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No doubt, most, if not all, South Africans are finding themselves in very tiring financial times due to the impact the Covid-19 pandemic has on the South African economy. Payment of debts are taking a backseat to your family’s essential needs in this time, and you may find yourselves asking “I cannot pay my debts this month (and possibly the next few months), what can I expect from my creditors?”. The National Credit Act 34 of 2005 (hereinafter referred to as “the Act”) regulates the process available to creditors in the event of breach of contract (due to non-payment of debts).

The Act makes provision for an opportunity for the consumer to rectify his or her breach, by way of a notification of such breach by the creditor. No legal action may be instituted against a consumer unless he or she has been notified of his or her breach of contract by the creditor. We refer to this notification as a section 129(1)(a) letter of demand. The law is very clear in this regard as this letter is compulsory and any legal proceedings institution will be deemed pre-mature if section 129(1)(a) of the Act is not complied with (Absa Bank Ltd v Prochaska t/a Bianca Cara Interiors 2009 (2) SA 512 (D)). In the section 129 notice, the creditor must set out the consumer’s default and draw the consumer’s attention to his or her rights in terms of the Act.

The question however arises: “Well, what if I didn’t receive the letter of demand?”. The court found in Rossouw v Firstrand Bank Ltd 2010 (6) SA 439 (A) that in the event that the consumer didn’t receive the letter in terms of section 129(1)(a) of the Act and the creditor took all reasonable steps, including sending the letter to the address provided by the consumer (domicilium citandi et executandi), via registered post (as provided for in section 168 of the Act), by way of electronic mail or facsimile, the consumer bears the risk to prove the contrary and the creditor may proceed with legal proceedings in terms of section 130 of the Act.

In the instance where the consumer has been in breach of the credit agreement for at least 20 (twenty) business days, and 10 (ten) business days has lapsed since the letter of demand has been delivered (i.e brought to the attention of the consumer) and the consumer has not responded to the creditor’s notice, alternatively rejected the creditor’s proposals in terms of the notice, the creditor may approach a competent court to enforce the agreement in terms of section 130 of the Act. The courts will however not be able to assist in the event that the matter has already been referred to a tribunal, alternative dispute resolution agent or ombudsman.

In light of the aforesaid, it is important for consumers to take note of the fact that a section 129 letter of demand should not merely be ignored. It is furthermore important for creditors to ensure that all the requirements in terms of the Act have been complied with prior to instituting legal action against consumers.

At Cavanagh & Richards Attorneys we pride ourselves in providing reliable legal advice and assistance. We have successfully assisted not only creditors, but also consumers in various debt collection and breach of contract matters. Should you require accurate and objective advice, either as a creditor or as the consumer, do not hesitate to contact us.

Written by Cherise Leeann Leeferink

02 April 2020

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