Reinstatement of Credit Agreements
Last week, the Constitutional Court passed a judgment that throws a lifeline to struggling debtors. A ruling that was applauded by Socio Economic Rights Institute (Seri). The court ruled that debtors in arrears could reinstate their credit agreements, if they brought their accounts up to date. Even after a bank had attained a judgment against them for the full amount borrowed.
The case in question involved businesswoman, Nomsa Nkata, who had fallen into arrears with her First Rand Bank mortgage bond. After failing to repay a number of bond instalments, the bank took legal action against Ms Nkata. Accordingly, the court passed a judgment ordering Ms Nkata to pay the full value and allowing the bank to auction off her house to recoup this amount.
Account Brought up to Date
Prior to the bank auctioning off her house, Ms Nkata brought her account up to date. Although, she did not pay any enforcement costs or default charges. The bank proceeded to auction off her house. However, according to Section 129(3) of the National Credit Act, a debtor does not have to pay the full debt, in order to reinstate their credit agreement. They only have to pay the total amount of the arrears, the agreement enforcement costs and default charges.
These amounts should be paid prior to the execution of any court judgement, whether by the sale of the debtor’s house or otherwise. The Constitutional Court had to determine if, by bringing her arrears up to date‚ Ms Nkata had reinstated her credit agreement, according to section 129(3) of the Act. If the agreement had in fact been reinstated, the sale of the property was unlawful.
Majority Judgment
The majority judgment was in Ms Nkata’s favour. They found that her agreement had been reinstated, after her account was brought up to date. Furthermore, the court set aside the sale of her house. The objective of section 129(3) was to urge debtors to repay their unpaid debts‚ legal costs and default charges, wrote Deputy Chief Justice Dikgang Moseneke, speaking for the majority.
The reinstatement of their credit agreement and return of their home served as a reward for consumers in good standing, said Justice Moseneke. Friend of the court‚ Seri said that the Constitutional Court had sustained the significance of just dealings between struggling credit consumers and powerful banks.
Minority Judgment
The credit agreement had not been reinstated, according to the minority judgment‚ by Justice Edwin Cameron. As Ms Nkata had only repaid her arrears and not the bank’s legal costs‚ she had not paid the full amount required for reinstatement according to section 129(3, said Justice Edwin Cameron.