Post Office mix-up may change debt rules

2012-02-14 22:36

Johannesburg - A mix-up at the Post Office might change the way banks and other companies foreclose on people heavily in debt, following a Constitutional Court hearing in Johannesburg on Tuesday.

The case centres on a notice Standard Bank said it sent to Mashilo and Nombeko Sebola. Due to a "mistake" at the Post Office, it was sent to the wrong place and they did not receive the letter.

As a result, they did not contact the bank about the legally required debt resolution proposals that banks, and other credit providers, have to send to a customer.

This gave the bank the right to get a default order against them, which meant they would lose their property, for defaulting on their bond of just over R1 million.

They applied to the High Court in Johannesburg for the judgment to be rescinded, saying they had not receive the notice or the summons from the deputy sheriff informing them of court action. The deputy sheriff did not file an affidavit disputing their claim.

According to the bank's papers, it did not take action against the couple for a year, and they had that year to take steps to rectify their situation, but did not.

The court heard that in terms of section 129(a) of the National Credit Act, the required procedure before debt enforcement is, if a consumer is in default for 20 days, to "draw the default to the notice of the consumer in writing".

The bank must propose that the consumer refer the credit agreement to a debt counsellor, alternative to a dispute resolution agent, consumer court or ombud with jurisdiction for a chance to resolve the dispute or develop and agree on a plan to bring payments up to date.


Matthew Chaskalson, for the National Credit Regulator, said the success rate with this process was high although many people did not know they had this right.

He said the poor stood to lose the most in terms of executions.

In the first nine months of 2011, 77% of the credit provided was to people who earned less than R10 000 a month.

They were less likely to receive a notice of execution because of service delivery issues.

The court also heard that the Post Office could not be seen as an agent for debt collection.

If nothing is done within 10 days of the proposals being sent, the credit provider can take action.

The bank believes that the act does not require it to make sure the recipient receives the notice, and that it has to prove only that the notice was sent.

Hundreds of thousands of these notices were sent in bulk and there was an assumption that in 99% of cases, the Post Office would do its job, the bank's counsel Chris Loxton said.

"The question is then, who bears the risk?" Loxton asked.

To make sure the recipient got the notice would be onerous and expensive and could actually raise the cost of credit and lessen the chance of poorer people getting access to loans.

The bank believes the act actually impedes credit providers.


Friend of the court, the Socio-Economic Rights Institute of SA (Seri), believes this approach is unconstitutional because it infringes on people's rights to fair procedure and to not be arbitrarily deprived of their homes.

Seri proposed that the court amend section 129(1) of the act to require that the notice issued in its terms "comes to the attention of the consumer".

It submitted that in cases where the customer did not receive the notice, another 10 days be allowed for the consumer to exercise his or her options.

Justice Edwin Cameron wanted to know what the risk would be to the credit market, which was "worth trillions", if banks could not exercise their rights.

His colleagues on the bench wanted to know how consumers and credit providers would be protected if the consumer did not respond because of circumstances.

"I am not going to open this thing because the bank is probably after me," suggested Judge Johan van der Westhuizen as a possible response by a consumer.

"Or, I have taken refuge in alcohol because my position is too bad," suggested Judge Zac Yacoob.

Other scenarios included the notice being thrown away by someone else.

"Or a consumer who can't see," continued Yacoob, who is blind.

Judgment was reserved.

  • billxhosa - 2012-02-14 23:58

    Don't you people have registered mail? You know where you send a letter and it must be signed for? It costs extra but surely if you are trying to collect on a R1 million bond it must be done. bxhosa

      Thompho Muhanganei - 2012-02-15 01:31

      Post office guys put them letters on your gate(even with a safe built on ur wall) and the wind blows away, or rain damages, or kids in the street take and play with.

      Breinlekkasie - 2012-02-15 07:02

      No, cost saving. A company cannot send a letter by registered mail because that would jeopardize the director's bonuses. Anyway it will also appear that someone is taking responsibility for the problem and we don't want that.

      Merven - 2012-02-15 11:06

      Registered mail don't work. I send a golden chain via registered mail. The package ended up empty at the recipient. It is now 2 years later, 4 complaints later on and nothing came from it.

      Gail - 2012-02-15 16:50

      I have what I consider a very fancy letterbox which is large enough to hold several magazines flat as well as accommodate sundry other letters however I recover mail which has been blown out of my letterbox right down my garden under shrubs and things. Wind blows in all areas and unless your letterbox is sealed things do just blow away and also the Post Office delivery people put them in wrong boxes etc. Large institutions like banks frequently have typos in addresses as well. The bank wants to recover defaults on a million rand bond which is not a rich person's house they need to personally contact them or send them Certified Mail.

  • John - 2012-02-15 00:33

    Only in South Africa !!!!

      Marcell - 2012-02-15 02:30

      Only in SA post 1994.

      Gungets - 2012-02-15 06:54

      How do you know it is only in South Africa. It happens everywhere and most certainly happened before 1994. Do you have any idea how hard it is, or impossible it is, to evict people from squats in the UK and USA. Travel a bit, it will broaden your minds a little.

      Marcell - 2012-02-15 07:18

      The last time I checked SA is not in the UK or USA. Pre 94 the postal services were functional. Now it is a miracle if you do get your parcel and everything is still there.

      John - 2012-02-15 07:54

      @Gungets Thanks for traveling idea, but we need to measure services today, not what was in 90's. Gungets, honestly im not interested what happen outside. I'm interested others to measure against us for better service. If you belive that "it happens everywhere"...improvement is just a "lost word". SA Post office and the banks are equally wrong. Now they will need to fix the "procedure". Now tell me when this happen in US and UK, becouse I need to travel abroad....maybe in the past.

      FlowingRivers - 2012-02-15 09:17

      @Gungets & Marcell............Kindly MOVE back home......whereva that is!

  • Leendert - 2012-02-15 03:59

    So they cannot pay their mortgage but have money to take the case to the High Court?? Makes sense. Not.

      steve.dupreez - 2012-02-15 07:16

      In this case Leendert the cost will probably be for Standard Bank, depending on the outcome. The couple only have to pay a retainer to their attorney who would not have accepted the case unless he was 110% sure they have >90% chance of success. What concerns me is how long have they reserved judgement for as some cases have been reseved for much longer time period than the law allows for.

      Emile Myburgh - 2012-02-15 08:38

      It was most likely some NGO who picked up the legal tab.

  • Silvana - 2012-02-15 05:02

    I don't care about the legal procedure in this case. Surely if you have not been paying your bond, you don't wait for the bank to contact you. I've been getting sms on my mtn internet from lawyers to some guy demanding payment of about R11000 owing to Edgars. Obviously the lawyers have been taking a short cut OR it's a scam.

      Kevin - 2012-02-15 06:53

      Agree ,non payers are treated with kid gloves. Its the lawyers way of ensuring there can be a court case so they earn bucks. Form of extortion

  • Saamprater - 2012-02-15 06:08

    Who bears the risk? The person owing. How can the responsibility to service debt be shifted. You know when you have defaulted, therefore owe up and either give back the said goods or pay up.

  • Breinlekkasie - 2012-02-15 07:00

    Two problems: 1. The owner new he defaulted on his home loan - a clear lack of responsibility. 2. The bank is not responsible to make sure the communication reaches the person in question - a clear lack of responsibility. No responsibility, everything will just happen by itself. God or aliens or something will take responsibility.

  • Kungfumouse - 2012-02-15 07:15

    It nowadays cheaper to send stuff via courier than registered mail, and as Bill said: You have to sign for it.

  • K0BUSL - 2012-02-15 07:31

    This taken from the SA National Treasury General Conditions of Contract.... 31. Notices 31.1 Every written acceptance of a bid shall be posted to the supplier concerned by registered or certified mail and any other notice to him shall be posted by ordinary mail to the address furnished in his bid or to the address notified later by him in writing and such posting shall be deemed to be proper service of such notice 31.2 The time mentioned in the contract documents for performing any act after such aforesaid notice has been given, shall be reckoned from the date of posting of such notice. If this is acceptable to government as a Business Practice, I see no reason why the Banks should not follow suit. So apart from the official notice of your bond registration any oher notices should be posted as normal mail with the date of action calculated from the actual date of posting. My only problem with this is how does the bank actually prove, in the case of BULK NORMAL MAILING, that your specific letter was actually handed to the post office and did not fall out and land in file 13....... TO finish this procrastination I have to say UNFAIR CONSUMER, you fell behind in your payments which is your responsibility and you had the chance to "FIX" it by various means. Yet you decided to play Ostrich and now... now that the hunter has kicked your but and is taking aim on you, you want to cry fowl...... no pun intended

  • Angus - 2012-02-15 08:07

    The main issue is that people in general do not live morally and ethically. IF you take a bond, knowing you can't pay it, or even if you lose your job, you need to sell immediately and pay back the difference. That is a fact of life! IF you DON'T...and avoid the banks etc then you are being deceitful. If you have to downgrade and live in a tent in a caravan park, then so be it. Your very integrity is at stake in such a situation. Bottom line is that you cannot make your problem everyone else's problem.

      Wendy - 2012-02-15 09:29

      Angus, to add to what you said, people need to realise that NOBODY has job security nowadays, so before taking out any debts, specially large, long-term ones, you already need to be thinking about how you would deal with that debt should you lose your job. There are legal minimum retrenchment packages, although large companies often give more than the minimum. Does everyone bother to find out what their employer offers even if there has been no mention of retrenchments? I suspect not. Also to be borne in mind is that whether they offer 1 or 2 weeks pay for each year of service, at the end of the day, it's the years of service that ultimately count for the most. If you job-hop to keep getting better salaries, and take out a new bond for the maximum early in your employment with a new company, you have not thought about this aspect.

  • Emile Myburgh - 2012-02-15 08:41

    I must say, Judge Yacoob's statement about people not getting notices because of a drunken stupor can definitely not be taken seriously. Should banks honestly ensure that their debtors are not alcoholics?

  • jensuffhaus - 2012-02-15 12:44

    The way I see it ... If you take out a loan, you agree upfront to the terms and are responsible for upholding your end. Technicalities like this are invented to give extra protection to defaulter who knowingly ignore their responsibility. If I am in arrears and can't pay, I approach the creditor and make a plan with them. Its my duty and their money.

  • Gail - 2012-02-15 16:56

    I am still waiting for a parcel posted well before Christmas from Australia. No idea what was in it but have not seen a parcel slip yet. It is strange since I shop online and have mail posted to me from the Virgin Islands and have never had a problem. Maybe because there is tax to pay on it.

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