Prescription and More - PowerPoint Presentation

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Prescription and MoreDCA sec 15(1)(g) - NCA sec 126B

Brett Bentley - Attorney Slide2

"Improper conduct by debt collectors 15. (1) A debt collector may be found guilty [by the Council] of improper conduct if he or she, or a person for whom he or she

is vicariously liable— (g) contravenes the provisions of section 126B of the National Credit Act, 2005; “Slide3

NCA:126B. (1) (a) No person may sell a debt under a credit agreement to which this Act applies and that has been extinguished by prescription under the Prescription Act, 1969 (Act No. 68 of 1969).

(b) No person may continue the collection of, or re-activate a debt under a credit agreement to which this Act applies—(i) which debt has been extinguished by prescription under the Prescription Act; and(ii) where the consumer raises the defence of prescription, or would reasonably have raised the defence of prescription had the consumer been aware of such a defence, in response to a demand, whether as part of legal proceedings or otherwise.Slide4

F

itting square pegs into the round holes and “Hail Mary passes” to the Debt Collectors CouncilSlide5

The Department of Justice and Constitutional Development’s explanation of the Bill via Deputy Minister Jeffery:“By way of background, the following: In December 2013 Cabinet authorized the Ministers of Finance and Trade and Industry to take measures to assist over-indebted households and also to prevent them from becoming over-indebted in future. To oversee the implementation of these measures, the National Treasury and the DTI constituted an oversight committee, which, in turn, set up a technical task team to assist with the more detailed and technical aspects of the work. Members of the oversight committee and technical task team are from the National Treasury, the DTI, the Department of Justice and Constitutional Development, the South African Reserve Bank, the Financial Services Board and the National Credit Regulator. Our Department was brought on board during the course of 2014 and has been participating actively in the task team's deliberations

.The Justice Department was requested by the task team to prepare legislation which will bring attorneys who do debt collecting under the jurisdiction of the regulatory body responsible for debt collectors, namely the Council for Debt Collectors established by the Debt Collectors Act, 1998. The Department has also, in the past, received a request from the Black Sash who raised similar concerns.Slide6

In motivating the request for the amendments, one of the arguments made by National Treasury points towards a "Twin Peaks" model of financial regulation. The move to a "Twin Peaks" model is an effort to address the shortcomings

in the current regulatory structure and cause the least amount of disruption to the financial industry and the current regulators. The "Twin Peaks" model is seen as giving transparency, market integrity and consumer protection, sufficient priority. The two regulators will be the "Prudential Regulator'' and the "Market Conduct Regulator''. The Prudential Regulator will form part of the South African Reserve Bank. It will enhance financial stability by promoting safety and soundness of regulated institutions. The Market Conduct Regulator will form part of a restructured Financial Services Board. It will protect consumers of financial services and promote confidence. Market conduct will focus on regulating and supervising the market conduct of banks, insurers, financial intermediaries, retirement funds and administrators, investment institutions and financial markets. - It will ensure that consumers are not vulnerable or exploited and will complement the prudential regulation and supervision. The National Treasury and the DTI are strongly of the view that debt collectors, whether they are attorneys or not, should all fall under the regulation of the body primarily responsible for persons who undertake debt collecting, in keeping with the Twin Peaks approach.Slide7

Further arguments in support of the proposals relate to what has been happening in practice, namely the abuses in the debt collection industry, as you acknowledge in your e-mail. The National Treasury and the DTI have provided concrete examples of attorneys who exploit the poor and vulnerable during the debt collection process. When these complaints are brought to the attention of the Council for Debt Collectors, the Council is powerless to do anything because it does not have jurisdiction over attorneys.

It has moreover been alleged that the regulatory bodies in the legal profession are not addressing the rampant abuses taking place and that the Council for Debt Collectors is more effective in ensuring that its members are sanctioned in the case of misconduct.While the provisions in the newly enacted Legal Practice Act, 2014, dealing with misconduct and discipline, have been crafted in such a way to ensure that errant attorneys are brought to book meaningfully In a transparent manner, it is imperative to make provision for the protection of the poor and vulnerable in the manner proposed.Slide8

I trust that this will go some way in assisting you to furnish comments, which the Department looks forward to receiving. It is understood that comments will be collated and considered by the Department. Further engagement with role-players will follow thereafter before a final draft of the Bill is prepared. As you will know, when the Bill

is introduced in Parliament, a further public participation process will ensue.Slide9

The proposal does not seem have much insight into the operation of the attorneys profession and the consequences of the proposal has not been researched It

undermines the South African Legal Practice Council before it has even come into operationAttorneys are going to have 2 masters which is going to lead to conflictsIt is going to create a burden both administratively and financial on small and new legal practices “Hail Mary pass” to the Debt Collectors Council to the deal with the industry abusersSlide10

What are industry attorneys abuses(very simplified)?Costs Issues around EAO grantingSlide11

The review of attorneys fees in the area of debt collection needs to be overhauledProfitability in legal consumer debt collections is a challenge and it is why most of the large law firms are not involved in the fieldEither the debtor pays or the client and most attorneys are looking to the debtor as opposed to the client while debt collectors look primarily at their clients in terms of the contingency agreements. Why?

The Contingency Act creates uncertainty for attorneys and was designed for RAF matters not collection matters and is clumsySlide12

Recommendations:

1 The Creation of a new Debt Collection Ombudsman or the extension of the Credit Ombud to investigate abuses in both the attorneys profession together with debt collectors and make recommendations to the respective governing bodies2 Review of the attorneys costs which can be recovered in terms of the enforcement provisions of the Magistrates Court Act3 The amending of the Contingency Act to provide for certainty to attorneys so they can enter into contingency contracts with clients in the same manner debt collectors can

Brett Bentley - Attorney - Bentley Attorneys