of financial freedom
Follow the easy steps set out in this book and learn the secrets of creating a life in which you will have financial security and independence.

Learn the secrets towards financial freedom

This book is dedicated to the millions of South African consumers and users of credit and other financial services products. May this book empower you to gain financial freedom and security.

INTRODUCTION SECTION 1 THE CONSUMER'S RIGHT TO REDRESS 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 The right to be heard...................................................................... The right to be informed................................................................. The right to safety.......................................................................... The right to choose........................................................................ The right to redress........................................................................ The right to consumer education..................................................... The right to the satisfaction of their basic needs.................................. The right to a healthy environment................................................... 1 2 2 2 3 3 3 4 4 4

SECTION 2 CONSUMER PROTECTION LEGISLATION IN SOUTH AFRICA 2.1 The National Credit Act.................................................................. 2.1.1 A super credit watchdog – the National Credit Regulator....... 2.1.2 Consumer rights relating to credit transactions.................... 2.1.3 Interest rates and other charges and fees............................. 2.1.4 Reckless lending................................................................ 2.1.5 Debt counselling............................................................... 2.1.6 Registration of credit providers............................................ 2.1.7 Credit bureaux.................................................................. 2.1.8 A Consumer Credit Court – The Consumer Tribunal............... 2.1.9 Beware of negative listings with the credit bureaux.................. 2.1.10 Microlending.................................................................... 2.1.11 Credit cards...................................................................... The Consumer Protection Bill..........................................................

5 5 5 6 6 7 8 8 8 9 10 10 10 11




Take control of your money matters.................................................. 12 Personal budgeting....................................................................... 12 Five simple steps to prepare your own budget.................................... 12

SECTION 4 BORROWING WISELY 4.1 4.2 4.3 4.4 Borrowing should only be occasional............................................... Borrowing should only be for necessities........................................... Borrowing can create unnecessary pressure...................................... Be a smart consumer......................................................................

18 18 18 18 19

SECTION 5 REPAYING YOUR DEBTS 5.1 5.2 5.3 5.4 5.5 Legal consequences of defaulting on debt obligations..................…... First steps – telephone calls and letters of demand…........................... Second steps – signing s57 or s58 documents or receiving a summons...................................................................................... Judgements and other court orders…………....……....……............... The painful costs of repaying your debts in terms of a judgement...........

22 22 22 23 24 25

SECTION 6 CONSUMER RIGHTS AND REMEDIES IN LEGAL DEBT ACTION General guidelines…………………………………………………...... Defences – Prescription and In Duplum…………….………………….. Debt Collectors' Rules……………………………….………………….. When and how to have a judgement rescinded…….………………….. Applying to court to have an emolument (salary) attachment order rescinded or amended…………………………………………… 6.6. Applying to the sheriff to stop the sale of your goods………………….... 6.7 Unhappy with attorneys' fees and charges? Have the account taxed………….................................................... 6.8 Under administration and not getting out of debt?.............................. 6.9 Too much debt? Find a debt counsellor who can help you…......…….... 6.10 Surrendering goods bought on credit........……………………………. SECTION 7 UNDERSTANDING THE CREDIT BUREAUX 7.1 7.2 7.3 6.1 6.2 6.3 6.4 6.5

28 28 29 29 30 30 31 31 32 33 34


Recording credit information on the bureaux…...…………………… 35 Consumer rights…………………………………..…………………..... 35 What to do if you are incorrectly listed…………....……………………. 36 38 40


How do people obtain financial independence and freedom? How do people become wealthy? It is not only luck or inheritance, or advanced degrees or even intelligence that helps people to build fortunes. Financial independence and wealth are more often the result of a lifestyle of hard work, perseverance, planning and self-discipline. Personal budgeting and money management are valuable tools for achieving financial independence. Many people fail to make ends meet because they do not budget and plan. This book will equip you with knowledge to do just that – plan properly.


CONSUMER RIGHTS Consumers have the following rights - based on the United Nations Guidelines for Consumer Protection, 1985: ? to be heard The right ? to be informed The right ? to safety The right ? to choose The right ? to redress The right ? to consumer education The right ? to the satisfaction of their basic needs The right ? to a healthy environment The right It is the responsibility of individual consumers to make sure that their rights are not violated. 1.1 THE RIGHT TO BE HEARD Somebody must listen – the retailer, repairman or anybody involved in the matter – when the consumer is not satisfied with a purchase or with a service received. Go straight to the top! Approach the owner or the manager with your complaint. Consumers have the right to stand together and to lobby for the right to air their views. 1.2 THE RIGHT TO BE INFORMED Consumers have the right to be given all the information they require about a product or service and it is their responsibility to see to it that they get it.


For instance, as a consumer, you have the right to know the exact ingredients of every type of processed food you buy, and the right to know all the details on a contract. If you do not understand certain points, insist on having them explained to you. 1.3 THE RIGHT TO SAFETY Consumers must be protected against flaws or hidden dangers in products that they buy or services that they receive. They also have the right to physical safety. Consumers must be the watchdogs of the community and be on the lookout for potentially dangerous situations. Consumers must alert the local authorities or the relevant government departments about problems or unsafe products. 1.4 THE RIGHT TO CHOOSE Consumers must insist on a variety of products and goods to choose from based on personal taste, quality or price. Competition in the marketplace allows you to buy that which suits your particular circumstances. 1.5 THE RIGHT TO REDRESS When you are sold an inferior product or receive an inferior service, you have the right to go back to the seller or provider and demand a replacement or a refund. In some instances, this right is protected by law and consumers can take their cases to the courts to exercise their right to redress. If consumers do not demand redress for inferior products and services, suppliers will not know that there is a problem with the product/service and will not be able to rectify the matter. -3-

1.6 THE RIGHT TO CONSUMER EDUCATION Consumers have the right to education in consumer affairs. Both the state and the private sector have a role to play in this regard. Many opportunities are available and the onus rests on you, the consumer, to make sure that you are educated.

1.7 THE RIGHT TO THE SATISFACTION OF THEIR BASIC NEEDS Consumers have the right to basic goods and services which guarantee survival. This includes adequate food, clothing, shelter, health care, education, sanitation and electricity.

1.8 THE RIGHT TO A HEALTHY ENVIRONMENT Consumers have the right to a physical environment that will enhance their quality of life.


2.1 THE NATIONAL CREDIT ACT In 2006, a new law called The National Credit Act (NCA) was passed in parliament. This Act gives consumers more protection ? borrow money; when they ? buy goods, such as furniture, on credit; or ? get finance for an asset, eg a house or a car. It even protects consumers during cash transactions, should these accounts go into arrears. The National Credit Act came into effect in June 2007, replacing the Usury Act and the Credit Agreements Act. The new Act provides one framework for all aspects of credit and all credit providers have to comply with the new Act. 2.1.1 A SUPER CREDIT WATCHDOG – THE NATIONAL CREDIT REGULATOR The whole credit industry is now supervised by a body called the National Credit Regulator (NCR). This body has the task of educating consumers and ensuring that the credit industry complies with the National Credit Act. Among other functions, it ? complaints, investigates breaches of the law and conducts audits on receives credit providers, conducts research, monitors practices and reports to the Minister on matters such as market conduct and consumer over–indebtedness; and ? raises consumer awareness through education and the dissemination of information. -5-

All credit providers, credit bureaux and debt counsellors are required to register with the NCR. All credit agreements must also be registered with the NCR. 2.1.2 CONSUMER RIGHTS RELATING TO CREDIT TRANSACTIONS The NCR protects consumers in many ways, for example:
? practices of agents canvassing for loans are Certain

now unlawful or restricted, eg door-to-door selling, and canvassing at workplaces and homes without an invitation. ? practices and advertisements are also more Marketing controlled to protect consumers, eg credit facility limits may not be automatically increased, and negative option marketing is unlawful (“if you do not decline, we will assume you agree”). ? Consumers must be given a quote, valid for five days, with all the details about the loan so that they can shop around and compare prices. 2.1.3 INTEREST RATES AND OTHER CHARGES AND FEES Interest rates and other charges and fees will be controlled based on a formula which is dependent on the South African Reserve Bank's Repurchase (Repo) Rate (RR) below.

? categories of credit have different maximum interest rates and fee Different

caps, as set out below:

CATEGORY 1 2 3 4 Mortgage agreements Credit cards/facilities Unsecured credit transactions Short-term credit transactions (loans of not more than R8 000.00, and repayable in 6 months or less)

MAXIMUM INTEREST FORMULA [(RR x 2.2)+5%] p.a. [(RR x 2.2)+10%] p.a. [(RR x 2.2)+20%] p.a. 5% per month (60% p.a.)

Example if the Repo Rate is 11.5% 30.3% p.a. 35.3% p.a. 45.3% p.a.


CATEGORY 5 Developmental credit agreements 6 Other credit agreements 7 Incidental credit agreements (eg cash transactions that go into arrears, such as doctors’ bills/clothing accounts etc)

MAXIMUM INTEREST FORMULA [(RR x 2.2)+20%] p.a. [(RR x 2.2)+10%] p.a. 2% per month (24% p.a.)

Example if the Repo Rate is 11.5% 45.3% p.a. 35.3% p.a.

? In addition to the above interest rates, other charges are also allowed, although

they are regulated, eg initiation fees, service fees, default fees and collection costs. ? cover on loans is permitted but the charge must be reasonable and Insurance the consumer can use an existing policy as cover instead of taking out special cover for the loan. Interest must be charged monthly (unless it is a large credit agreement, in excess of R250 000.00). ? which are signed must be written in plain language, available in at Contracts least two languages and the consumer must receive a copy. ? Consumers are entitled to a reason for credit being refused. ? providers must assess whether a consumer can afford the loan, and all All credit loans will be recorded on a register. This aims to ensure that a consumer will not become over-indebted. 2.1.4 RECKLESS LENDING
? provider that gives credit without considering Any credit

whether or not a client can afford the loan, may be guilty of reckless lending. ? be severe penalties for this and the credit There will provider may even lose the right to recover the debt. ? Most important though – a consumer will not receive any protection if he/she does not fully disclose all


his/her debts and expenses. In such cases the credit provider will not be guilty of reckless lending. 2.1.5 DEBT COUNSELLING
? When consumers cannot pay their debts, they will have the right to go to a debt

? The counsellor will help the consumer to solve his/her problem by, for example,

restructuring/rearranging his/her debt repayments. This arrangement can be made an order of the court. ? provider must give notice to a consumer when he/she defaults advising A credit him/her of the right to consult a debt counsellor. If there has been no response to a notice after 10 days, or the credit provider does not accept a proposal from the consumer or counsellor, the credit provider can then proceed to court for a judgement. ? Consumers must remember that once they have signed up for a debt counselling programme, they will not be able to apply for credit until their debt has been paid off. 2.1.6 REGISTRATION OF CREDIT PROVIDERS All credit providers must be registered with the NCR. If the credit provider is not registered with the NCR it cannot institute a claim against a consumer for non-payment. 2.1.7 CREDIT BUREAUX Credit bureaux are now more strictly controlled ? sure that information is accurate; and to make ? that information which is incorrect is immediately removed without to ensure cost to the consumer once the consumer has lodged a complaint. The time that a default listing will remain on record is also limited as follows:


CATEGORIES 1 Enquiries


Enquiries made on a consumer’s record 2 Payment profile Factual information about the payment record/profile of a consumer 3 Adverse Negative information about a consumer’s information default on payments 4 Debt restructuring An agreement where all debts are restructured


1 year

5 Judgements

6 Administration orders 7 Sequestrations

Until a clearance certificate is issued (once all payments have been settled as agreed to) The earlier of 5 years or when the judgement is rescinded/the creditor abandons the judgement under special circumstances The earlier of 10 years or when the order is rescinded by court The earlier of 10 years or when a rehabilitation order is granted by court

? The regulator, as well as consumers, will be able to take

complaints about breaches of the NCA to a special court called the Consumer Tribunal. ? Consumers now have their rights protected as well as having a court to go to if the credit provider does not comply with the law and does not address a consumer's complaint.


? Remember that there are also many other ombuds offices and organisations

that consumers can go to, to have their complaints addressed. (See contact numbers in section 8.) 2.1.9 BEWARE OF NEGATIVE LISTINGS WITH THE CREDIT BUREAUX
? Always make sure that you are up to date with your credit

payments or have made some arrangement with your creditor. ? Businesses subscribe to credit bureaux, which supply them with all credit account information, whether positive or negative. When you apply for new credit your application may be refused if your credit record is negative. (It could be that you have too much existing debt.) ? allowed to query your credit report issued by such a bureau. Each You are person is entitled to receive one free copy of his/her credit record per year. No information will be given telephonically and you will be required to supply proof of identity. ? To get the information, contact TransUnion: Tel 0861 482 482 or Experian Bureau: Tel 0861 105 665. ? If you would like to know how long a listing remains on the credit bureaux, eg administration, sequestration, debt restructuring or a negative/adverse judgements listing, please refer to page 9. 2.1.10 MICROLENDING Be sure that you only deal with businesses that display their registration with the NCR in their offices. In the case of microlenders, compare interest rates and be sure that the microlender is registered with the National Credit Regulator, Tel: 011 554 2600; ShareCall: 0860 627 627; Fax: 011 805 4835; or email 2.1.11 CREDIT CARDS
? of your credit card numbers, expiry dates and the Keep a list

telephone number of each card issuer, in a secure place. ? When selecting a card, compare the terms offered by several card issuers to find the card that best suits your needs.

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? Watch your card after giving it to a clerk. Take your card back promptly after the

clerk has finished with it and make sure it is yours.
? Never sign a blank receipt. Draw a line through any blank spaces above the

total when you sign receipts. ? Open credit card bills promptly and compare them with your receipts to check for unauthorised charges and errors. ? questionable charges to the Bank which issued your card and do this Report any promptly telephonically and then in writing. ? Never give out your credit card number over the telephone unless you have initiated the call. ? your card number on a postcard or on the outside of an envelope. Never put ? cards as soon as they arrive. Cut up expired cards and dispose of them Sign new promptly. Cut up unwanted cards and return them to the issuer. ? Leave infrequently-used cards in a secure place. ? your credit cards are missing or stolen, report the loss to your card issuer If any of as soon as possible. For your own protection, follow up your telephone calls with a letter to each issuer. The letter should contain your card number, the date on which the card went missing, and the date on which you reported the loss telephonically. You may be required to go to a police station to report the loss and to obtain a case number. ? for credit card misuse and loss insurance with the issuer of the credit Arrange card. 2.2 THE CONSUMER PROTECTION BILL The Bill aims to: a fair, accessible and sustainable marketplace for consumer products and services ? responsible consumer behaviour Promote ? a consistent enforcement framework for Promote consumer transactions and agreements ? certain unfair marketing and business Prohibit practices ?for improved standards of consumer information Provide ? for harmonisation of laws relating to consumer transactions and Provide agreements ?for the establishment of the National Consumer Commission Provide
? Promote

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3.1 TAKE CONTROL OF YOUR MONEY MATTERS! Many people have money problems in one form or another, eg their income does not keep up with increasing prices, someone in the family may be retrenched, unexpected events occur like illness or hospitalisation; and some of us simply overspend. At the same time, it is so easy to get credit that we can be at risk of falling into the trap of being over-indebted. There are different forms of credit:
? Loans from banks ? Microloans from microlenders ? at retail stores, doctors, chemists Accounts ? Hire purchase or credit agreements

It is acceptable to use credit to help you solve a temporary problem or to make a large purchase and pay for it in monthly instalments – that you can afford. However, you cannot carry on borrowing month after month, or take out loans that you cannot afford to pay back, because your financial situation will just get worse. YOU MUST TAKE CONTROL OF YOUR MONEY MATTERS How do you take control? Well, firstly, you need to look at WAYS OF SAVING COSTS. If you still do not have enough money to meet all your obligations, you may then need to look for OTHER SOURCES OF INCOME. 3.2 PERSONAL BUDGETING Many people are too scared to sit down and prepare their own budget – just like some people are frightened of medical check-ups. They fear what it will tell them.

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Self-discipline is the first step towards financial independence. Budgeting sounds complicated and is often seen as something that only businesses and very rich people do. However, it is simple and very, very important for all of us to do. Without a proper budget, you do not really know what is happening with your money, and your problems will probably get worse. If you do not budget properly, you are less likely to be able to save anything. 3.3 FIVE SIMPLE STEPS TO PREPARE YOUR OWN BUDGET Step 1 Your income Work out the total net income that comes into your household each month. “Net income” means the amount of money that you take home after all deductions from your gross income have been made. Work out your total net income by adding Calculate Your Income together your salary and Salary that of your spouse 1 R (husband or wife or 2 R partner). Now add any 3 R other income you get, Other sources of income perhaps from a part1 R time job or a business 2 R you run from home. If a 3 R friend or relative stays TOTAL INCOME R with you and pays ============ towards household expenses or if your children are staying in your home and are contributing to the household income, you must add these amounts to the household income. Always work on the amount of your income after tax and other deductions. Only this net amount will be available for you to spend each month.
Exercise 1

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Step 2 Fixed Payments Each month there are certain payments that you have to make, otherwise serious problems may arise. For example, if you do not pay your rent you may be forced to leave your house; if you do not pay the instalment on your furniture it could be repossessed; or if you do not pay back the money you have borrowed you could get a judgement against your name. On a second page, make a list of all these fixed monthly expenses – who must be paid, and what the monthly Exercise 2 instalment is. Fixed Payments Also make a list of all payments that you have to make but not on a monthly basis – like licences for your car or TV, school books, birthday parties, clothes and other R ===== things (see page TOTA L FIXED PAYMENTS 15+16). Consider setting aside some money each month. This will help you to start up a savings plan so that you are in a position to meet these expenses as they arise. Always try to keep these types of expenses to a minimum. If you are having financial problems, do not take on any more commitments until things have improved.

Rent/bond Rates and Taxes Insurance - home/car Transport fees ( taxi, bus, train, petrol) Hire purchase/lease Accounts, eg clothes School fees Loans Licenses (TV, car etc) Bank charges Other


________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________

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Step 3 Day-to-day expenses Fixed payments are when you know exactly how much you need to set aside each month. However, with certain payments you do have some control over how much or how little you pay. For example, you have to eat and drink, but you do not have to eat expensive meat and drink expensive wine every day. You may need Exercise 3 to make telephone calls, Day-to-day expenses but you can take steps to Groceries R control the number of Meat calls that you make R each month. You may Electricity R also need water and Telephone R electricity, but you can Repairs to home and appliances R control how much you Chemist R use.
Doctor/Dentist R

You may not know exactly how much you TOTAL DAY -TO-DAY EXPENSES R spend on these items. If ========= that is the case, keep a detailed record for a month or two until you know exactly what it is that you are spending your hardearned money on. Step 4 Non-essential/luxury payments Discretionary payments are payments for items that you would like to spend money on but that you DO NOT HAVE TO spend money on. Usually, this area has the best opportunities for getting out of problems or saving some money. Many smokers, for example, would be amazed if they sat down and calculated just how much money they spend on their smoking habit. We all like to dress nicely, but what is the point of having smart clothes and shoes if we do not have a home to live in?

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Non-essential/luxury payments

Hairdresser/Hair products Skin products Alcohol Cigarettes Entertainment Holidays Birthday parties Presents Newspapers/books/magazines Pets Hobbies/sport Other





Step 5 Your personal budget On page 17 is a document where you can summarise the results of Exercises 1 to 4: Think about this document very carefully after you have completed it. If your total payments exceed your total income, it tells you that you HAVE TO TAKE ACTION NOW to regain control over your financial affairs. Options available to you are ? the amount you spend; or to reduce ? to increase your income.

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b DAY-TO-DAY EXPENSES Details 1. 2. 3. 4.








TOTAL PAYMENTS [b] + [c] + [d] = DIFFERENCE [a] – [e] =

e f


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4.1 BORROWING SHOULD ONLY BE OCCASIONAL Borrowing is sometimes a necessity but must be done responsibly.

Always remember to live below your means. This means that you should spend less than you earn. If you earn R2 000.00 per month you should spend no more than R1 950.00 in order to SAVE.

? It is important that we should only borrow when we really have a need. ? borrow money to buy items that you do not really need and can do Do not

without. ? be much richer if you save for what you want and buy it when you have You will the cash. This is because when you buy on credit, you pay interest on the money - which is charged every day on the balance - so you pay more, and save less! 4.3 BORROWING CAN CREATE UNNECESSARY PRESSURE Everyone would agree that living with debt is a lot more stressful than living within your budget.
? frustrating if you cannot do or buy everything you would like to because It can be

you do not have the money. However, living with the threat of losing your furniture or your home or having no food on the table is much more frustrating and stressful and is the beginning of a constant uphill battle.

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This can cause many unnecessary problems in a relationship which can affect your daily life. 4.4 BE A SMART CONSUMER CONSUMER TIPS GET THE MOST FOR YOUR MONEY BEFORE MAKING A PURCHASE OR BORROWING SOME MONEY:
? Think about what products or services you need. ? brands and prices and shop around. If you borrow money, compare Compare

interest rates. Ask your friends for recommendations and look for formal comparison reports. Find out why friends are dealing with a particular company, what they are paying, and use that information to make up your mind where you want to go for a loan.
? stores. Look for a store with a good reputation and plan ahead to take Compare

advantage of sales. Find out whether the company is reputable.
?for any extra charges such as delivery fees, installation and service Check

charges. In the case of microloans it is important to check the interest rate and to beware of hidden costs.
? Make sure the microlender is registered with the NCR – see contact details in

section 8.
? Read warranties/guarantees to understand what you and the manufacturer

have to do if you have a problem.
? terms of contracts carefully. Make sure all the blank spaces are filled in Read the

before you sign a contract and make sure that you understand the agreement.
? Ask the salesperson to explain the store's return or exchange policy. ? assume that an item is a bargain just because it is advertised as a Do not

? follow the instructions on how to use the product or service or when Read and

instalments should be paid in terms of your loan agreement. - 19 -

? Keep copies of advertisements, brochures and manuals given to you when you

made the purchase. Inspect the product carefully at delivery.
? product only as recommended by the manufacturer in the instruction Use the

? understand the warranty/guarantee. Read and ? contracts, sales receipts, warranties/guarantees, and instructions in a Keep all

safe place.
? develops, report the problem as soon as possible. Trying to fix the If trouble

product yourself may cancel the warranty/guarantee.
?file of your efforts to resolve the problem. This file should include the Keep a

names of the individuals you speak to and the dates, times and outcomes of the conversations.
? Keep copies of all letters you send and the replies you receive. Write down the

names of all businesses or people to whom you send copies of your letter.
? model number, serial number and brand name of the product. State the

? First contact the seller or service provider if you have a complaint. ? If that does not resolve your problem, contact the company's head office. ? If your problem is still unsolved, refer to the South African National Consumer

Union (SANCU) (see contact details in section 8) for the relevant organisations that can help you take up your issue with the company, free of charge.
? Taking legal action should be the last resort.

? anything you have not read or do not fully Never sign

understand. If you cannot understand the contract, ask someone who has knowledge of the contract to help you.
? Never sign a contract if a lender or a retailer will not

let you have another person review it first.

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?that all verbal promises are included in the written contract. You will not Be sure

be able to rely on what the salesperson said if this has not been written into the contract. ? a contract that has blank spaces. Draw lines through them first. Never sign ? to ask for a copy of the contract that you have signed and keep it in a Be sure safe place. ? out contracts with organisations that have a good reputation. In the Only take case of microlenders, compare interest rates and make sure the microlender is registered with the National Credit Regulator. INSURANCE AND INVESTMENTS Many consumers are being approached by various insurance brokers regarding funeral policies, pension funds, life insurance and property insurance. Investment managers also offer their services to consumers.
? The Financial Advisory and Intermediary Services (FAIS) Act protects consumers

who buy or invest in financial products.
? The furnishing of advice by a product supplier (for example an insurer), an

insurance broker or an investment manager, and the rendering of intermediary services by a financial intermediary, are covered by the above Act.
? they qualify, persons involved in these activities have to be licensed by Provided

the Financial Services Board and their market conduct (that means the way in which they must deal with consumers) is regulated by the Act.
? Consumers must in future make sure that they do business only with licensed

financial services providers or their representatives. The Act also provides for an ombud's office (the FAIS Ombud) (see contact details in section 8) to handle consumer complaints against financial services providers or their representatives. The FAIS Ombud aims to resolve complaints in a quick and informal manner at no cost to the consumer.

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5.1 LEGAL CONSEQUENCES OF DEFAULTING ON DEBT OBLIGATIONS If you have any problems repaying your debts, the first thing to do is to contact your creditors immediately. If you do not make an alternative payment arrangement with your creditor, it can hand the matter over to a debt collector or a lawyer who will take legal action against you to recover the money that you owe. If this happens, you will end up paying much more for the debt – in extra interest and in legal charges – and you will definitely be worse off than before. For many consumers the experience of receiving legal letters and documents and visits from sheriffs and debt collectors is frightening, confusing and humiliating. So, below we set out the process that is usually followed when a consumer fails to pay a debt or to make an arrangement with a creditor. We hope this will empower you to understand your obligations in this situation, and your rights if you are not treated fairly. 5.2 FIRST STEPS – TELEPHONE CALLS AND LETTERS OF DEMAND
? Some companies will phone you when you default. Take advantage of this and

offer to pay as much as you can. Confirm any telephonic agreement in writing and keep copies, with fax coversheets, as proof. Also make sure that you pay what you promise – this will avoid your account being collected via the legal court process.
? instead, or also in addition, receive a letter demanding payment. The You may,

National Credit Act now makes this letter (known as a section 129 letter) compulsory before a creditor can take any legal action against you. The letter also has to advise you that you have the right to approach a debt counsellor for help if you are over-indebted.
? receive a letter of demand you should then either When you ¢ the creditor and make an arrangement to pay; or contact

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¢ if you cannot cope with all the debt you have, contact a debt counsellor. ? If you disagree with the claim or the amount that they say you owe, you must act

¢ the creditor, confirm your disagreement in writing and ask for proof Contact

of the debt/balance of the debt.
¢ are still unhappy after negotiating with the creditor, find a FREE If you

SERVICE PROVIDER to assist you, eg if it is a bank, contact the Ombudsman for Banking Services and if it is any other credit, contact the National Credit Regulator (see Section 8).
¢ act immediately! It becomes very costly if the debt lands up being You must

collected via the legal process.
¢ The creditor must wait 10 working days from the date on which it sent you a

letter of demand, before it can take the legal process further. 5.3 SECOND STEPS – SIGNING s57 or s58 DOCUMENTS OR RECEIVING A SUMMONS If you do not respond to the letter of demand, the creditor will usually send an agent to your home or workplace to ask you to sign either:
? 57 Acknowledgement of Debt – here you will sign that you know that a section

you owe the money (the amount will be stated), and that you promise to pay monthly instalments in a certain amount. You will also sign that if you default again (do not pay) on any instalment as agreed, the creditor can take the documents you signed to court, have a judgement taken against you, and get an emolument attachment order against your salary (see below); or
? 58 Consent to Judgement that you agree that judgement can be taken a section

in court and that a deduction can be effected against your salary. The difference between a section 57 and a section 58 document is that with a section 57 you have a second chance – no judgement will be taken against you if you keep to the payment arrangement. With a section 58, you agree to immediate judgement.

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The debt collector/lawyer can also, after sending you a letter of demand, and instead of sending an agent to visit you or getting you to sign a section 57/58, get the sheriff of the court to serve a summons on you. This is usually done at home or at work or at the address you provided in the contract when you signed the agreement (this is known as the “domicilium” address). If you receive a summons:
? 5 working days to advise in writing that you want to defend the case. You have ? the money there is no point in defending the case. Your best response If you owe

would be to call the attorney and make an arrangement to pay off the debt in monthly instalments. Suggest that they do not take judgement as you will not default again – and keep to this agreement. Also put what you have agreed to in writing and send them a copy. (Keep proof of this agreement.)
? not owe the money, or do not agree with the amount that they say you If you do

owe, you should immediately contact the attorney and advise the creditor in writing that you dispute the claim or the amount.
? this dispute resolved without going to court, but if the attorney is not Try to get

cooperative, you need to give notice that you want to defend the case. For this, a Notice of Intention to Defend is attached to the back of the summons. You must complete the Notice, serve it at (take it to) the address provided and then, once they have signed for the receipt of the Notice, take the original and a copy, signed by the creditor, to the Clerk of the Court.
? At this stage you may need an attorney to assist you. This can be costly and the

best solution is always to negotiate a settlement or an agreement first. 5.4 JUDGEMENTS AND OTHER COURT ORDERS If you sign a section 57 and then default, or sign a section 58, or if you do not respond to a summons, the court will order judgement against you in a given amount as stated, plus interest and costs. The court can also award any of the following orders relating to how the creditor will recover the money from you:
? of execution against your property A warrant ¢ will be sent to your house to list all the goods that you own (eg your A sheriff

furniture, kitchen equipment, motor car etc). These goods – up to the amount that you owe plus costs – will then be sold on auction unless you

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have the money demanded, and can pay it all. The sheriff may not attach (take away) your beds, bedding and clothes and you may keep these.
¢ items have been sold, and the sheriff has been paid, the balance is After the

forwarded to the creditor. If the sale does not yield enough to cover the debt, and you own your home, your house can also then be sold in execution. If there is a balance after the sale, the creditor can ask the court for an emolument attachment order as well.
? An emolument (salary) attachment order This is one of the most common ways in which a debt is collected from the consumer after judgement has been granted. Here, the court orders your employer to deduct the debt from your salary in specified instalments. It is sometimes incorrectly called a garnishee order. It is also unlawful for your employer to refuse to deduct the money, as the instruction comes from the court. ? A garnishee order Here, the court orders someone (usually your bank) who owes you money to pay the creditor instead of paying you. So, for example, if you had R5 000.00 savings in your bank account, and you owed the creditor R3 000.00, the court would order the bank to pay the R3 000.00 from your bank account to the creditor.

5.5 THE PAINFUL COSTS OF REPAYING YOUR DEBTS IN TERMS OF A JUDGEMENT You can see that it is very costly if your account is handed over into the legal collections environment. Not only do you have to pay the original debt, but now you will have to pay extra interest (it is taking you longer to repay, and interest is charged each day), extra charges to lawyers, to debt collectors, to sheriffs and even to your employer if it is involved in paying money to your creditors. So a small debt ends up being a huge burden!

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Here is an example of the costs and interest charged on a debt where the judgement taken was for R7 200.00 and where the court ordered interest at 15.5% per year, and a monthly deduction via emolument attachment order of R600.00 per month:
Capital owing per judgement Interest at 15.5% over 18 months Legal costs – legal process – Collection Commission to attorneys (10% plus VAT ) R64.98 X 18 Employer’s deductions (5% of each instalment) = R30.00 x 18 TOTAL COSTS TO BE PAID TOTAL TO BE REPAID including capital Some attorneys will charge more than the above, others charge additional costs for every telephone call and letter on the file. This can also add up to a lot ex tra. (Beware that you are not overcharged by the lawyers – this can happen!) R7 200.00 R 809.21 R 800.00 R1 169.64 R 540.00

R3 318.85 R10 518.85 (18 x R600.00 per month) Note also that : * If the interest rate was higher , eg 22% or 30%, you would end up paying much more in interest and other costs and for a longer time. * If the monthly instalment that you pay is a small amount, the interest will also be higher as interest is charged on the balance at any point in time .

See page 27 for an example of a Judgement plus costs.
? warrant of execution is issued, the sheriff's auction will usually result in When a

the goods being sold for much less than they are worth. After the sheriff has taken his/her fees, you could still end up owing quite a lot of money – and be without your furniture and other items.
?in your own interest to contact the creditor or lawyer as soon as you So it is

receive notice of anything and make arrangements to pay.
? If you cannot do this for yourself, get someone who can help you or contact a

debt counsellor or consumer advice office which provides assistance free of charge. It is important that you look for free advice as there are many people out there who will offer to help you, charge a fee, and put you in a worse situation than you were in before.

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Example of a Judgement plus costs

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There are many stories about consumers who have been treated badly by debt collectors who threatened them if they did not pay, about deductions from salaries which left a consumer with no money to live on, and about sheriffs selling goods with consumers still having to pay most of the debt. Below, we provide you with some general guidelines and tell you what remedies you have in these and other situations. 6.1 GENERAL GUIDELINES
? If you owe money, always make some payment, no matter how small. Pay as

much as you can, ie never pay nothing – the more you pay, the less interest you will pay in the long run.
? Do not have the attitude of “…the balance is wrong so I won't pay anything”. If

you owe money you will be charged interest every day until the debt is settled in full.
? Never sign any documents that still have blank spaces. If you are asked to sign a

section 57 or 58 document, make sure that all the information is complete, including the amount due, the interest rate to be charged, the amount of the monthly instalment, when you must start paying and how you must pay.
? Never sign a document that you do not agree with – what you sign is binding

and will have consequences for you.
? Make sure that you get a copy of what you sign – this is proof and helps you to

know what your obligations are.
?complain if you have a problem – and get help if you yourself cannot Always

negotiate with the parties involved.
? Always contact the credit provider and lawyer before they take any legal action

(because of the costs) – and always keep a record of who you spoke to, at what time you spoke to him/her and what was discussed. Most important, record

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what was said in writing and send a letter or email to the person. (Keep proof of this as you may need it in the future to solve the case.) 6.2 DEFENCES – PRESCRIPTION AND IN DUPLUM Consumers have two defences in common law that they can use, where relevant:
? time that you paid any money on the account was more than three If the last

years ago, and you have not admitted that you owe the money, you can claim that the debt has prescribed. If you raise this defence (and it is true), you will not have to pay the debt at all. (Note: Prescription does not apply if judgement has been taken for the debt.)
? If the interest on an account is more than the capital balance at the time that you

default, you can claim that some interest must be written off in terms of the in duplum principle that the interest may not be more than double the outstanding capital charged. The in duplum principle is very complex and is a legal requirement to be applied on all loans granted after 1 June 2007. 6.3 DEBT COLLECTORS' RULES If a debt collector charges for his/her services, he/she must be registered with the Debt Collectors Council and is not allowed to:
? or threaten to use force against you or your family Use force ? threaten you or your family Physically ? threaten to give, information to your employer that may affect your Give, or

opportunities as an employee
? with any false legal documents Serve you ?himself or herself as a police officer, sheriff or officer of the court Present ? or threaten to spread, any false information about your credit Spread,

? more than the tariffs or fees which are set down by the Council Charge

So, if you are unhappy with the way that a debt collector treats you, or you believe that he/she is charging too much, complain to the Council for Debt Collectors on 012 804 808/8483. - 29 -

? apply to the court to have a judgement rescinded (set aside), either if it You can

was granted in error, or if the debt has been settled.
? will only rescind a judgement in error if The court ¢ the judgement was obtained without you being present at court (ie the

judgement was by default);
¢ you apply for the rescission within 20 days after you become aware that the

judgement was taken; and
¢ to defend the claim - and can set out in an affidavit why you did you want

not defend the case originally and what your defence against the claim is.
? If you have settled your debt, your application to the court must include a letter

from the creditor confirming that your debt has been settled and that it has no objection to you having the judgement rescinded. Usually applications to court are done for you by an attorney. If you want to save on these costs, you can also do it by yourself. 6.5 APPLYING TO COURT TO HAVE AN EMOLUMENT (SALARY) ATTACHMENT ORDER RESCINDED OR AMENDED Emolument (salary/wages) attachment orders are sometimes obtained unlawfully, eg when you have signed an agreement to have this deduction from your salary at the same time as you applied for the loan. The court order can also be unfair if you cannot afford the instalment. You can then apply to the court to have the order set aside or amended (changed). Your application will need to have a covering document, known as a Notice of Motion, in which you state what you want. You will also need to submit an affidavit which will set out the details of your case. If you cannot afford the payments, you will state what you can afford to pay each month and you will have to give full details of your income and expenditure and attach proof (eg account statements, rent receipts, salary advice). The court will then consider your accounts and determine what is reasonable for you to pay.

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It is in your interest to pay as much as possible, as the lower your instalment is, the more interest you will pay. 6.6 APPLYING TO THE SHERIFF TO STOP THE SALE OF YOUR GOODS If a sheriff appears at your home after judgement and attaches your moveable property with a view to selling it on auction (see page ), you can apply to the court to have the sale in execution suspended. The court will only order this if you can prove that you can afford to pay reasonable regular instalments and/or agree to an emolument order being made against your salary. Again, you will need to make these regular payments or the order will be reinstated and your goods will then be sold. If the attachment is unlawful or incorrect, you can also apply to have the order rescinded. 6.7 UNHAPPY WITH ATTORNEYS' FEES AND CHARGES? HAVE THE ACCOUNT TAXED There are many complaints from consumers that attorneys' fees are very high and they do not know how to check what the attorneys can charge or how to challenge them.
? can only charge fees according to the tariff set down in the Attorneys

Magistrate's Court Rules.
? two tariffs for the magistrate's court – a standard tariff and a higher There are

tariff. The latter only applies if the consumer agrees to it. When you sign your contract, there will usually be a clause which says that if you default, the matter will be handed over to an attorney and you will have to pay the attorney's fees “on an attorney and client” scale. This allows the attorney to charge for more items, but the amount that he/she charges is still controlled.

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? If you think that you are being overcharged, ask for a full breakdown statement

and if you are not happy ask for the bill to be taxed at court (negotiate because you pay for this). ? The challenge with doing this is that it is difficult for a consumer to act on his/her own, as it requires expert knowledge to challenge an amount if it is not clearly wrong. You can report the matter to the Law Society, which is a society for lawyers in the different provinces, but unlike the ombuds offices, it is not independent. The best option is to find a free counsellor, advice office or law clinic to take on your case. 6.8 UNDER ADMINISTRATION AND NOT GETTING OUT OF DEBT? One of the major problems with debt is the fact that there are many people out there who advertise and offer consumers a remedy to get out of debt, but these remedies often mean that you pay for these services and end up with more debt than you had before. Many consumers have been left worse off by going under administration and paying an administrator an amount each month so that he/she can distribute the money to their creditors:
? administrators charge for their services – over R1 000.00 to get the Firstly the

court order, sometimes much more than this. They also take at least 12.5% of each instalment that you pay, as their fee. Some take double this amount.
? the instalment you pay is much less than the total instalments you were Usually,

required to pay on your debts combined, so each creditor receives much less than the instalment originally agreed to. However, you continue to pay interest on each account. The administrator only distributes money once every three months, so often the balance on your debts may even go up instead of going down because the creditor is receiving less than the interest that is being charged.
? Some administrators do not pay over the money on time; others have not paid

over the money received from you at all.
? Administrators are supposed to prepare distribution accounts each quarter, but

most often consumers do not receive copies, so they do not know what the charges are, or how much each creditor is receiving.

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? study showed that a consumer had to pay R49 050.00 on a debt that One case

would have been R15 807.00 if the consumer had not paid the debt via the administrator. If you find yourself in a situation where you have relied on one of these for-profit debt intermediaries, ask them for all the distribution accounts. Then contact your creditors to see if you can make arrangements to pay them directly, and go to court to have the administration order rescinded. If you need help, find a consumer advice office or not-for-profit debt counsellor to help you. 6.9 TOO MUCH DEBT? FIND A DEBT COUNSELLOR WHO CAN HELP YOU The National Credit Act encourages consumers who are “over-indebted” to approach a debt counsellor or dispute resolution agent for help in developing a repayment plan for all debts to be repaid within a reasonable period. Consumers can also approach a creditor for help in developing such an arrangement on an informal basis, or the court may, when approached for judgement of a debt, refer the consumer to a debt counsellor. When you are deciding who to ask for help, it is important that the person you approach has a good reputation, tells you upfront what he/she charges, and that the charges are reasonable. You may find some NGOs which do not charge or which charge very little and are committed to helping consumers. There are also creditors who are looking to help their clients in a similar way and will not charge for their services. Be wary of debt counsellors who are in it for the money, who will not give a full and caring service, and who will charge you a lot for their services. Rather find a creditor or debt counselling NGO and make sure that you are in good hands. The process with regard to debt counsellors is formal as set out in the National Credit Act. You will complete forms which will include details and proof of all your debts, your income and other expenses. They will look at whether any of your debts were granted “recklessly”, ie whether at the time that you applied for credit, the creditor properly assessed whether or not you could afford to repay the loan. (The court can order a remedy if the loan was granted recklessly – but you would have to have given full disclosure of all your debts and expenses or else no remedy would be

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available.) The counsellor will work out a plan for settling your debts and determine your monthly repayment. If the repayment plan is accepted, it is made an order of court. If the creditors do not accept the proposed plan, they can oppose the plan and the court will then decide whether or not to grant the order. Once the order is granted, your monthly payments are made either directly by yourself to your creditors or to a payment distribution agency which also charges for its services and which distributes the portions to the creditors. The arrangement will be listed on the credit bureaux and you will not be allowed to obtain further credit until you have paid off your debts. To find a debt counsellor in your area, or if you have a debt counsellor that you are not happy with and need to complain about, contact the National Credit Regulator on 0860 627 627 or 0860 NCR NCR. 6.10 SURRENDERING GOODS BOUGHT ON CREDIT The National Credit Act also provides extra protection for consumers who have purchased goods on credit, and who default on paying their instalments or who want to cancel the agreement. Since June 2007, you can return the goods to the credit provider within five days of giving written notice that you are cancelling the agreement. The credit provider must give you a written estimate of the value of the goods. You can then either keep the goods and continue with the contract or allow the creditor to sell the goods for the best possible price. Once the goods have been sold, you will receive a written notification indicating the details of the sale and any amount that you may still be owing, if there is a shortfall. This shortfall must be paid or the creditor can obtain a judgement against you for the balance outstanding. If you are unhappy with the sale, you should approach the creditor, get the help of a mediator, or approach your provincial consumer court.

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One of the most important consequences of not paying your accounts, and the one that most consumers do not like, is the fact that this information is recorded on the credit bureaux and most consumers then find it difficult to get more credit. Here we describe how bureaux work and what you need to do to keep a good credit record. 7.1 RECORDING CREDIT INFORMATION ON THE BUREAUX
? National Credit Act requires all creditors to record the details of all The new

credit granted with one of the major credit bureaux/registers.
? These details include your name, ID number, address and payment profile (how

you have paid your accounts each month), any default information, as well as judgements, administration orders and sequestrations (bankruptcy).
? All creditors are now required by law to check whether a consumer can afford to

take credit and to make sure that a consumer will not get over-indebted by the new credit given. Therefore, they are all likely to consult a bureau to check your record:
¢ record is positive, ie you have been paying your debts each month If your

and have money to spare, you are likely to get credit.
¢have negative information, either defaults or a judgement or an If you

administration order, a creditor may refuse to give you more credit because of this negative record.
? Most people are recorded on the bureaux – some have positive records and

others have negative records. It is when consumers have negative records that people talk about them being “blacklisted”. 7.2 CONSUMER RIGHTS
? have a default or another negative listing on the bureau and you pay When you

off the debt, there should be a “PAID IN FULL” status noted at the bureau – the listing will only be deleted as shown on page 9 – so do not be fooled by promises to “remove blacklistings”, as the above rules must be followed. - 35 -

? refused credit because of a negative listing by the Credit Bureau, you If you are

have the right ¢ to be informed which bureau has listed you; and ¢given its contact details so that you can investigate the matter if you to be

disagree with the listing.
? The bureau must protect your privacy (not show your records to others without

your permission), keep accurate records (this is the responsibility of the credit providers who give the information to the bureau), and be open and transparent.
? entitled to a copy of your bureau record at any time (a fee of not more You are

than R20.00 may be charged) and you can obtain one free copy of your credit record each year during your birthday month.
? The bureau will not give information over the telephone and you need to show

your ID book – this is done to protect your privacy. Contact the TransUnion Information Trust Corporation (ITC): Tel O1l 488 2911 or the Experian Bureau: Tel O1l 463 3930 for further information. Removing negative information from the Credit Bureau Any negative information on your credit record can only be removed:
? information is wrong When the ? set time period has expired – the negative information will be removed When the

? judgement has been reversed in court When a ? If the company that requested the listing instructs the bureau to delete or remove

the information because the listing was a mistake When one of the above applies to you, negative information against your name should be removed free of charge.

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7.3 WHAT TO DO IF YOU ARE INCORRECTLY LISTED Firstly, complain to the creditor that listed you and if you have no luck, then complain to the bureau itself. If they do not assist you, refer your complaint to the Credit Information Ombud on 086 166 2837. This Ombud's office offers a free service to consumers who have issues with data on the bureau. So there is no need to pay for a lawyer or a company that offers to help with delisting – unless you need to go to court to have a judgement rescinded. Many people have been blacklisted because they have not budgeted properly. If you plan correctly and pay your creditors on time you will build up a good credit record again. Be sure to follow carefully the budgeting principles set out in this book and your financial situation will definitely improve.

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OMBUDSMEN Ombudsman for Banking Services PO Box 5728, Johannesburg, 2000 Tel: 011 838 0035/0038/0039 Fax: 011 838 0043 ShareCall: 0860 800 900 Email: 0861 662 837

Credit Information Ombud Postnet Suite #444, Private Bag X1, Jukskei Park, 2153 Ombud for Financial Services Providers (FAIS) PO Box 74571, Lynnwood Ridge, 0040

Tel: 012 470 9080 Fax: 012 348 3447 Email: Tel: 021 657 5000 Fax: 021 674 0951 ShareCall: 0860 662 837 Email: Tel: 012 841 2945 Fax: 012 841 2842 Email: Tel: 011 788 4829/4837 Fax: 011 788 4990 Email:

Ombudsman for Long-Term Insurance Private Bag X45, Claremont, 7735

Motor Industry Ombudsman Private Bag X025, Lynnwood Ridge, 0040

Press Ombudsman PO Box 47221, Parklands, 2121 - 38 -

National Credit Regulator PO Box 2694, Houghton, 2041

Tel: 011 554 2600 Fax: 011 554 2860/2774 ShareCall: 0860 627 627 Email: Tel: 012 366 7000 Fax: 012 366 7105/ 012 362 3473 FreeCall: 0800 11 20 40 Tel: 011 726 8900 Fax: 011 726 5501 ShareCall: 0860 726 890 Email:

Public Protector Private Bag X677, Pretoria, 0001

Ombudsman for Short-Term Insurance PO Box 32334, Braamfontein, 2017

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In a comprehensive study done in the USA among American Millionaires it was discovered that these people had the following in common : 1. 2. 3. 4. 5. 6. 7. They live below their means. They spend time, energy and money efficiently. They strongly believe that financial independence is important. Their parents did not support them after leaving home. Their adult children are self-sufficient. They are good at seeing opportunities. They chose the right occupation.

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