion is further supported by the fact that only once the Second Respondent has made a decision, can the matter progress further.

28. If the NCR issues a notice of non-referral, the consumer him or herself, is entitled to refer the matter to the Tribunal, provided the Tribunal grants leave for the matter to be heard.

29. Once a matter is referred to the Tribunal, either by the Second Respondent or by the consumer, it must conduct a hearing into the matter,⁹ which will lead to a finding by the Tribunal regarding whether or not the conduct complained of constituted prohibited conduct in terms of the Act.

30. Such a finding is important because it will have a direct bearing on whether or not the consumer is entitled to claim any damages he or she may have suffered as a result of prohibited conduct.

31. The sections regarding the procedure to be followed must be read in conjunction with Section 164 of the Act which deals with civil actions and jurisdiction. Section 164 (3) provides that a person who has suffered loss or damage as a result of prohibited conduct, or dereliction of required conduct must, when instituting proceedings in a civil court for the awarding of damages, file with the registrar or clerk of the court a notice from the Chairperson of the Tribunal certifying that the conduct constituting the basis for the action has been found to be prohibited or required conduct in terms of the Act. Therefore a person who is of the view that he or she has suffered damages as a result of prohibited conduct must first ensure that the matter is heard by the Tribunal, in order to obtain a certificate from the Chairperson before proceeding to the civil courts in order to claim his or her damages.

CONSIDERATION OF THE LAW AND THE FACTS

32. The Second Respondent is correct in that it has not issued a notice of non-referral and therefore the Tribunal is not empowered to take this matter any further. In addition, the Applicant is requesting certain relief from the Tribunal which it is not empowered to grant. The orders which the Tribunal, a creature of statute, are entitled to grant are set out in Section 150 of the Act and this section does not include the power to remove information listed against a consumer’s name with the credit bureaux nor does it include the power to award damages for loss suffered by a consumer as a result of a person’s prohibited conduct.

33. The Second Respondent must therefore be correct in its view that this matter before the Tribunal is premature. However, the Second Respondent also clearly indicated to the Applicant that it regarded the matter as being closed without conducting a formal investigation into the matter and without issuing a certificate of non-referral. The question which the Tribunal is of the view must be answered is this: is this then the end of the matter and should it simply be dismissed?

34. Although the Applicant did not state her case in eloquent legal terms, she submitted a comprehensive statement to the Second Respondent in which she clearly complained about the treatment which she had been subjected to as a result of her debt counsellor’s failure to deal with her case properly.

35. In addition, this comprehensive statement contains clear allegations that the Applicant is of the view that she suffered damages as a result of the debt counsellor’s conduct. Again, this was not set out in eloquent legal terms but the consumer was not legally represented and has no legal training. Therefore it must be accepted that she will not understand the legal nature of her complaint or what she is required to set out to bring her complaint within the ambit of the Act. She clearly complained about suffering loss as a result of the debt counsellor’s handling of her case. She was eventually forced to sell her house, her debts increased substantially and she incurred further debts as a result of legal fees. Finally, she suffered reputational damage because adverse information regarding her credit history was listed with certain credit bureaus. In legal terms, the consumer may well have suffered damages as a result of her debt counsellor’s conduct or dereliction of duty, which conduct or failure to act could well constitute prohibited conduct under the Act.

36. Debt counsellors are regulated by the Second Respondent and therefore their conduct stands to be judged by the requirements of the Act. Before a consumer can claim damages as a result of this conduct, it must be shown that this conduct constituted prohibited conduct as defined in the Act. This pre-supposes that the Second Respondent either referred the matter to the Tribunal for a hearing or the consumer herself referred the matter following the issuing of a certificate of non-referral by the Second Respondent. Without such a hearing, the consumer will be left in limbo and will be unable to proceed any further with a claim for damages in the civil courts.

37. The Tribunal is particularly concerned about the response of the Second Respondent to certain questions from the Tribunal in which it was stated that the Second Respondent does not investigate complaints of this nature from consumers. It only investigates complaints if it is of the view that the complaints against a debt counsellor are wide spread and justify a formal investigation.

38. The problem with such an approach is that :

1) This approach does not comply with the requirements of the Act, which requires that at the very least a certificate of non-referral should be issued, even in the case of an informal investigation;¹⁰ and

2) This leaves the consumer in limbo as he or she is unable to proceed to the Tribunal for a hearing and cannot claim damages in the civil court as he or she has not obtained a notice of prohibited conduct from the Chairperson.

39. In response to a question from the Tribunal, the Second Respondent suggested that if the Tribunal wished to do so, it should issue a notice in terms of Section 164 of the Act to enable the Applicant to proceed to the civil courts in order for her to claim her damages.

40. However, the Tribunal is unable to do this because there has been no investigation by the Second Respondent and consequently no hearing into prohibited conduct by the Tribunal. At the hearing, the Second Respondent confirmed that there was no investigator’s report and from its responses, the Tribunal must assume that the debt counsellor has never been informed that his/her conduct was or is under investigation or that he/she could be found to have been in dereliction of his/her duties under the Act, which could constitute prohibited conduct. It is only after an investigation by the Second Respondent, a hearing by the Tribunal, and finally a finding of prohibited conduct (during which time, the debt counsellor will be given a full opportunity to explain his/her conduct) that such a certificate can be issued. It must be noted that a certificate of prohibited conduct issued by the Chairperson is conclusive proof of its contents, and is binding on a civil court.¹¹

41. To issue a notice of prohibited conduct without a proper investigation by the Second Respondent and without the Tribunal conducting a hearing would be unlawful as the procedure followed would not comply with the requirements of the Act and would also be contrary to all basic principles of administrative justice.

42. Although the Second Respondent is of the view that this matter is premature, it is also of the view that the matter should be referred back to it for further investigation. The Second Respondent in its proposed order asks that it be ordered to finalise the complaint within the Second Respondent’s Complaints Department. However, it must be accepted, as pointed out above, that the Applicant is not legally trained and cannot be expected to understand the Second Respondent’s internal processes. The Applicant submitted a substantial complaint to the Second Respondent in which she set out in detail how she was treated by her debt counsellor and, as stated above, although not articulated in clear legal language, the gist of her complaint can easily be distilled from this document, as well as any legal redress which she is seeking. In terms of Section 15 of the Act, the Second Respondent is obliged to enforce the Act by ensuring that prohibited conduct is prevented, detected and prosecuted. The responsibility therefore rests on the Second Respondent to follow up the complaint even if this involves the complaint of a single consumer. This may even result in a consent order being reached between the Second Respondent and the debt counsellor.¹² Such consent order may include an award of damages to the complainant in a matter, which will assist the consumer, in that the consumer will not have to proceed to the civil court for his/her damages.¹³

ORDER OF THE TRIBUNAL

43. The Tribunal accordingly makes the following order -

43.1 This matter is referred back to the Second Respondent for further investigation. The Second Respondent is ordered to investigate this matter in accordance with the procedures set out in the Act and to decide whether to refer the matter to the Tribunal for a hearing into possible prohibited conduct or to issue a certificate of non-referral to the Applicant.

43.2 The Second Respondent is ordered to report on this investigation by 30 September 2013. In the event that the investigation is not finalized by the stated date, the Respondent is ordered to submit a progress report on the date and every 60 (sixty) days thereafter until finalization of the investigation.

43.3 The Respondent is further ordered to notify the Applicant of the outcome of the investigation, upon the finalization thereof. Should the Second Respondent decide to issue a certificate of non-referral, it will be the Applicant’s prerogative to decide whether she wishes to pursue the matter any further. No order is made against the First Respondent.

Thus done and signed at Centurion this 26th day of August 2013.

[signed]

_______________________________

Prof T. Woker

Presiding Member

Prof B. Dumisa and L. Best concurring

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