IN THE NATIONAL CONSUMER TRIBUNAL
 HELD IN JOHANNESBURG

CASE No: NCT/510/2010/138(1 )(P)
DATE:16/01/2011

In the matter between

GERALD CLIVE SCHWARTZ.................................................................... Applicant/Consumer
(Represented by a debt counsellor)

and

AFRICAN BANK..............................................................................Respondent/Credit Provider
JUDGMENT

1. INTRODUCTION

1.1 The Applicant is a consumer who applied for debt review in terms of the National Credit Act 34 of 2005 (the Act). The debt counsellor representing the debtor is Marilyn Koetsie. The Applicant is applying for a consent order in terms of section 86(8) read together with section 138 of the Act.
1.2 The debt counsellor found that the Applicant was experiencing difficulty in satisfying his obligations under his credit agreement in a timely manner.
1.3 The debt counsellor recommended a restructuring of the payment instalments to the credit provider, as per the agreements, which are attached hereto marked "Annexures A and B."
1.4 The respective credit provider (Respondent to this consent order) consented to this agreement.

2.APPLICATION FOR CONSENT ORDER
2.1 The Applicant applied for a consent order on 4 March 2010. The Tribunal expressed concern regarding the interest rate which African Bank Limited (the ... Respondent) was charging the Applicant in the consent order under loan account numbers 3831185002 and 3831185005, respectively. A directive was issued for the Tribunal to subpoena the respective contracts in order to establish the type of credit agreements entered into and the applicable formula for calculating interest.
2.2 The matter commenced again on 15 November 2010 after the Tribunal received the relevant contracts related to the agreements between the Applicant and the Respondent.

"3.  CONSIDERATION OF THE AFRICAN BANK CONTRACTS LOAN ACCOUNT NUMBER 3831185002

On 15 August 2006 the Applicant was granted a loan by African Bank of R10 000,00. The interest rate is recorded as 36,64% over a period of 35 months.
At the time when the credit agreement was entered into on the 15 August 2006 the applicable repo rate was 8. Thus the applicable interest rate was [8 x 2.2 + 20%] 37.6% and accordingly the interest rate being charged was within the legal limits. However, with the subsequent reductions in the repo rate the credit provider did not reduce the interest rate being charged to the consumer.

When the application was lodged on the 31st of March 2010 the maximum rate of interest that could be charged was 7. Therefore the applicable interest rate was [7 x 2.2 + 20%] 35.4%. Accordingly, the credit provider is charging interest in excess of the prescribed limit.

LOAN ACCOUNT NUMBER 3831185005

On 2 July 2007 the Applicant was granted a loan by African Bank of R8000,00. The interest rate is recorded as 39,80% over a period of 27 months.

At the time when the credit agreement was entered into on the 2 July 2007, the applicable repo rate was 9. Therefore the applicable interest rate was [9 x 2.2 + 20%] 39.8% and the interest rate being charged was within the legal limit. However, with the subsequent reductions in the repo rate the credit provider did not reduce the interest rate being charged to the consumer.

When the application was lodged on the 31st of March 2010 the maximum rate of interest that could be charged was 7. Therefore the applicable interest rate was [7 x 2.2 + 20%] 35.4%. thus the credit provider is charging interest in excess of the prescribed limit.

4. CONSIDERATION OF THE CONSENT AGREEMENTS

The consent agreements attached to the application for a consent order indicates that the Applicant owes African Bank R8981.73 and 7152,94 respectively. In addition, the Applicant has agreed to repay African Bank R259,09 for a period of 40 months and 262,07 for a period of 26 months. The interest rate for this debts are recorded at 36,60% and 39,80% respectively.

5. CONSIDERATION

 Section 101 (1) (d) (I) states that the interest charged must not exceed the maximum prescribed rate. Therefore, an agreement to pay 36,60% and 39,80% interest per annum constitutes an illegal agreement.

In addition such an agreement is contrary to the in duplum rule. The common law . in duplum rule has been codified in section 103 (5). However, this section has expanded the common law rule in that the interest charged, can never exceed  the principal debt. This section reads as follows:

Despite any provision of the common law or a credit agreement to the contrary, the amounts contemplated in section 101 (1) (b) to (g) that accrue during the time that the creditor is in default under the credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under that credit agreement at the time that the default occurs.
This section has been interpreted by Du Plessis J in NCR v Nedbank Limited and others 2009 (6) SA 295 GNP. The court interpreted the section to mean that:
(a) the amount contemplated in section 101 (1) (b) to (g) which accrues while the consumer is in default may not exceed, in aggregate, the unpaid balance of the principal debt when the default occurred;
(b) once the total charges referred to in section 101 (1) (b) to (g) equal the amount of the unpaid balance, no further charges may be levied;
(c)  once the total charges referred to in section 101 (1) (b) to (g) equal the amount of the unpaid balance, payments made by a consumer thereafter during a period of default do not have the effect of permitting the credit provider to charge further interest while such default persist.

Although it is not possible, from the consent agreement, to establish exactly what the outstanding amount was on the principal debt (that is without the added interest and charges) when the consumer fell into arrears, the amount which African Bank will ultimately receive through this consent agreement, is clearly in excess of what African Bank is entitled to receive, taking into account the statutory in duplum rule.

CONCLUSION

The application for a consent order is accordingly refused and the Tribunal makes the following order:

The matter is referred to the National Credit Regulator in order to investigate whether there was prohibited conduct on the part of African Bank. The Regulator

is requested to report back to the Tribunal within a period of fourty five (45) days from the date of this judgment regarding its findings.

Handed down on this 16th day of January 2011.

P A BECK
PRESIDING MEMBER