Are you a party to a loan agreement or a credit account thinking that the contact details you insert are a mere formality? Do you skip a payment or two every so often and circumvent the letters of demand or legal notices by ignoring the registered post sent to you? If so you may wish to reconsider your approach. With debt, ignorance is never bliss and the recent case of Kubyana v Standard Bank of South Africa Ltd (CC) clearly illustrates that.
This latest court case, addressing the manner in which credit providers are required to inform consumers of their payment default, drastically curtails the ability of the consumer to claim ignorance of such a notice. Mr Kubyana was one such consumer whom Standard Bank sent a notice duly informing him that he was in default of his credit agreement with them. Mr Kubyana failed to collect his registered post. Upon the registered postal notice being returned to Standard Bank, the financial institution issued summons against Mr Kubyana. Mr Kubyana, however, responded to the summons with a special plea averring that Standard Bank had not discharged all its obligations in terms of section 129 of the National Credit Act 34 of 2005 (“NCA”).
According to the NCA, the obligations resting on the credit provider requires the credit provider to, at a minimum, notify the consumer of his default. However, the scope of the notification process is mistakenly presumed to be more onerous on the part of the credit provider than what is in fact required - and many consumers think that they can evade the attempts of the credit provider to reach them. Evidencing the inaccuracy of this presumption, the North Gauteng High Court held that, due to Mr Kubyana being unable to provide a suitable explanation for his failure to collect his registered post, Standard Bank was under no obligation to employ additional means to ensure that Mr Kubyana received his notice.
Mr Kubyana sought to appeal the ruling in favour of Standard Bank to the Constitutional Court, arguing that Standard Bank was required to fulfill its obligations in terms of the NCA before instituting legal proceedings against a consumer. In the Constitutional Court, Mr Kubyana relied on the older case of Sebola and Another v Standard Bank of South Africa Ltd and Another where it was held that proper delivery of a notice would not be done (as required by the NCA) in the event of the notice being sent by registered post (with proof thereof) and such notice being returned to the credit provider as unclaimed. The two questions before the Constitutional Court were the following:
- What is required of a credit provider to ensure that notice of the default reached the consumer?
- What must the credit provider prove in order to satisfy the court that it has sufficiently discharged its obligations?
From Mr Kubyana’s factual situation, the Court held that Standard Bank was under no obligation to bring the notice to the attention of the consumer, nor did it have to provide for serving it in person. If the NCA required these conditions to be fulfilled for proper delivery of such notice, the NCA would have expressly provided for such.
Therefore, the Constitutional Court determined that it is sufficient if the notice is reduced to writing and made available to the consumer at his nominated address, which primarily translates into delivery by registered post to the correct post office. If the consumer fails to respond to the notice, the credit provider is allowed to proceed with legal steps against the consumer.
What distinguishes the Sebola case from the facts of Mr Kubyana’s is that the meaning of the NCA was wrongly interpreted by Mr Kubyana. Sebola was successful in challenging the delivery of the notice as it was sent to the wrong post office and therefore it never reached Sebola, unlike Mr Kubyana who merely refrained from collecting his registered post correctly sent to him.
Although defaulting on payments is not advisable, it could happen for many reasons. Before the situation gets out of hand, collect your post. If the long arm of the law is threatening, seek out a legal advisor to assist you with options of debt counselling or appropriate legal advice in the face of pending legal proceedings.