There have always been negative connotations associated with the practice of debt collection, and people tend to associate it with "loan sharks" from the movies. Recent court judgments and media reporting in South Africa have highlighted the gross abuse of the debt collection processes. Unfortunately, in some cases, certain attorneys have been the ones carrying out this abuse.
The Debt Collectors Act 114 of 1998 (“the Act”) was put in place to exercise of control over the occupation of debt collectors and legalize the recovery of fees / remuneration by registered credit providers. The existing legislative framework has, however, proven to be inadequate in ensuring that debts are recovered in a fair and efficient manner with adequate control and oversight. In light of this, the Legislature has amended the current Act to provide for greater regulation and control. The new Draft Debt Collectors Amendment Bill (“the Bill”) has been tabled for comment and interested parties are invited to submit written comments by 30 November 2015.
One of the most significant proposed amendments to the Act is the insertion of section 8A. The Act in its current form excludes attorneys who render the services of debt collection, resulting in disparity between the rules and tariffs applicable to attorneys and debt collectors respectively.
The proposed section 8A (1) provides that “…No attorney, employee of an attorney, or agent of an attorney shall act as a debt collector unless he or she is registered as a debt collector in terms of this Act". Subsection (2) further provides that: "the provisions of this Act shall in addition to the provisions of the Attorneys Act, where applicable apply to an attorney, employee of an attorney or agent of an attorney contemplated in subsection (1).” The amendments seek to introduce an additional mechanism of compliance for attorneys involved in debt collection (in addition to the Attorneys Act 59 of 1973). The Bill also marks a departure from the current position in that it seeks to subject attorneys who do debt collection to the jurisdiction of the Council for Debt Collectors in terms of the Act.
The Bill regulates the processes dealing with improper conduct of debt collectors (which will now include attorneys). Improper conduct includes:
- Use or threats of force;
- Unfair tactics or any similar conduct;
- Acts of intimidation towards the debtor or persons with whom he has a family or personal relationship;
- Use of fraudulent of misleading representations including simulation of legal procedures or documents;
- The representation by a debt collector as a police officer, sheriff or officer of the court; and
- The making of unjustified threats to enforce rights and spreading of false information concerning the credit-worthiness of a debtor.
The Bill proposes that improper conduct now include the contravention of S68 and S126B of the National Credit Act 34 of 2005, which deal with breaching debtor information confidentiality and attempting to collect debts that have prescribed. The Bill introduces the role of an investigator who is tasked with investigating the improper conduct referred to above. In terms of the Bill, an investigator may enter the premises of a debt collector with, or in certain circumstances without, a search warrant, to conduct investigations. The Bill makes it compulsory for the council formed in terms of the Act to report improper conduct of an attorney to the Law Society of appropriate jurisdiction. The proposed section 15(6) states that the Law Society must then take further steps to determine if the attorney is still fit and proper to continue practicing. Attorneys can be disqualified as debt collectors if they are found guilty of dishonourable or unworthy conduct in terms of section 72 of the Attorneys Act.
Penalties for non-compliance with the Act include the withdrawal or suspension of registration as a debt collector, imposing of fines, an order to reimburse any person prejudiced by the conduct of the debt collector or a combination of these penalties, and the Bill proposes the addition of admission of guilt fines. The Bill also proposes changes that will result in the drastic reduction of fees and charges which attorneys have, in the past, been permitted to charge.