If the consumer signs a Section 57 and then defaults (doesn’t pay in terms of the agreement), or signs a Section 58, or if the consumer does not respond to a summons, the court will order judgment against the consumer for the amount owing plus interest and costs. The court can also award any of the following orders relating to how the creditor will recover the money from the consumer.

A WARRANT OF EXECUTION AGAINST THE CONSUMER’S PROPERTY

A sheriff will be sent to the consumer’s house to list all the goods that they own (for example, furniture, kitchen equipment, motor car, etc). These goods, up to the amount owed plus costs, will then be sold on auction unless the consumer has the money demanded, and can pay it all. The sheriff may not attach beds, bedding and clothes.

After the items are sold, and the sheriff is paid, the balance is sent to the creditor. If the sale does not provide enough to cover the debt, and the consumer owns a home, this can also then be sold in execution. If there is a balance still owing after the sale, the creditor can ask the court for an emolument (salary) attachment order as well.

AN EMOLUMENTS (SALARY) ATTACHMENT ORDER

This is one of the most common ways that a debt is collected from the consumer after judgment is granted. Here the court orders the consumer’s employer to deduct the debt in specified instalments from the consumer’s salary. It is sometimes incorrectly called a garnishee order. It is also unlawful for the employer to refuse to deduct the money because the instruction comes from the court.

A GARNISHEE ORDER

Here the court orders someone (usually the bank) who owes money to the consumer, to pay the creditor instead of the consumer. So for example, if the consumer had R5 000 savings in their bank account, and owed the creditor R3 000, the court would order the Bank to pay the R3 000 from the consumer’s bank account to the creditor.

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 also have to pay extra interest (it is taking them longer to repay, and interest is charged every day), extra charges to lawyers, debt collectors, 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

This is an 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.

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.

THE DEBT RELIEF BILL

The Debt Relief Bill is aimed at implementing debt relief measures for certain qualifying creditors and trying to reduce the problems linked to households being in too much debt. For example, a qualifying person could be someone who has been retrenched or doesn’t have work but needs to pay off debt. it includes debt forgiveness for struggling consumers. Recommendations for debt relief under the National Credit Act included:

• Prescribed debts (If the last time that a consumer paid any money on the account is more than 3 years ago)
• Social grant beneficiaries
• Loans to students under the NSFAS Scheme
• Garnishee orders
• Mis-selling of insurance
• Reckless lending

The proposals for debt relief have not yet been finalised by Parliament.