Your Rights During Debt Review (Section 88(3) Protection, and Its Limits)

The protection: section 88(3)

Once a credit provider has received notice under section 86(4)(b)(i) that you have applied for debt review, section 88(3) says it may not exercise or enforce by litigation or other judicial process any right or security under that credit agreement until two things are both true: you are in default under the agreement, and one of a defined set of events has occurred.

Those events are, broadly, the review ending in one of the ways set out in section 88(1)(a) to (c) - rejection with the time for direct filing expired, a court finding you are not over-indebted or rejecting the proposal, or all your re-arranged obligations being fulfilled - or you defaulting on an obligation under a re-arrangement agreed with your credit providers or ordered by a court or the Tribunal.

In practice this is what stops summonses, judgments and attachment orders while you are performing under a debt review. It is the most valuable thing the process gives you.

The limit: section 86(10) termination

Section 88(3) opens with the words 'Subject to section 86(9) and (10)'. That is not decoration. Section 86(10)(a) allows a credit provider to terminate the review, but only where all of the following are true:

• You are in default under that particular credit agreement. If you are not in default on it, that credit provider cannot terminate.
• At least 60 business days have passed since the date you applied for the debt review.
• It gives notice in the prescribed manner to you, to your debt counsellor, and to the National Credit Regulator. All three.

Termination is per agreement, not per person. One credit provider terminating does not end your debt review as a whole.

The limit on the limit: section 86(10)(b)

This is the provision most commonly left out, and leaving it out has pushed people out of debt review who should have stayed. Section 86(10)(b), as substituted by the National Credit Amendment Act 19 of 2014, says:

No credit provider may terminate an application for debt review lodged in terms of this Act, if such application for review has already been filed in a court or in the Tribunal.

So the 60-business-day termination window is not open indefinitely. Once your matter has been filed in a court or the Tribunal, that door closes. This is one of the strongest practical reasons to press your debt counsellor to get the matter filed rather than left in negotiation.

And if they terminate anyway: section 86(11)

If a credit provider gives notice to terminate and then proceeds to enforce the agreement, section 86(11) gives the court hearing that matter the power to order that the debt review resume, on any conditions the court considers just in the circumstances.

A termination notice is therefore not the end of the road. It is a serious event that needs an immediate response from your debt counsellor, and if necessary legal advice, but the Act expressly contemplates a court putting the review back on track.

Your other rights in the process

• A debt counsellor may not require or accept a fee from a credit provider in respect of your application. Section 86(3)(b).
• You are entitled to proof of receipt of your application. Section 86(4)(a).
• If your application is rejected you are entitled to a letter setting out the basis for the finding, including the income, deductions, living expenses and other debt considered, and a copy of the assessment form. Regulation 25.
• If rejected, you may apply to the Magistrate's Court yourself under section 86(9), with the court's leave, within 20 business days.
• If your debt counsellor refuses or fails to issue your clearance certificate when you are entitled to it, you may apply to the National Consumer Tribunal to review that decision, and the Tribunal may order them to issue it. Section 71(3).
• If your debt counsellor fails to file the certified clearance certificate with the bureaux, you may file it with the NCR yourself and lodge a complaint against them. Section 71(4)(b).
• If proposals are not submitted or the matter not referred within 60 business days of your application, the NCR fee guideline requires a 100% refund of fees paid, excluding the application fee.

Your obligations, which are also enforceable

Section 86(5) requires you to comply with reasonable requests from your debt counsellor to help evaluate your indebtedness, and to participate in good faith in the review and in the negotiations. Your credit providers are under exactly the same duty.

Section 88(1) requires you not to incur further charges under a credit facility or enter into any further credit agreement, other than a consolidation agreement, until the review ends. If you break that, section 88(4) allows the new agreement to be declared reckless credit whether or not the usual section 80 circumstances apply, and section 88(5) says the protections in this Part of the Act will never apply to that agreement.

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