Mandla has borrowed money from a microlender to buy furniture and also to pay off the new section he has added onto his house. For the past two months he has not been able to pay his monthly instalment due to other unexpected expenses. He has received two phone calls demanding payment and a letter of demand. He comes to you for help.

What does the Law Say?

The National Credit Act defines the steps that must be taken to deal with this problem. (See: Legal consequences of defaulting on debt obligations)

What Can He Do?

The following steps can be used to guide you in the way you would deal with Mandla’s problem.

STEPS TO HELP A PERSON WHO HAS A PROBLEM REPAYING DEBT

1. FOLLOW STEPS 1, 2 AND 3 IN PROBLEM 5

(See Problem 5: Helping a person assess their financial situation: drawing up a budget)

These steps cover:

• What you can and cannot do for the client
• Recording information about the client’s debt
• Drawing up a budget based on the client’s monthly income and expenses (if appropriate).

2. ASSESS THE CREDIT PROVIDER’S ACTIONS

Check the following information regarding your client’s credit providers:

• When was the contract signed – before or after the the NCA came into effect on 1 June 2007?
• Did the credit provider follow the correct processes in dealing with your client? Give details (attach a separate page if necessary) (See: Protection when making a loan application)
• Do you think there may have been any reckless credit granting?
  • If yes, give details (attach a separate page if necessary) (See: Reckless Lending)
• Did the credit provider send your client a written notice (letter of demand) and did your client respond in any way?
  • If yes, give details (attach a separate page if necessary) (See: Legal consequences of defaulting on legal obligations)
• Have legal procedures been instituted against your client?
  • Give details (attach a separate page if necessary)
• Were all legal processes followed correctly?
  • If no, give details (attach a separate page if necessary)
• Was your client refused credit?
  • Give details (attach a separate page if necessary)

3. DEAL WITH THE PROBLEM

From the information you have gathered in the previous steps, you will now have to assess how serious Mandla’s situation is.

• If you think that Mandla is over-indebted or that a credit provider may have been reckless in granting credit then Mandla will need to see a registered debt counsellor. If you are not registered as a debt counsellor, you must refer your client to someone who is registered.
• If Mandla has received a written notice (letter of demand) from the credit provider, check if proper procedures have been followed. It is very important for Mandla to respond to a written notice. It is still not too late for him to see a debt counsellor.
• If legal action has been taken against Mandla. Check if legal procedures have been properly followed and advise him how to respond.
• If Mandla has been treated unfairly or unlawfully in any way, ask him for permission in writing to report this to a suitable institution
• If there have been no faults in the process, discuss with Mandla what the possible solutions could be to his situation. Your advice will be important in helping him to exercise his rights and to think of constructive ways of finding solutions. You can also refer Mandla to the Legal Aid South Africa (LASA) for appropriate legal support.