NCA s 129(1)(a) notice - A Practical Perspective on the Interpretative Challenge
The National Credit Act 34 of 2005 (NCA) in modern South Africa, has been the focus of many legal cases, mostly dealing with the interpretation of its meaning, one of the largest contributors being the provisions of s 129(1)(a). The purpose of this article is not a legal analysis of applicable case law on s 129(1)(a) but rather a practical critique of the poor drafting of this subsection that has rendered its effectiveness and application problematic. Moreover, there are core shortcomings, which are being largely ignored and not receiving proper redress.
Jurisprudence on s 129(1)(a) notices has challenged credit providers and legal practitioners alike. Any credit provider or legal practitioner dealing with, what should be a simple matter of sending a registered letter, seems bound to have to read the latest judgments on the requirements thereof, only to be condemned later to repeat this task for what seems an eternity.
Few issues in our judicial history have been examined by more High Courts, been the subject of a 100 page plus Supreme Court of Appeal judgment and yet still required multiple examinations by the Constitutional Court (CC). All for a seemingly simple issue of what constitutes proper delivery of a s 129(1)(a) notice by registered mail.
Judgments on the matter originally comprised two schools - the first required proof of actual delivery (ABSA Bank Ltd v Mkhize and Another and Two Similar Cases 2012 (5) SA 574 (KZD)) while for the other, proof of despatch alone by registered post being sufficient (Rossouw and Another v First Rand Bank Ltd 2010 (6) SA 439 (SCA)). While the former proved a substantial challenge to credit providers, as proving actual subjective receipt of the notice by the debtor is an evidentiary nightmare, it was a heaven-sent to dilatory debtors and their legal practitioners.
Section 129(1) of the NCA provides as follows:
'If the consumer is in default under a credit agreement, the credit provider -
(a) may draw the default to the notice of the consumer in writing and propose that the consumer refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date? and
(b) subject to section 130(2), may not commence any legal proceedings to enforce the agreement before -
(i) first providing notice to the consumer, as contemplated in paragraph (a), or in section 86(10), as the case may be? and
(ii) meeting any further requirements set out in section 130.'
Between the CC cases of Sebola and Another v Standard Bank of South Africa Ltd and Another 2012 (5) SA 142 (CC) and Kubyana v Standard Bank of South Africa Ltd 2014 (3) SA 56 (CC) the issue of whether the amount of the debtor's default should appear in the s 129(1)(a) notice or not, was resolved by the CC. However the recent case of Amardien and Others v Registrar of Deeds and Others (Woman's Legal Centre Trust as amicus curiae) 2019 (2) BCLR 193 (CC) showed that other interpretative challenges still remain .
The legislature's limited attempt to remedy the defects of the NCA with the National Credit Amendment Act 19 of 2014 (NCAA), added subss (5) to (7) to s 129, as an attempt to bring certainty to the method of sending these notices and the degree of proof required for delivery thereof. The NCAA thus provided that:
'(5) The notice contemplated in subsection (1)(a) must be delivered to the consumer -
(a) by registered mail; or
(b) to an adult person at the location designated by the consumer.
(6) The consumer must in writing indicate the preferred manner of delivery contemplated in subsection (5).
(7) Proof of delivery contemplated in subsection (5) is satisfied by -
(a) written confirmation by the postal service or its authorised agent, of delivery to the relevant post office or postal agency; or
(b) the signature or identifying mark of the recipient contemplated in subsection (5)(b).'
The NCAA, therefore, limits delivery methods to registered post or personal service, as elected by the debtor.
I submit that these methods are not only archaic and costly but in the case of registered mail, also ineffective. In the Mkhize case the poor success rate of registered mail actually being collected was highlighted at para 29:
'I have also been provided with an affidavit by an attorney who attends to ABSA's home loan and asset and vehicle finance matters in Pretoria. He too has not kept detailed statistics but estimates that 70% of the registered s 129 letters his office sends out are returned unclaimed.'
Based on my experience, I concur with this estimate.
Modernising the process
Despite the legislature's resolve to remain attached to antiquated delivery methods, there does appear to be a modern solution in the offing through s 19(4) of the Electronic Communications and Transactions Act 25 of 2002 (ECTA), which states:
'Where any law requires or permits a person to send a document or information by registered or certified post or similar service, that requirement is met if an electronic copy of the document or information is sent to the South African Post Office Limited, is registered by the said Post Office and sent by that Post Office to the electronic address provided by the sender.'
If this provision were in operation, it would allow e-mails or even electronic text messages such as SMSs, to serve as valid s 129(1)(a) notices.
A Pew Research Centre research paper released in June 2018 showed that 51% of South Africans have smart phones, a further 40% had other forms of cellular telephones and 59% had access to the Internet. Furthermore, South Africa, since 2015, lead the increase in internet users globally. (www.pewglobal.org, accessed 22-2-2019). In comparison, the poor receipt rate of conventional registered mail makes it plain that electronic communication has become a far more effective means of communication to general consumers.
Those reliant on registered post for legal compliance were thus excited by the South African Post Office's (SAPO) announcement in May 2016 that it was launching 'eRegistered Mail' (www.fin24.com, accessed 22-2-2019). Unfortunately, based on various meetings with sales representatives of SAPO and other players in the communications industry over a two-year period, it is, my opinion, that SAPO itself is not confident in the service as it is practically cumbersome and based on 'pull' as opposed to 'push technology'. It is, therefore, no surprise that the general public has not embraced nor made much use of it since inception.
There are, however, a number of private companies currently claiming to offer viable 'push technology' solutions. Based on use of such products, I believe at least one may be a potential answer to ensuring electronic service of legal notices while maintaining a sound evidentiary trail. The challenge lies with s 19(4) of ECTA. While many service providers claim SAPO's endorsement, the communications -
- do not appear to be sent by the sender to SAPO as required; and
- do not appear to be sent by SAPO to the electronic address provided by the sender.
Additionally, there is some uncertainty as to whether these electronic communications are registered by SAPO.
Therefore, a lacuna exists, which could be resolved by SAPO either partnering with an efficient service provider or, alternatively providing a service of comparable quality, to achieve the goal of ensuring compliance with the ECTA. This would be of benefit not only with NCA compliance, but serve a similar purpose with other legislation referring to registered mail.
The purpose of s 129(1)(a) notices
The most important shortfall of the s 129(1)(a) saga appears to have been overlooked, namely is s 129(1)(a) serving the purpose for which it was enacted?
I submit that the most apt description of the purpose s 129(1)(a)'s is found in BMW Financial Services (SA) (Pty) Ltd v Donkin 2009 (6) SA 63 (KZD), where the court held at para 10:
'That notice invites the debtor to refer the credit agreement (not the debt) to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction. The purpose of such reference is either to resolve a dispute that may exist in relation to that agreement or to reach agreement on a plan that will enable the debtor to bring his or her payments under the agreement up to date. In other words, what is contemplated is a consensual process mediated by the person to whom the credit agreement has been referred. This is a process entirely distinct from the general debt review under section 86, which depends upon the debtor being over-indebted.'
However, does consensual meditation actually take place, or is it simply an added compliance requirement for credit providers in the collection process and one being exploited as a spurious defence tool for recalcitrant debtors?
I have, since 2012, been fortunate enough to annually deliver Legal Debt Collection seminars for the Law Society of South Africa around the country, aimed primarily at legal practitioners acting for credit providers. The question constantly posed to attendees is - has any of the s 129(1)(a) third parties ever contacted them in response to a s 129(1)(a) notice, with a view to consensual mediation? I confirm that in over seven years and in seven cities across the country, the total affirmative replies has not exceeded five in total.
The NCA does not make provision for the payment of any third-party mediators, essentially disincentivising debt counsellors from being involved in the process. However, with the Credit Ombud being a government funded service, this could be a possible tool for overburdened debtors receiving s 129 notices. In view of this, a few years back, I contacted the erstwhile Deputy Credit Ombud, inquiring as to how many consumers had contacted them for a s 129(1)(a) mediation. The answer was that they were uncertain as the majority of debtors contacting them were lodging a dispute but unfortunately the Ombud did not question consumers as to what had prompted the contact and thus there exists no definitive statistics. The Deputy Ombud, however, felt that s 129 notices served a meaningful purpose by affording the debtor an opportunity to contact credit providers directly and negotiate the debt, thereby possibly avoiding litigation. While this may be true, I submit that -
- this is not the described purpose of the s 129(1)(a); and
- this result achieves little more than a normal letter of demand and certainly should not be a prerequisite for litigation or a determinant of jurisdiction (Blue Chip 2 (Pty) Ltd t/a Blue Chip 49 v Ryneveldt and Others (National Credit Regulator as Amicus Curiae) 2016 (6) SA 102 (SCA)).
To summarise the opinion expressed - s 129(1)(a) of the NCA is a poorly drafted provision; one that has caused an excessive number of judgments on delivery by registered post. Furthermore, the failure to properly remedy this defect through the NCAA, has bound the delivery requirements of s 129(1)(a) to anachronistic processes, replete with practical shortcomings and the only potential saviour (SAPO through ECTA) is itself struggling to modernise and provide service more efficiently.
Moreover, the majority of deliberations still centre on 'the best route to the room' rather than the fact that the room is occupied by a colossal myth - that s 129(1)(a) is achieving its purpose of creating a third-party mediation process to relieve overburdened consumers. The reality is that s 129(1)(a), with its noble intents, has turned out to be little more than red tape.
Originally published in the April 2019 edition of the official South African attorneys' journal De Rebus.
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