There’s a limit to what debt collectors can charge you
If you’ve defaulted on a credit agreement and have been “handed over” by your credit provider to a debt collector, the debt collector may charge you a fee of no more than the capital amount of your debt or R814, whichever is lower. In addition to these debt collection fees, you will be liable for commission of 10 percent of each instalment paid, to a maximum of R407 per instalment.
This is in terms of recent changes to fees set out in the regulations under the Debt Collectors Act, which applies to all registered debt collectors.
Advocate Andries Cornelius, chief executive of the Council for Debt Collectors (CDC), says debt collectors are not attorneys, but some attorneys do debt collecting and this fee structure does not apply to them. “This is important, because debt collectors’ fees are regulated in a different manner from attorneys’ fees.”
Considering that there is no cap on the fees that attorneys can charge for debt collection, you’re better off being pursued by a debt collector than by an attorney. If you are overcharged by a debt collector, you can complain to the council. If you feel you’ve been overcharged by an attorney, you will have to complain to the Law Society.
Cornelius says his office can impose a fine on a debt collector guilty of improper conduct. The fine is up to R100 000 on each charge.
The National Credit Act states that a credit provider may begin legal proceedings as early as 20 business days of the consumer being in arrears. Cornelius says that, in practice, creditors allow for much longer grace periods – some up to 120 days – but that they are within their rights to pursue you “immediately”.
“There is no waiting period required by law before a creditor can hand your account over to a debt collector,” he says.
Debt collection is a pre-legal process aimed at persuading you to pay. It is less costly – for you and the credit provider – than legal action instituted by an attorney.
As of June 7, a debt collector can charge you the following fees (which must not exceed R814 or the capital amount of your debt – whichever is the lesser):
* R17 for every fax, email, letter or registered letter of demand (excluding registration costs).
* R17 for every necessary phone call that is not a consultation. Cornelius says a consultation is a process where the two parties discuss the issue and come to some kind of agreement. A “necessary phone call” would be a call to demand a sum of money.
* R2.20 for every electronic communication (other than fax or email) – up to 10 a month.
* R17 for other “necessary expenses” not specifically provided for. Cornelius says this is for any expense that the debt collector has incurred that is not set out in the annexure to the Act. It would be for expenses such as bank charges for cash payments made by the debtor.
* R166 for serving you with documents at home or work to obtain your signature on an acknowledgment of debt.
* R11 for a necessary registered credit bureau search (with a maximum of four a month).
* R33 for drawing up and furnishing you with a settlement account. Cornelius says the settlement account is a statement showing the fees raised on the account.
“Generally, it would set out the amount claimed by the credit provider, the payments made and the fees raised on the account including the debt collection fees. The credit provider would in most instances not be able to give a detailed statement of the claim handed over to a collector,” he says.
* R8 for correspondence received and attended to. Cornelius says this refers to correspondence received from you, the debtor, and this is not a per-page fee.
* R41 for necessary consultations with you.
* R65 for “attending taxation”. Cornelius says this refers to a formal process that arises when a debtor challenges the fees or interest raised on his or her account. The account then goes to the taxing master in the Magistrates Court, who will decide if the fees raised are necessary and in line with the law, he says.
* In addition to the R814 in debt collection fees, you will also be liable for commission of 10 percent of each instalment paid, to a maximum of R407 per instalment.
In other words, R814 is the maximum – in total – that you can be charged for debt collection fees. But you will also be liable for ongoing commission until your debt is paid.
Collectors may not harass or threaten you
Andries Cornelius, the chief executive of the Council for Debt Collectors, says his office receives about 5 000 complaints a year, and about 70 of these result in prosecutions.
If you are ever contacted by a debt collector, Cornelius’s advice to you is: “Always check if the debt collector is registered with the council, and don’t sign any documents before you have taken legal advice – especially not an acknowledgment of debt. You are under no obligation to sign anything. The only time you have to sign is when you are served papers by a sheriff or deputy sheriff of the court.”
Cornelius says it is illegal for anyone to operate as a debt collector if they are not registered |with the council. (Attorneys collect debt in terms of the Magistrates Courts Act and High Courts Act. Before the introduction of the Debt Collectors Act, only attorneys could collect debt.)
It is also a violation of the debt collectors’ code of conduct for a debt collector to, among other things:
* Misrepresent the true nature of his or her business, or threaten to institute legal proceedings if there is no intention to carry out such a threat;
* Collect or attempt to collect money in excess of the amount owing to the creditor, except for interest and costs legally recoverable;
* Threaten to harm you, those related to you, or your property;
* Use obscene, defamatory or threatening language when communicating with you or your relatives;
* Communicate with you when your legal adviser has notified the debt collector in writing to communicate with your legal adviser;
* Abuse or intimidate you in any way, whether orally or in writing, in order to induce you to pay a debt;
* Call on you, or park in front of your residential or work address in a vehicle which is conspicuously marked in any way that discloses its purpose and thereby cause you embarrassment;
* Make telephone calls or personal calls for the purpose of demanding payment of a debt on a Sunday or between the hours of 9pm and 6am on any other day, unless you or your spouse requests the debt collector to do so;
* Engage in any other excessive conduct which can reasonably be construed as harassing you or |your relatives;
* Disclose or threaten to disclose information which could adversely affect your reputation for creditworthiness, knowing or having reason to suspect that the information is false;
* Communicate with an employer, acquaintance, friend, relative or neighbour of yours, unless such a person stands surety for you, or unless it is to obtain your address or telephone number;
* Give, or threaten to give, to your employer, spouse or any member of your family, information that may adversely affect your employment or employment opportunities or those |of your spouse or any member of your family;
* Disclose or threaten to disclose information of a debt which with valid reason is disputed by you, without disclosing the fact that you dispute such debt;
* Give to any person any false or misleading information that may be detrimental to you, your spouse or any member of your family;
* Make a demand for payment of an account by telephone, personal call or in writing, without indicating the name of the creditor to whom the debt is owing, the balance of the account and the identity and the basis of the claim of the person making the demand.
The Council for Debt Collectors is a statutory body whose members are appointed by the Minister of Justice and Constitutional Development. The council’s role is to enforce the Debt Collectors Act. It does the following:
* Regulates the occupation of debt collectors;
* Regulates the recovery of collectors’ fees;
* Registers debt collectors;
* Issues registration certificates; and
* Enforces its code of conduct and investigates complaints against debt collectors. Where appropriate, it institutes disciplinary proceedings against them (see “ Collectors may not harass or threaten you”, above).
Contact the council if you have a complaint