DEFAULTERS’ CHOICES

If you have defaulted on your debt payments, your creditor will send you a letter telling you of your right to refer the credit agreement to a debt counsellor, alternative debt resolution agent, consumer court or ombudsman, or agree to a plan to bring your payments up to date.

The letter is known as a section 129 notice, because it is issued under section 129 of the National Credit Act (NCA). It is a notice of impending legal action against you, and it gives you 10 days to use one of the remedies listed above.

If negotiations with your creditor fail or if you don’t respond to the section 129 letter, your creditor can issue you with a summons, with the intention of obtaining a court judgment against you. The judgment may give your creditor the right to attach and sell your assets, such as your car, or obtain an emoluments attachment order (“garnishee”) against your salary.

A credit agreement in which a summons has been issued does not qualify to go under debt counselling. You must then either defend the matter in court or go for mediation in jurisdictions where this is offered.

This is where court-annexed mediation can be helpful, Magauta Mphahlele, the chief executive of the National Debt Mediation Association, says. Mediation does not replace alternative dispute resolution as a remedy under the Act, she says. “The alternative dispute resolution process [as described] in the NCA works differently: alternative dispute resolution agents have to register with the National Credit Regulator, and settlement agreements reached in the alternative dispute resolution process can be confirmed by the National Consumer Tribunal, whereas settlement agreements reached in mediation can be confirmed by the court.”