Credit providers can use debt collectors to recover debts from consumers. Debt collectors are regulated by the Debt Collector’s Act (No 114 of 1998) which provides for the exercise of control over debt collectors and legalizes the recovery of fees or remuneration by registered debt collectors. The overall goal of the Act is to monitor the conduct and professionalism of debt collectors and promote a culture of good governance within the profession. This will contribute to protecting consumers as well as creditors. The Council for Debt Collectors exercises control over debt collectors.

If a debt collector charges for their services, they must be registered with the Debt Collectors Council and they are not allowed to:

• Use force or threaten to use force against the consumer or their family
• Physically threaten the consumer or their family
• Give, or threaten to give information to the consumer’s employer that may affect their opportunities as an employee
• Serve any false legal documents
• Present themselves as police officers, sheriffs or officers of the court
• Spread, or threaten to spread any false information about the consumer’s credit worthiness
• Charge more than the tariff of fees which is set down by the Council

Debt collectors are allowed to charge for letters and notices that they send out to people. These costs usually have to be paid for by the debtor (the person who owes the money). Debt collectors are not allowed to issue a summons- this can only be issued by a court.

ADMISSION OF LIABILITY

To get a consumer to pay their debt, a debt collector may get the consumer to sign a form, called an Admission of Liability. If the consumer signs this form, it means they agree that the money is now owed to the debt-collecting agency and NOT to the creditor.

By signing this form the consumer also agrees to pay all the extra administrative charges of the debt-collecting agency. The original amount that was owed to the creditor will now increase because of these add-on charges.

If the consumer signs this form and then refuses to pay the agency, the debt- collector can refer the debt to their lawyers. The consumer will then have to pay the lawyers the original debt, the debt collector’s fee and the lawyer’s costs. The consequences of signing such a form are therefore very serious.

If a consumer is finding it difficult to repay the debt, they should contact a debt counsellor who will work with the consumer and the credit provider to try and reach an agreement on how the debt should be repaid. This allows the consumer to pay back the money through an agreed legal process, rather than wait until there are more serious consequences – like being called to court or having their goods repossessed. (See Debt counselling)

THE DEBT COLLECTOR’S ACT

The following are important provisions in the Debt Collector’s Act:

• Establishment of a Council for Debt Collectors which is responsible for monitoring debt collectors and their work
• Registration as a debt collector – No one, except for a lawyer, can act as a debt collector unless they are registered as a debt collector under the Act.

There is a prescribed code of conduct for debt collectors that is published in the government gazette.

• Complaints against debt collectors can be referred to the Council which can withdraw a debt collector’s registration if they are found guilty of improper conduct. An application can also be made to the court to deregister a debt collector if they don’t comply with the Act.
• Debt collectors are only allowed to collect the following:
  • The amount of the original debt that wasn’t paid, plus interest based on legal interest rates, for the period during which the debt wasn’t paid
  • Necessary expenses and fees that are prescribed by the minister in the government gazette
• A debt collector must open a separate trust account at a bank and any money deposited into this account must be dealt with according to specific procedures in section 20 of the Act
• If you are unhappy with the way that a debt collector has handled a matter, or if you believe that they are charging too much, complain to the Council for Debt Collectors on 012 804 9808/8483 or email info@cfdc.org.za or visit their website: https://www.councilsmart.org.za/create-complaint

For more information on the Council for Debt Collectors and a list of registered debt collectors, go to their website: www.cfdc.org.za