Administration vs. Debt Counselling
Credit providers are recklessly and unlawfully granting credit to consumers who are under debt administration, to the apparent indifference of their administrators. An administration order is an outdated debt relief method regulated by the Magistrates’ Courts Act (MCA), for consumers whose debts are below R50 000 in total.
Whereas, debt counselling is a new, improved debt solution focused on consumer protection, governed by National Credit Act (NCA). In line with the NDA, granting credit to a consumer who is under administration is against the law, unless their administrator consents to it.
However, it was recently discovered that two big-name banks, namely Standard Bank and First National Bank (FNB) granted loans to two Durban factory workers, who were under administration at the time.
Repeat Offender – FNB
One of the consumers, Leon was granted an administration order in October 2010, with debts totalling about R12 500. Regrettably, after 2 years had passed, Leon’s debt had just about doubled to R22 000. In June 2012, Leon’s outstanding balance was at R21 748. He owed R2 000 to African Bank and, on top of this, had taken out three more loans to the value of R16 000 with FNB, plus a further loan of R3 800 with Capital Consulting.
Leon’s administrator was Anand Mohan Sinayhakh. Administrators’ fees are paid via an emoluments attachment order (EAO), comprising a percentage of each monthly debt repayment. An EAO compels a consumer’s employer to debit payments from their wages, for their credit providers. This represents a conflict of interest, as it’s in the administrator’s interest for the consumer to rack up more debt.
In this way, the consumer will have to make higher repayments and, as such, the administrator will receive a higher percentage. Though Leon admitted to taking out loans in 2011, while under administration, his administrator did not inform him that this was illegal and punishable by 90 days in prison, incontestably his duty as administrator.
DCI is on the Case
Founder of the Debt Counselling Industry (DCI), Deborah Solomon asserts that the loans were granted “recklessly and unlawfully”. FNB statements show that Leon was granted three loans over 60 months, one in September 2011, and a further two in October 2011. Moreover, these were reckless loans, as Leon was only earning a weekly wage of R963. Clearly, FNB did not take affordability into consideration. Based on his salary, Leon could not afford to repay these loans, without cutting into his essential living costs.
Even so, this debt was incurred under the watch of an administrator, which means Leon should not have to pay for his administrator’s negligence. Though, it does not ordinarily regulate administration, Solomon has referred FNB to the National Credit Regulator (NCR), with a view to obtaining financial redress.
Slapdash Lender – Standard Bank
The other consumer, Sibongile is a colleague of Leon’s. She owed African Bank R12 842 for loans granted to her in 2006 and 2007. Accordingly, she was put under administration in July 2008. However, she was then granted two personal loans in 2012 and a further loan in 2013 from Standard Bank. Regardless, Sibongile’s 2014 Experian credit report unmistakably shows that she was under administration at the time, and had been since 2008.
Sibongile’s administrator, Johannes van der Merwe Booysen re-sent an EAO for R5 922 to her employer, adding sheriff and administrators fees. Since then, the court has rescinded Sibongile’s administration order and she is now undergoing debt counselling. Solomon also referred Standard Bank to the NCR for unlawful and reckless lending.
Contact Help With Debt today, if you’d like help getting your reckless debts written off.