NCR disputes lawyers’ interpretation of in duplum rule

The National Credit Regulator (NCR) has differed with lawyers’ interpretation of a key piece of legislation which forms the lifeblood of SA’s debt collection industry, says a Moneyweb report. The conflict centres on the interpretation of the in duplum rule as contained within the National Credit Act (NCA) – and as sparked by a Moneyweb investigation which revealed an apparent abuse of unsecured borrowers by collection attorneys.

The NCR’s Lesiba Mashapa said the statutory in duplum caps the fees lawyers may charge in connection with the collection of loans. Under the NCA’s extended version of in duplum collection, costs – together with interest and other fees that accrue when the consumer is in default – should not exceed the unpaid balance of the capital amount of the loan. However, the report notes, Mashapa’s interpretation of the law differs fundamentally from the interpretation which is put into practice by the majority of collection attorneys.

Lawyers maintain that in duplum does not include lawyers’ fees, effectively allowing them to charge defaulters amounts well in excess of the principal amount of the loan. This interpretation has allowed for situations where SA workers had been charged apparently exploitative amounts – upwards of 10 times the principal – for the recovery of outstanding debt. By Mashapa’s interpretation, this practice – believed to be widespread – is illegal.

– Extract from Legal Brief, 27/09/2012