Credit providers must engage meaningfully with debtors and afford them a fair opportunity to address their obligations, particularly when debtors show a willingness to address their debts. This is according to a judgment handed down last month by the High Court in Cape Town, which dismissed a credit provider’s application to repossess a vehicle.
FFS Finance, trading as Ford Credit, sought to enforce an instalment sale agreement governed by the National Credit Act (NCA) against CP van der Merwe.
The agreement concerned a 2015 Ford Ranger 4×4 motor vehicle, which FFS Finance sought to repossess because Van der Merwe defaulted on the monthly payments. According to the credit provider’s records, Van Der Merwe owed R112 888.19 in December 2022.
FFS Finance issued a section 129 notice under the NCA, followed by personal service of the summons. A section 129(1)(a) notice informs a consumer who is in default on a credit agreement of their rights and gives them an opportunity to rectify the default before legal action, such as debt collection or repossession, is taken.
Although Van Der Merwe filed a Notice of Intention to Defend, he did not submit a plea, leading to the matter proceeding unopposed.
The credit provider requested confirmation of the agreement’s cancellation, the return of the vehicle, and legal costs on an attorney-client scale. FFS Finance argued that Van Der Merwe’s failure to maintain payments justified the cancellation of the agreement and the repossession of the vehicle.
An affidavit from Kyle Vilakazi, a manager at FFS Finance, detailed Van der Merwe’s attempt to negotiate a payment plan. The credit provider informed Van der Merwe that he was required to pay 50% of the arrears immediately and the remainder over three months. Vilakazi stated: “The defendant advised that he is unable to meet the plaintiff’s requirements, and therefore an arrangement was not concluded.”
Debtor’s proposal must be considered
The point of departure in Judge Daniel Thulare’s judgment was the NCA’s principles of fairness, transparency, and consumer protection. He found that FFS Finance’s approach did not align with these objectives.
He criticised FFS Finance’s inflexible demand for an immediate 50% payment of the arrears followed by a three-month repayment period. The judge noted that Van der Merwe had “contacted the plaintiff to make the necessary payment arrangements to bring the arrears to date”, demonstrating an intent to resolve the matter.
However, FFS Finance omitted the details of Van Der Merwe’s proposal from its application, which the court described as “a mystery” that could negate “a genuine attempt made to reach a resolution of the indebtedness without resorting to litigation”.
Referring to Vilakazi’s affidavit, Judge Thulare observed that FFS Finance’s approach “suggests coercion and not collaboration”. The failure to disclose Van der Merwe’s proposal, its financial implications, or the reasons for its rejection was deemed “an unfair practice in debt collection” that excluded “meaningful participation by the debtor in the payment arrangement”. The court found this conduct inconsistent with the NCA’s goals of fairness, transparency, accessibility, and debtor protection.
Judge Thulare said a section 129(1)(a) notice is not “an empty box for a creditor to tick” but confers responsibilities on a creditor that are prerequisites central to the creditor’s decision to institute litigation proceedings. The debtor’s response to the notice “is not simply a noisy irritation to be endured by a creditor”.
It was important to consider the debtor’s proposal as a reflection of their potential contribution to resolving the dispute. “A genuine consideration of the proposal means the creditor appraised the relationship and the esteem of the debtor, and did not see the debtor as a commodity with fungi, to be dispensed with at will.”
Judge Thulare said FFS Finance failed to explain why it deemed Van der Merwe’s proposal unworthy of a payment arrangement. He therefore dismissed the application.
