Credit Ombud Annual Report

The High Court case between Stellenbosch’s Legal Aid Clinic (LAC) and Flemix & Associates last year is unquestionably behind the Office of the Credit Ombud receiving fewer complaints about EAOs. Credit Ombudsman, Nicky Lala Mohan said this at his annual report last week.

EAOs

EAOs or emoluments attachment orders require the employer of a debtor to pay a portion of the debtor’s salary to the creditor monthly, until their debt is repaid.

Last year, the University of Stellenbosch’s LAC brought legal action against 13 creditors and the attorneys that administered EAOs for them, Flemix & Associates. The LAC were supported by Webber Wentzel and Wendy Applebaum.

In a landmark ruling, the Judge declared certain sections of the Magistrates Court Act (MCA) relating to EAOs to be unconstitutional. Though, the Constitutional Court has yet to overturn or uphold the ruling.

EAO complaints made up 6% of the 5074 disputes settled by the credit ombud over the course of the year. Whereas, 9% of disputes pertaining to non-bank credit were related to EAOs. This figure has certainly dropped over the years and is expected to continue to drop in upcoming years said Lala Mohan.

Non-bank Credit Complaints

Last year, the majority of case profiles dealt with by the credit ombud pertained to non-bank credit complaints. Most prominently, statements of account and service disputes.

Often, consumers who cannot fulfil their credit agreements enter into new repayment arrangements with their creditors. Only to fail to meet these new repayment obligations. Thus, creditors take legal action against these consumers.

There are also many cases of unscrupulous lenders, often unregistered, not providing statements of account to consumers, said Lala Mohan. In such cases, the accounts of these consumers have often been laden with lawyer’s fees.

Crooked law firms, hired by creditors to collect debts, often charge absurd fees for their services.  Borrowers are then billed these fees, quickly turning a R6 000 loan into an R80 000 debt.

These unscrupulous practices are not prevalent and only a few law firms operate in this manner, according to Lala Mohan. “It’s a Law Society issue,” he replied, after being asked why these law firms could not be reprimanded.

The serious issue is that attorneys are not bound by the Debt Collectors Act, which puts a cap on the amount collectable from debtors and enforces a code of conduct. The Government is planning to amend the act to include attorneys, said the National Treasury’s chief director of financial sector development, Ingrid Goodspeed.

Check Your Credit Report

Complaints over inaccurate and outdated credit information continued to flood in, emphasising how crucial it is for consumers to check their credit report to make sure their credit history is correct.

Everyone is eligible for one free credit report a year, which can be obtained from Experian, TransUnion, XDS or Compuscan. You are also entitled, by law, to challenge any inaccurate information on your credit report.

In total, the credit ombud received over 12300 enquiries and complaints in 2015. Of these, the ombud saved consumers almost R7.6 million. 25% of the 5 000+ disputes settled were found to be invalid, where the complaint was not upheld.

Please Call Me Service

The credit ombud introduced a ‘please call me’ (PCM) SMS service in June. Consumers can send a PCM to 44786 to receive a call from the office and voice their complaints. As a result, the ombud received almost 1500 messages from June to December.

“As times get tough, talk to credit providers. They’re there to help you,” Lala Mohan advised.

There is a possibility that the credit ombud may be declared a statutory ombud under the Financial Sector Regulation Bill (Twin Peaks). This would mean its rulings would carry the same weight as court orders.

If your credit providers refuse to lower your monthly repayments, contact Help With Debt immediately and we will negotiate with them on your behalf.