Mandla has borrowed money from a microlender to buy furniture and also to pay off the new section he has added to 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.

1. EXPLAIN WHAT CAN AND CANNOT BE DONE TO HELP THE CLIENT

• Help her understand the different legal actions that may have been taken against her if she failed to repay her debts in the past
• Advise her of her rights and support her in claiming these rights
• Refer her to a registered debt counsellor as well as to the other institutions that govern the National Credit Act. Tell her that some credit providers choose only to work with debt counsellors, and may not want to talk with you.

2. RECORD INFORMATION ABOUT THE CLIENT

• Mandla’s details, such as name, address, ID number
• His debt and credit record
• Check if his income is more or less than his expenses

Make as many copies of this as you need (See below for the Form for Recording Client’s Basic Information)

3. DRAW UP A MONTHLY INCOME AND EXPENDITURE BUDGET

Before offering to help the client draw up a monthly income and expenditure budget, check that they are willing to do this. People may or may not be too willing to share personal information. (See: Problem 5: Helping a person assess their financial situation and drawing up a budget)

4. 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 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)
    

5. 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. Mandla needs 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 Legal Aid South Africa (LASA) for legal support.

FORM FOR RECORDING CLIENT’S BASIC INFORMATION

Client’s surname: ……………………….. First names……………….

ID no:  ………………………..

Address:     ……………………………………………………………………

Contact numbers: home: …………………….   work: …………………………Cell: …………………………………….

Paralegal’s name:      ………………………………………………………….

Start date: …………………………………………………………………………

THE CLIENT’S STORY

Ask why the client has come to the advice office

(Use a blank page to record the main points of the client’s story)

CREDIT INFORMATION CHECKLIST

(Complete details for each debt)

Name of credit provider (organisation/person to be paid): ………………………………………………………………………………………….

Department/person to be contacted:  ………………………………………………………………………………………….

Street address of the credit provider: …………………………………………………………………………………………..

Postal address    ……………………………………………………………….

Phone: …………………………………………………   E-mail:  ………………………………………………

Amount of initial loan: ……………………………….   Period of loan: ……………………………….

Total amount still owing: ……………………………………………………………………………………………..

Amount to be paid monthly: ……………………….  

Number of payments still to be made: ………………

INCOME (Received each month)

R …………………………………………………………………

R …………………………………………………………………

R …………………………………………………………………

R …………………………………………………………………

EXPENSES (Must pay each month)

Rent:    ……………………………………………………………………………………………………

Electricity:     …………………………………………………………………………………………..

Phone:    …………………………………………………………………………………………………

Airtime:     ………………………………………………………………………………………………

Transport:     ……………………………………………………………………………………………

Groceries:     ……………………………………………………………………………………………

Toiletries:     …………………………………………………………………………………………….

Clothes and shoes: …………………………………………………………………………….

School expenses:  ……………………………………………………………………………….

Support of family members: ……………………………………………………………

Debt instalments: ………………………………………………………………………………

Donation to religious institution: …………………………………

Burial society or funeral policy: ………………………………………………………

Insurance:      …………………………………………………………………………………………..

Cigarettes:      ………………………………………………………………………………………….

Alcohol:     ………………………………………………………………………………………………

Sweets, cool drinks and other snacks: ……………………………………………

School fees:   ………………………………………………………………………………………..

Religious festivals, e.g. Christmas/Eid: …………………………………………….

Birthdays:      ……………………………………………………………………………………………

Weddings:      …………………………………………………………………………………………..

Initiations:      ………………………………………………………………………………………….

Funerals:     ……………………………………………………………………………………………..

Travel to visit family: ………………………………………………………………………..

TOTAL MONTHLY INCOME: R : 

TOTAL MONTHLY EXPENSES: R :

MONTHLY INCOME LESS EXPENSES: R :