The Constitutional Court recently handed down judgment in a matter which addressed certain aspects of the relationship between credit providers and consumers. The judgment considered a credit provider’s obligations under the National Credit Act 34 of 2005 ("the Act") when it seeks to notify a consumer of his or her default before approaching a court to enforce the credit agreement between them.
In 2007 Mr Kubyana (as consumer) and Standard Bank (the official registered credit provider) entered into an instalment sale agreement for the purchase of a new motor vehicle. Shortly thereafter, Mr Kubyana at some stage failed to honour his regular payments and fell into arrears.
In 2010 the bank sent a notice to Mr Kubyana in terms of section 129 of the Act to him, indicating that he was in arrears and that it (the bank) intended to approach a court to enforce the debt. The bank sent the notice by registered post to the branch of the Post Office as indicated by Mr Kubyana in the instalment sale agreement. Two notifications were also sent to Mr Kubyana’s home requesting that he collect his registered mail - however, he failed to do so.
Some time later the notice was returned to Standard Bank uncollected.
In considering the matter, the High Court found that the bank had fulfilled its legal obligation to bring the notice to Mr Kubyana’s attention in terms of section 129 of the Act. In doing so, Standard Bank was therefore entitled to enforce its debt against Mr Kubyana, who was ordered to settle the amount outstanding under the instalment sale agreement and to return the motor vehicle.
In higher call, the Constitutional Court upheld the decision of the High Court and also found in favour of Standard Bank.
The Court found that a credit provider wishing to enforce a credit agreement must deliver a notice to a consumer setting out the consumer’s default and draw the consumer’s attention to his or her rights. This would fulfil the legal requirements set out under section 129 of the Act. The Court indicated that this is an essential component of the Act’s efforts to first look for non-litigious resolution of disputes before approaching the courts.
The court further ruled that in order to effect delivery, the credit provider (in this case Standard Bank) must take those steps that would bring the notice to the attention of a reasonable consumer.
This phrase has the effect that when a consumer has elected to receive notices by way of post, a credit provider must prove:
(i) dispatch of the notice by way of registered mail;
(ii) that the notice reached the correct branch of the Post Office; and
(iii) that the notification from the Post Office requesting that the consumer collect the section 129 notice was sent to the chosen address.
The court found that if a credit provider has taken these steps it will generally have discharged its obligations unless, in the circumstances, the section 129 notice would still not have come to the attention of a reasonable consumer.
The judgment strikes a welcome balance between the obligation of credit providers to take reasonable steps to give due notice to consumers who are in default on the one hand, and the responsibility of consumers to consider and adhere to their financial responsibilities in terms of such agreements on the other. It is also important to note from the judgment the important focus placed upon affected parties in such matters to first seek non-litigious resolution of disputes before approaching the courts.
by Adv Jacques du Preez, Centre for Constitutional Rights