Financiers, Consumers, Debt Collectors, Lawyers and other Animals.(Episode 2)

Episode 2 

Financiers, Consumers, Debt Collectors, Lawyers and other Animals.

What happens when a debtor defaults on his/her commitments towards a Creditor.   What are the actions Creditors take ?

Without going into too much detail one or all of the under mentioned is going to happen:

The debtor might phone the creditor or visit them at their place of business to discuss his problem. The Creditor might phone the debtor. Invariable a letter of demand will be in the mail already.  Initially all will be very cordial and possibly an arrangement as to how this is going to be rectified will be made.  All fine and well?   Nooo not really…………..  Should the debtor default on this arrangement the tone of voice and accompanying facial expressions is going to change. Smiles disappear.  

You will be greeted by a very official good morning Mr.  You will not be John or Mary anymore. You will be Mr or Mrs……………

Just for clarification : It is in all probability not the doing of the debtor that landed him in the predicament. One of a few things could have happened.

Firstly The creditor might not have given execution to his required caution in terms of the NCA in that he might not ( More than a 50% probability) have evaluated the debtors ability to repay the borrowed money.  This could be classified as reckless lending which could cost him the loss of the full capital lend out. (This action will be discussed in more detail later)

Secondly The debtor might have encountered a few  problems:  He might have had a serious sudden expense (broken down vehicle, burglary,  whatever) This can normally be handled in a month or so if the creditor plays ball and extend the possible arrears.

He might have lost his job, might have been retrenched, his business might have a cash flow problem or any other real reason.  The reason normally is of no real concern to the creditor.  You see ….as far as they are concerned it is the problem of the Debtor.

Now the problem might escalate. The debtor might not be able to honour his commitments anymore and will start avoiding the threatening phone calls, Sms’s or emails.  The Creditor will now send out a notice in terms of s129 of the NCA which by law have to be received by the Debtor before any legal action can commence. Please not I say RECEIVED. ( in a recent case commonly known as Sebola it was established by the constitutional court that proof of receipt of this notice must be given and not just proof of dispatch thereof)

Normally at this stage the debt might be given over to debt collectors who will start the process again of phoning and threatening the consumer.   In some cases, depending on the bank’s view of possibility to collect, the debt is ceded to the debt collectors who now operate on the view that you owe them money.  Should the debtor make an arrangement with them they will collect a collection fee as well as interest.   They will in all probability send the debtor an AOD (acknowledgement of debt) where amongst others the debtor will wave his right defend any action and consent to judgment.

I will in future episodes handle all the different ways and tricks Creditors use to extend pressure and stress on debtors.   For now I am only going to list a few actions a DEBTOR  might take and cautions to observe when dealing with Creditors.    I know I might get a lot of flack from a lot of people (mostly creditors) but what the heck.  I am playing with the lions tail and I might just be gearing up for a class action of sorts – details later.

Here are the  7 cardinal rules when confronted by a Creditor:

(Just remember : should this land a court of law the creditor will use every piece of paper and every word in a conversation against you)

1.     Never admit to owning them anything – not verbally or in writing.

2.     Never make specific arrangements you do not have 100% control over.(and you most probably never have 100% control over anything!)

3.     If phoned by a debt collector no matter who they are insist on them identifying themselves.  The following are the bare minimum you request they email to you:

a.     A copy of their mandate from the Creditor to act on his behalf.

b.     A copy of the debt collector’s registration certificate with the debt collectors council.

c.      Proof that the caller are actually employed by the Debt collector agency.

d.     A copy of the original alleged instrument of debt.

e.     A full copy of how they have arrived at the alleged amount owed to them.

f.       Full details of the relationship between the debt collector and the debt – is he operating on behalf of a creditor or has he taken session of the debt.

4.       Never but Never sign anything – Like in Never.

5.       If you ever consider to ignore rule 3 see a Lawyer first !

6.       Especially never sign a new AOD  - never !

7.       Do not agree with anything that is said to you on the phone- remember

  you do not know who the person on the other side is.

Episode 3 to follow

Financiers, Consumers, Debt Collectors, Lawyers and other Animals.

Episode 1

This blog post has had a long incubation period. Probably not quite the right word, it is more a question of was I going to go the route or not but I do think the time has come to start pulling the lion’s tail.

As we all know DEBT and CREDIT probably means the same thing. They are both swear words and worse than the one’s you hear on TV.  The moment you are given credit by a Financier you are in DEBT. The process and documentation involved are really very intricate although most financiers do not really think so.  The arrangement between you and the creditor now are regulated by various acts. I am discussing this specifically in the South African context.

Over a long period of time the government of the day, in its unfathomed wisdom created acts that govern the relationship between the parties and I am quoting a few of these:

1.     The present National credit act

2.     The Consumer affairs act

3.     The Supreme court act 1959

4.     The Magistrates court act 1979

5.     The attorneys act 1979

6.     The debt collectors act 1998

There are a few more but these are the main acts I might refer to in this post.  

The relationship between a consumer and a creditor are born out of the consumers’ need for money and the creditors’ ability and willingness to lend this the consumer.  This is not the extension of a service to the consumer, it is the need (or greed) of the creditor to make money out of the transaction. 

As an interlude the above definition nullifies all banks’ claims that “we are there for you” or “what can we do for you” and all that bull.

The present National credit act (NCA) governs to a great extend the initial relationship between Creditor, Debtor, contract requirements, defaults et all.

For the purpose of this post I am specifically referring to the possible (and in most instances inevitable) decline of the relationship if (when) the lender defaults.   What is import to notice here is that the financier (Bank – whoever) evaluated the debtor’s financial position as per instruction by the NCA  and upon finding it to their liking extended the credit to the debtor with the aim of making money out of the transaction.   The relationship always had a 50/50 chance of success at best.

Either the debtor would be an angel and keep his job, get increases at regular intervals and pay his required payments as arranged.  Or he could lose his job, his business could fail, he could be retrenched, he could get ill to the extent that he no longer can earn an income.  There are a few hundred more reasons this could happen.  The point I am making is that this invariably happens to good people too!

Unlike what banks say in some of their threatening letters I still have to encounter a debtor who “Choose not to pay us” or “choose not to honour your agreement”.

Now once(if/when) this relationship do go south the client's status immediately change from “client” to  “ Problem” with the accompanying change in tone of voice when he is spoken too. Also the accompanying change in facial expression, tone of letters etc. 

How does a debtor handle this? I will not go into the reasons for the decline but only as to what happens and how does a debtor defend himself against the onslaught of verbal abuse he or she is going to have to endure.

In episode 2   I will discuss what exactly happens to the creditor and what is done from the creditor’s side.

In Episode 3    I will discuss the actions a consumer can take to defend himself against the onslaught.