Debtfree Magazine Sept 2017

to the consumer requesting a declaration of reckless lending) after the assessment.
At first glance, this appears to be an increase in income to Debt Counsellors because,
in the past, they were expected to do this work at no cost. Many Debt Counsellors
will thus be incentivised to look into reckless lending on every account consumers
have. If so, the credit providers will be hard pressed to cooperate. The challenge
with these investigations has and probably always will be getting the needed
documents from the credit providers. As has been seen in so many securitization
cases the original documents often are not accessible.
At present too few reckless lending investigations happen due to the fact that it
is estimated (by the 2014 DCASA research) to double the amount of hours taken
in a debt review matter. Double the work for no extra money. This is now set to
potentially change.
Another thing that is set to change is the legal fees which will need to be charged to
cover the costs of credit providers fighting any court orders which mention reckless
lending. Since there can be fines of R1 million it is clear why, even if the debt is tiny.
Legal fees can then be expected to double or potentially even quadruple to cover
these associated costs.
To cover the extra legal fees, several months of payments might have to go by for
the ‘average’ consumer toward these costs before payments to creditors begin.
Some courts have recently handed down costs against Debt Counsellors following
the NCR’s previous fee guideline which resulted in payment delays to the credit
providers which the Credit Providers attorneys argued put the consumer’s accounts
into default. Now with much longer payment delays, will this argument become a
common issue across every court in the country? Will Debt Counsellors face even
more punitive cost orders driving them out of business for following the NCR’s
guidelines?
The truth is that no-one would be motivated to do an entire reckless lending
investigation purely to get R250 (if that is what the wording means and not R250 x
the amount of accounts the consumer has). It would not financially be worthwhile.
One solution is to then increase the amount and reconsider when this payment