If a consumer has any problems repaying their debts, the first thing to do is to contact the creditors immediately. If they do not make an alternative payment arrangement with the creditor, the creditor can hand the matter over to a debt collector or attorney who will take legal action against the consumer to recover the money owed. If this happens the consumer will end up paying much more for the debt, because of extra interest and legal charges, and will be worse off than before.

For many consumers the experience of receiving legal letters and documents and visits from sheriffs and debt collectors is frightening, confusing and humiliating. Below is a process that is usually followed when a consumer fails to pay a debt or to make an arrangement with a creditor.

STEPS TAKEN FOR REPAYINg DEBT

STEP 1: PHONE CALLS AND LETTERS OF DEMAND

Some companies will phone a consumer when they default – this is the best option for the consumer who should take advantage of this and offer to pay as much as they can. Where there is an agreement, the consumer should confirm any telephonic agreement in writing and keep copies with fax coversheets as proof.

Also, they should make sure that they pay what they promise to pay as this will avoid their account being collected through a court process.

A consumer may instead or also receive a letter demanding payment. The National Credit Act now makes this letter (called a Section 129 Letter) compulsory before a creditor can take any legal action. The letter also has to advise that the consumer has the right to approach a debt counselor for help if the consumer is over-indebted.

When a consumer receives a letter of demand they should then either:

• Contact the creditor and make an arrangement to pay, or
• If they cannot cope with all the debt that they have, contact a debt counsellor

If the consumer disagrees with the claim or the amount that they say is owed, the consumer must act immediately to contact the creditor, confirm what the consumer disputes in writing and ask for proof of the debt/balance of the debt.

If the consumer is still unhappy after negotiating with the creditor, refer the complaint to the next level:

• If it is a Bank, contact the Ombudsman for Banking Services
• If it is any other creditor contact the Credit Ombud or the National Credit Regulator

NOTE: As a paralegal it is important to act immediately to assist the consumer – it becomes very costly if the debt ends up being collected through a legal process.

The creditor must wait 10 working days from the date that they send a letter of demand before they can take the legal process further.

STEP 2: SIGNING SECTIONS 57 OR 58 DOCUMENTS OR RECEIVING A SUMMONS

If the consumer does not respond to the letter of demand, the creditor will usually send an agent to the consumer’s home or workplace to ask them to sign either:

• A Section 57 Acknowledgement of Debt where the consumer signs that they owe the money (the amount will be stated), and that they promise to pay monthly instalments in that amount. They also sign that if they default again (do not pay) on any instalment as agreed, the creditor can take the documents signed to court, have a judgment taken against the consumer, and get an emolument attachment order against the consumer’s salary (see below);

OR

• A Section 58 Consent to Judgment where the consumer agrees that judgment can be taken in court immediately and that a deduction can be made against the consumer’s salary.

The difference between a Section 57 and 58 is that with a Section 57 the consumer has a second chance. In other words, there is no judgment if the consumer keeps to the payment arrangement. With a Section 58, the consumer agrees to judgment immediately.

After sending a letter of demand, instead of sending an agent to visit the consumer to sign a Section 57 or Section 58, the debt collector/attorney can get the Sheriff of the Court to serve a summons on the consumer – usually at home or work or at the address the consumer provided in the original contract (this is called the “domicilium” address). If the consumer receives a summons they have 5 working days to advise in writing that they want to defend the case.

If the consumer does owe the money there is no point in defending the case. The best way to respond is to call the attorney and make an arrangement to pay them monthly instalments. Suggest that they do not take judgment and ensure that the consumer keeps to this agreement. Also put what you have agreed in writing and send them a copy (keep proof).

If the consumer does not owe the money or does not agree with the amount that they say is owed, the consumer should immediately contact the attorney and advise in writing thatthey dispute the claim or the amount.

Try to get this dispute resolved without going to court, but if the attorney is not cooperative, the consumer must give notice that they want to defend the case. A Notice of Intention to Defend is attached to the back of the summons and must be filled in by the consumer, and taken to the address provided. Once they have signed the receipt, they must take the original and a copy signed by the creditor to the Clerk of the Court.

At this stage it will be necessary to have an attorney to assist which can be expensive. Therefore it is always best to first try and negotiate a settlement or an agreement.