Banks must establish delivery of default notices; consumers have a right to contest in case of non-receipt

The Constitutional Court today acted to protect debtors who default on their credit agreements, handing down judgment in the Sebola case. Section 129(1) of the National Credit Act requires that debtors in default of a credit agreement be informed of their rights to debt counselling and other alternatives to enforcement of the agreement. Cameron J, writing for a majority, held that a notice under section 129(1) must be properly delivered to the consumer, who will be entitled to contest the enforcement of the credit agreement in the event that she did not receive the notice. Until today, it was sufficient for a credit provider to show that it had sent the notice to the consumer’s address. It did not matter if the consumer had not received it.

SERI intervened as amicus curiae in the case in order to ensure that it would always be open to a consumer to contest the enforcement of a credit agreement on the basis that she did not know of her rights to refer the matter to a debt counsellor together with her other rights in terms of section 129.

Cameron J said that the purpose of section 129 is to “give consumers a last chance before court enforcement procedures drop the guillotine on them”. Accordingly “where the credit provider posts the notice, proof of registered despatch to the address of the consumer, together with proof that the notice reached the appropriate post office for deliver to the consumer will in the absence of contrary indication constitute sufficient proof of delivery.” However “if in contested proceedings the consumer avers that the notice did not reach her, the court must establish the truth of the claim. If it finds that the credit provider has not complied with section 129 (1), it must in terms of section 130 (4) (b) adjourn the matter and set out the steps the credit provider must take before the matter may be resumed”.

Osmond Mngomezulu, an attorney at SERI, said: “We welcome the Court’s comprehensive and meticulous judgment. SERI intervened in this case in order to ensure the consumers are properly informed of their rights and were given a reasonable opportunity to exercise them. Cameron J’s judgment achieves this end”.

In a separate concurring judgment, Zondo AJ (with whom Mogoeng CJ and Jaftha J agreed) said that a creditor must go further and demonstrate that the consumer was actually aware of her rights in terms of section 129. While SERI agrees that this is the goal of section 129, the judgment of Cameron J leaves sufficient space within which a consumer can contest proceedings on the basis that she was unaware of her rights because the notice did not reach her.

SERI was represented in court by Advocates Stuart Wilson and Irene de Vos SC.

Source: Polity