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The Costs of Repaying Debts in Terms of a Judgement

It can cost a lot if an account is handed over to a legal collections department, especially for debt happening before the National Credit Act. Not only does the consumer have to pay the original debt, but they have to pay extra interest (it is taking them longer to repay, and interest is charged every day), extra charges to lawyers, to debt collectors, to sheriffs and even to the employer if they are involved in paying money to your creditors.

Before the National Credit Act, this meant that a small debt could end up being a huge burden. Even under the NCA, a consumer can pay much more than they signed the contract for.

Example of the costs and interest charged on a R4 000 loan taken in May 2007 (in other words, before the NCA), where judgment was taken for R7 200 and where the court ordered interest at 15.5% per year, and a monthly deduction from an emolument attachment order of R600 per month.

Amount owing according to the judgmentR7 200.00
Interest at 15.5% over 18 monthsR 809.21
Legal Costs – legal processR 800.00
Collection Commission to attorneys (10% plus vat) R64.98 X 18R1 169.64
Employer’s deductions (5% of each instalment) = R30.00 x 18R 540.00
TOTAL TO BE REPAID including amount owing (18 x R600.00 per month)R10 518.85

Some attorneys will charge more than the above, others charge additional costs for every telephone call and letter on the file. This can also add up to a lot extra (beware that you are not overcharged by the attorneys – this can happen!)

Note also that:

  • if the interest rate was higher e.g. 22% or 30%, you would end up paying much more in interest and other costs and for a longer time.
  • if the monthly instalment that you pay is a small amount, the interest will also be higher as interest is charged on the balance at any point in time.

Some attorneys will charge more than the above. Others charge additional costs for each telephone call.

When a warrant of execution is issued, most often the Sheriff’s auction will result in the goods being sold for much less than they are worth and after the Sheriff takes his fees, the consumer could still end up owing quite a lot of money AND be without the furniture and other items sold.

So it is in the consumer’s interest to contact the creditor or attorney as soon as they receive notice of anything and make arrangements to pay.