Many South Africans are currently feeling the pressure of the economic recession and looking for relief. However, it has now become more widely recognised that the solution contained in the National Credit Act 34 of 2005 (“NCA”) of debt counselling, has inherent limitations and flaws and is thus not the panacea of debt relief it is so often believed to be . It is therefore interesting to note that the South African Law Reform Commission has revived its long-suffering discussion paper on amending Section 74 of the Magistrates Court Act dealing with administration orders, which calls for public comments by the 31st December 2020.
This discussion paper’s first incarnation was published shortly after the enactment of the National Credit Act in 2006 and its progress has been painfully slow.
Our submissions on the previous discussion paper are summarised on page 35 of the current paper:
“Similarly, Bentley Attorneys argue for a single debt relief process but, interestingly, suggest that, in view of the fact that the debt relief provisions of the NCA have been poorly drafted and are vague and terse, all forms of debt moratorium, with regard to both credit agreements and other debts, should be incorporated under the well-established section 74 of the MCA.”
Section 74 Administration orders like debt relief in terms of Section 85 and Section 86 of the National Credit Act, provides a debt moratorium for private individuals as opposed to the more complete relief of an individual’s sequestration. The fundamental difference between administration orders and debt relief is that debt relief deals with debts resulting from a credit agreement as defined by the NCA. In contrast, administration orders deal with debts that do not stem from credit agreements. While both do provide debt moratoriums to debtors, the application of such assistance differs, each having unique pros and cons.
However, from a debtor’s perspective, both processes result in them having to seek two distinct forms of court-based debt assistance with unnecessary additional costs on their already burdened pockets. While we note that Prof. Kelly-Louw also calls for a single form of debtor assistance, her proposal differs from ours in that she suggests that this be dealt with in the NCA. We respectfully disagree that the NCA should be the governing legislation for the reasons set out in our original submission. In addition, the National Credit Act is centred around the governance of credit agreements and as such, it should not attempt to deal with debts which do not result from credit agreements as these will present issues which fall outside the ambit of the NCA.
We intend to write a more comprehensive article on the report with suggestions for improvements in the operation of debtor moratoriums in due course.