The short answer
You should notify the bank that you intend to defend yourself on the grounds of reckless lending.
The whole question
Kindly assist me with the following queries:
If a creditor (First National Bank) obtained a default judgment against me for an amount of R18,000 and the "in duplum" maximum amount (R36,000) has now been reached, when I make an arrangement to settle the amount on a monthly basis, will I still incur further interest or will the debt be forever capped at R36,000 regardless of me making arrangements to pay it on a monthly basis as opposed to a single payment in full settlement.
I would like to challenge the judgment on the grounds that the amount was lent to me recklessly as my affordability assessment should have indicated that I couldn't afford a credit of that amount. What steps do I need to follow? What documents will I need to submit to the court?
The long answer
Thank you for your email asking (1) whether your debt will be permanently capped at double the original amount borrowed, or whether you will incur further interest payments as you pay it off, and (2) what steps you need to take to challenge the default judgement on the grounds of reckless lending.
1) Until the court decides, the statutory in duplum rule applies where all interest and other payments are capped at double the amount of the original debt. But after judgment has been granted, interest at the rate set by the court, which could be the Prescribed Rate of Interest, will start to run on the judgment debt. There has been confusion over whether the statutory in duplum rule also applies to the judgement debt, but it seems that the courts have ruled that if you default on the judgment debt, the interest stops running when the debt is double the judgement debt.
2) If a creditor takes legal action against you, you should notify the creditor that you intend to defend yourself on the grounds of reckless lending.
As you know, a credit provider must conduct a pre-agreement assessment before granting credit. The assessment should include a copy of your credit report at the time you applied for credit. If you had an adverse listing or a judgment against you, and you were still granted credit, this would be reckless lending. Your creditors must be able to produce a copy of the affordability assessment that they did before granting you credit. If they cannot produce it, you can raise the defence of reckless lending.
If they conducted a pre-agreement assessment, and it was clear that you were ignorant of the risks and obligations you were taking on, or that you were unable to afford the repayments, that would be reckless lending.
The person seeking the credit is also required to be honest regarding their income and expenses.
Documents that you would need would include copies of your bank accounts, salary slips, municipal bills, monthly expenditure on food, transport, school fees etc at the time you entered the credit agreement, which showed what surplus there was after all your existing obligations were met.
Case law has held that it is up to the person alleging that the credit was extended recklessly to prove it. It has often been difficult for consumers to prove that the credit provider did not do a pre-agreement affordability check, and the courts have not been sympathetic to consumers claiming reckless lending as a last desperate attempt to stop the credit provider from enforcing payment.
If the court agrees that it was reckless lending, the debt could be suspended for a given period, restructured with other debts, or at best, written off. The National Consumer Tribunal (NCT) is also empowered to adjudicate in reckless credit agreement cases, and you can refer the matter to the NCT:
Tel: (012) 663 5693
You could also approach Legal Aid for assistance in taking the matter to court:
Reception (National Office): 011 877 2000
Legal Aid Advice Line (Toll-free): 0800 110 110
Legal Aid Ethics Hotline: 0800 153 728
Please-Call-Me number: 079 835 7179
Answered on Sept. 9, 2019, 10:08 a.m.