When a consumer is in default of a credit agreement,the National Credit Act, No 34 of 2005 (Act) requires the credit provider to bring the consumer’s default to his, or her attention in writing and to alert the consumer to the various options available to them (referral to a debt counsellor, alternative dispute resolution agent, etc).

In general, in terms of s65(2) of the Act, if no method has been prescribed in the credit agreement for the delivery of a particular document to a consumer, the credit provider must:

a)    make the document available to the consumer through one or more of the following mechanisms:

  1. in person, at the business premises of the credit provider, or at any other location designated by the consumer but at the consumer’s expense, or by ordinary mail;
  2. by fax;
  3. by email; or
  4. by printable web-page; and

b)    deliver it to the consumer in the manner chosen by the consumer from the options made available in terms of paragraph (a) above.

It has been held in previous Constitutional Court judgments that the credit provider must:

  1. show that it has effected the s129 notice by registered mail;
  2. prove that the s129 notice was delivered to the correct post office; and
  3. in order to prove delivery, furnish a post-despatch (track and trace) printout from the post office website.

Is strict compliance with these requirements required?

The Supreme Court of Appeal (SCA) recently considered these requirements in the matter of Navin Naidoo v The Standard Bank of South Africa Limited [2016] ZASCA 9 March 2016.

Standard Bank (Bank) sued Mr Naidoo on a loan advanced to him, which was secured by a mortgage bond. The Bank alleged that it had complied with the requirements of s129 and had drawn Mr Naidoo’s attention to his default and the options available to him. After issuing summons against Mr Naidoo the Bank applied for a default judgment, which was later granted.

Mr Naidoo appealed the default judgment and the matter was finally considered by the SCA. Notwithstanding Mr Naidoo’s acknowledgment of receipt of the s129 notice, Mr Naidoo alleged that the Bank had failed in its obligations in terms of s129 as it did not strictly comply with the requirements as set out by the Constitutional Court above.

Given Mr Naidoo’s admitted receipt of and response to the notice, the SCA was reluctant to allow reliance on technical arguments regarding a strict mechanical compliance with s129(1).

The SCA disagreed with Mr Naidoo and confirmed that, “All that is required of a credit provider is to satisfy the court from which enforcement is sought that the notice, on a balance of probabilities, reached the consumer. Ultimately, the question is whether delivery as envisaged in the Act has been effected”.

So what now?

At first glance, it may appear that the SCA was satisfied that the Bank did not strictly comply with the Constitutional Court’s requirements in relation to s129 notices. However, this departure from the Constitutional Court’s requirements was permitted by the SCA given Mr Naidoo’s acknowledgment of the s129 notice. It is upon this recognition of the notice by Mr Naidoo that influenced the SCA’s finding that strict compliance was not necessary.

The above is the position notwithstanding the application of the stare decisis principle in this instance and that the Constitutional Courts’ judgments take precedence over any decision made by the lower courts.

We therefore, suggest that credit providers err on the side of caution and comply with all the s129 requirements as set out by the Constitutional Court.