National Credit Regulator v Sullivan (NCT/22678/2015/57(1)) [2016] ZANCT 6 (8 March 2016)

IN

THE NATIONAL CONSUMER TRIBUNAL

HELD

IN CENTURION

Case number: NCT/22678/2015/57(1)

In the matter between:

NATIONAL

CREDIT REGULATOR

APPLICANT

and

CELESTE

SULLIVAN

RESPONDENT

Coram:

Ms L Best – Presiding Member

Prof B Dumisa- Panel Member

Prof T Woker- Panel Member

Date of Hearing- 18 August 2015

JUDGMENT

AND REASONS

Introduction of Matter

1. The Applicant in this matter is the National Regulator Creditor, a juristic person established in terms of Section 12 of the National Credit Act (“the Act”), situated at 127 Fifteenth Road, Randjespark, Midrand, Gauteng (“the Applicant”).

2. The Respondent in this matter is Celeste Sullivan t/a Siyaya Debt Solution, a registered debt counsellor whose address is 52 Falcon Way, Sunbird Park, Kuils River and whose registration number is NCRDC 1139. (“The Respondent”)

3. This is an application in terms of Section 57 (1) (a), (b) and (c) of the National Credit Act in which the Applicant seeks to cancel the registration of the Respondent as a debt counsellor.

4. The Applicant avers that the Respondent contravened the Act in that the Respondent:

4.1 Contravened Section 86(4)(b) read with Regulation 24(2) and 24(5) of the Act: After receiving an application for debt review, failure to notify and to deliver Form 17.1 to all credit providers (that are listed in the Application);

4.2 Contravened Regulation 24(10) of the Act: After completion of the assessment, failure to deliver Form 17.2 to all credit providers (that are listed in the Application);

4.3 Contravened Section 86(7)(c) of the Act: Failure to refer over -indebted consumer matters to court;

4.4 Contravened Regulation 55 (1) of the Act: Failure to maintain records.

4.5 Failed to comply with Condition 2 of General Conditions of Registration: performing debt counselling consistent with the Act; and

4.6 Failed to comply with Specific Condition B(1) of the Conditions of Registration.

5. The Applicant seeks the following order:

5.1 that in terms of Section 150(a) of the Act, the repeated contraventions of the Act and failures to comply with conditions of registration by the Respondent be declared prohibited conduct;

5.2 that in terms of Section 57(1)(a)the registration of the Respondent as a debt counsellor be cancelled;

5.3 that the Respondent be declared to be in repeated contravention of her conditions of registration;

5.4 that the Respondent surrender all client files to the Applicant and furnish to the Applicant a list of all past and present clients

within 10 (ten) days of the order;

5.5 that an administrative fine be imposed against the Respondent; and

5.6 any further and/or alternative relief as the Tribunal may consider appropriate to give effect to consumers’ rights in terms of the Act.

Brief Background

6. The brief background as alleged by the Applicant is as follows:

a. The Respondent practised as a debt counsellor under the name Siyaya Debt Solutions situated at 200 Voortrekker Road, Parrow, Cape Town.

b. The Applicant had received complaints from consumers against the Respondent. Mark Whale and Lesley Odendaal were appointed on 7 June 2013 by the Applicant in terms of Section 25 of the Act to conduct an initial investigation of the Respondent’s business.

c. A further investigation was conducted, with Whale and Odendaal visiting Siyaya Debt Solutions on 9 October 2013 and meeting with the Respondent.

d. During the course of the investigation, the investigators randomly selected 11 consumer files which were assessed.

e. The allegations contained in the investigation report submitted by the Applicant relate to debt review applications dealt with by the Respondent in ways which the investigators were of the view were contrary to the requirements of the Act, and which are elaborated

under the Applicant’s submission. Further that the modus operandi of the Respondent was to operate a call centre and employ

call centre agents. These agents, who are not registered as debt counsellors, contact consumers to provide debt counselling services

and to engage in the activities of a debt counsellor.

f. Audio recordings of this business practice were submitted as part of the investigators’ report.

Service of the Answering Affidavit by the Respondent

7. Before proceeding with the main Application, the Tribunal needed to deal with the issue that the Respondent did not file the answering

affidavit through the correct channels. The Respondent had made application in terms of the Tribunal Rules No. 30 for an application for substituted service. The confirmation of service for the Answering Affidavit was not delivered by hand or registered post. It was only sent via email to the Applicant. As a result, the Respondent had filed a condonation application.

8. The Applicant placed on record that there was no opposition to the manner of service by the Respondent, and confirmed that the Applicant had received the Answering Affidavit. Further that the Applicant would not oppose any application for condonation by the Respondent.

9. The Applicant accepted that the implication of this was that the Applicant would not have an opportunity to file a replying affidavit.

Further that the Applicant would not be seeking a postponement in this regard.

10. The Applicant confirmed that the matter could proceed to be heard.

Applicant’s Submissions

11. The Applicant alleges on the papers that –

11.1 The Respondent permits persons, who are not registered debt counsellors, to offer services of a debt counsellor, engage in services of a debt counsellor and hold themselves out to consumers as being authorised to offer any such service.

11.2 The Respondent and/or her agents make a determination that a consumer is over-indebted prior to any form 17.1 being issued and prior to verifying any information provided by the consumer.

11.3 The Respondent and/or her agents re-arrange the consumers’ debt obligations prior to a form 17.1 and form 17.2 being issued.

11.4 According to the investigation report, in six of the files examined, the Respondent failed to submit Form 17.1 to the credit providers.

11.5 In the sample of 11 files examined during the examination, no debt re-structuring orders or consent orders were found and neither were any applications to court or the National Consumer Tribunal for debt re-structuring or consent orders found.

11.6 The Respondent receives from consumers, through Netcash an entity that is not an approved Payment Distribution Agent, debt counsellor and legal fees, and that these fees are taken from the first two month’s payments made by the consumer. During these two months, no monies are paid on behalf of consumers to credit providers.

Respondent’s Submissions

12. The Respondent was unrepresented at the hearing.

13. On the Respondent’s version, the application is opposed on the papers as follows:

13.1 The call centre agents merely marketed the debt review process to consumers and obtained information and supporting documentation from consumers, which was handed to the Respondent, who in turn assessed the information and processed the applications for debt review as necessary.

13.2 The Respondent denies that persons, who are not registered debt counsellors, offer services of a debt counsellor, engage in services

of a debt counsellor and hold themselves out to consumers as being authorised to offer any such service, and further puts the Applicant

to the proof.

13.3 The Respondent denies that she and/or her agents make a determination that a consumer is over-indebted prior to any form 17.1 being issued and prior to verifying any information provided by the consumer.

13.4 The Respondent denies that she and/or her agents re-arrange consumers’ debt obligations prior to a form 17.1 and form 17.2 being issued and further puts the Applicant to the proof.

13.5 The Respondent denies failing to submit Form 17.1 to the credit providers, and further puts the Applicant to the proof.

13.6 The Respondent denies that no debt re-structuring orders or consent orders were found and neither were any applications to court or the National Consumer Tribunal for debt re-structuring or consent orders found, and further puts the Applicant to the proof.

13.7 The Respondent submits additional bare denials on a number of additional points in the Applicant’s founding affidavit.

Further Submissions During The Hearing

14. Accompanying the investigators’ report were audio recordings of the Respondent’s call centre agents speaking on the telephone with consumers. These recordings were accepted as official records by both parties. The Act allows for electronic records to be kept.

15. During the hearing, the audio recordings were played of a call centre agent, “Gaby” speaking firstly to consumer Mr Di Abreu during the course of two telephone calls and then to his wife, Ms Di Abreu, in a separate telephone call.

16. The Respondent confirmed that the recordings are a general reflection of the process of how call centre agents gather information over the telephone from consumers who live outside of Cape Town and are thus unable to meet with the Respondent in person. The Respondent indicated that the information gathered telephonically by call centre agents is then provided to the Respondent, who then does the assessment.

17. The Respondent confirmed that the remaining audio recordings would contain similar information and thus no further recordings were

listened to during the hearing.

Consideration of the Legal Provisions and Facts

18. One of the Applicant’s main grounds for the relief sought is that the Respondent has contravened Section 86(4)(b) of the Act read with Regulation 24(2), 24(5) and 24(10), which provides that –

“86: Application for Debt Review:

…

(1) A consumer may apply to a debt counsellor in the prescribed manner and form to have the consumer declared over-indebted.

(4) On receipt of an application in terms of subsection (1), a debt counsellor must-

(a) provide the consumer with proof of receipt of the application;

(b) notify, in the prescribed manner and form-

(i) all credit providers that are listed in the application; and

(ii) every registered credit bureau.

Regulations 24(2), 24(5) and 24(10) of the Act specify the prescribed manner and form as Forms 17.1 and 17.2 which must be sent to all credit providers and every registered credit bureau.

The Applicant proceeded to refer to consumer files that had been examined during the investigation which did not have Certificates of Balance on file, citing this as proof that Form 17.1 had not been sent to credit providers. The Applicant further referred to the audio recordings indicating how the call centre agent “Gaby” had explained to Mr and Ms Di Abreu how their repayments would be re-arranged, yet there has yet to be any communication with credit providers.

The Respondent had denied in her Answering Affidavit re-arranging consumers’ debt applications prior to the said forms being

issued and put the Applicant to proof, which this was provided by virtue of there being no Certificates of Balance on file or copies

thereof provided by the Respondent.

The Respondent’s reason for not dealing with this in her Answering Affidavit or providing the Tribunal with proof of the said forms being issued, is that she had envisaged that based on the Applicant’s supplementary affidavit, the Applicant would not rely on this, and hence the Respondent had not prepared for this. There is thus no evidence before the Tribunal that the Respondent did submit Form 17.1 to credit providers with whom consumers had entered into credit agreements.

The Applicant further contends that the Respondent contravened Section 86(7)(c) of the Act, which provides that:

86 (7) If, as a result of an assessment conducted in terms of subsection (6), a debt counsellor reasonably concludes that –

(a)….

(b) the consumer is not over-indebted, but is nevertheless experiencing or likely to experience, difficulty satisfying all the consumer’s

obligations under credit agreements in a timely manner, the debt counsellor may recommend that the consumer and the respective credit providers voluntarily consider and agree on a plan of debt re-arrangement; or

(c) the consumer is over-indebted, the debt counsellor may issue a proposal recommending that the Magistrate’s Court make either or both of the following orders –

(i) that one or more of the consumer’s credit agreements be declared to be reckless credit, it the debt counsellor has concluded that those credit agreements appear to be reckless and;

(ii) that one or more of the consumer’s obligations be re-arranged by –

(aa) extending the period of the agreement an reducing the amount of each payment due accordingly;

(bb) postponing during a specified period the dates on which payments are due under the agreement

(cc) extending the period of the agreement and postponing during a specified period the dates on which payments are due under the agreement; or

(dd) recalculating the consumer’s obligations because of contraventions of Part A or B of Chapter 5, or Part A of Chapter 6.”

19. In the sample of 11 files examined during the examination, no debt re-structuring orders or consent orders were found and neither were any applications to court or the National Consumer Tribunal for debt re-structuring or consent orders found. The Applicant thus contends that the Respondent contravened Section 86(7)(c) of the Act by her failure to refer over -indebted consumer matters to court.

20. The Respondent, in her Answering Affidavit had denied this and put the Applicant to proof.

21. During the hearing, the Respondent was unable to answer in the affirmative and confirm whether or not there were any court or Tribunal orders on file, indicating that her attorney would need to be approached to provide this information. There is thus no evidence before the Tribunal that the Respondent that the Respondent referred over-indebted consumers to court or applied to the Tribunal for consent orders for consumers who were experiencing difficulty satisfying their credit obligations.

22. The fact that there were no consent orders found in selected consumers’ files also places the Respondent in contravention of Section 86(7)(b) and 86(8)(a).

23. Whilst it may be a realistic possibility that the Respondent could have requested her attorney to keep on file consumer documentation

relating to court applications and not provide the Respondent with copies, an attorney has no role to play in an application for a consent order. There would thus be no reason for the Respondent to have relied on her attorney to keep on file copies of consent orders.

24. This further points to a contravention of Regulation 55 (1) of the Act on the part of the Respondent in terms of her responsibility as a debt counsellor to maintain adequate records rather than an attorney maintaining records on behalf of the debt counsellor.

25. What is of further grave concern is that the Respondent stated under oath in her Answering Affidavit that she denies the contents of Paragraph 6.2 of the Applicant’s Founding Affidavit and puts the Applicant to the proof thereof.

26. Paragraph 6.2 has three sub-paragraphs, of which paragraph 6.2.3 states:

“In the sample of consumer files extracted by Odendaal (the investigator), no debt restructuring order or consent orders were found neither was any application to court or this Honourable Tribunal for debt restructuring or consent order. This is a clear contravention of (Section)86(7)(c)”.

27. It is an indictment on the Respondent’ part that she makes a bare denial under oath and was yet unable to confirm to the Tribunal at all as to whether there were consent orders on consumers’ files or to provide copies.

28. The Applicant avers that the Respondent failed to comply with Condition 2 of General Conditions of her Registration as debt counsellor.

Condition 2 states:

General Conditions:

“2. The debt counsellor must perform debt counselling in a manner that is consistent with the purpose and requirements of the Act. The debt counsellor must in all instances act professionally and reasonably in providing debt counselling services to consumers and provide such services in a manner that is timely, fair and non-discriminatory and does not bring the NCR or debt counselling into disrepute”.

29. The Applicant made submissions that the Applicant failed to comply in a range ways, including

a) The Respondent used people who are not registered to conduct debt counselling services;

b) The manner with which the Respondent conducted business benefited the Respondent, rather than consumers in that the Respondent

benefited from the debt counselling fees and the after-care fees yet no consumers received protection through either a court order or a consent order;

c) Consumers were paying legal fees yet there is no evidence of legal work having been performed;

d) The Respondent did not follow the due process as the Act requires.

30. The Respondent did not deny employing people in her business who were not registered as debt counsellors. However, the Respondent submitted that they do not perform debt counselling, but merely gather information from consumers, which the Respondent then assesses and performs her responsibilities as a debt counsellor.

31. In the audio recordings, there are clear instances where the call centre “Gaby” makes statements such as:

“Okay I’ve brought the instalments down, including your bond”

“Nou wat ek vir jou uitgewerk het, jy betaal op die oomblik R7 100 nê? Wat jy moet doen, dis wat jy moet betaal. Nou ek het uitgewerk ʼn paaiement vir jou van R3 500”

“Ek het ʼn paaiement uitgewerk vir hom”.

32. “Gaby” also informs one consumer, Ms De Abreu, that she (“Gaby”) only does the first step and that people from the Collections Department will contact the consumer, but that “Gaby” does not know who those people are and further that the consumer will be under a Profile Manager.

33. The Respondent submitted that her instructions to her agents is for them to only collect information, but there are instances when the agents act contrary to instructions. The Respondent was firm that only she performs responsibilities as a debt counsellor, not her agents.

34. The facts set out above demonstrate contraventions of the Act, and the Tribunal accordingly finds that the Respondent –

(a) Contravened Section 86(4)(b) read with Regulation 24(2) and 24(5) of the Act

(b) Contravened Regulation 24(10) of the Act

(c) Contravened Section 86(7)(c) of the Act

(d) Contravened Section 86(7)(b) read with Section 86(8)(a)

(e) Contravened Regulation 55 (1) of the Act

(f) Failed to comply with Condition 2 of General Conditions of Registration

Relief

35. The Applicant requested the Tribunal to order the following relief:

(a) that in terms of Section 150(a) of the Act, the repeated contraventions of the Act and failures to comply with conditions of registration by the Respondent be declared prohibited conduct;

(b) that in terms of Section 57(1)(a)the registration of the Respondent as a debt counsellor be cancelled;

(c) that the Respondent be declared to be in repeated contravention of her conditions of registration;

(d) that the Respondent surrender all client files to the Applicant and furnish to the Applicant a list of all past and present clients

within 10 (ten) days of the order;

(e) that an administrative fine be imposed against the Respondent.

Considerations in Determining the Order

36. In considering the appropriate order to be made, the Tribunal was faced with the situation that the Respondent simply denied a number of the Applicant's claims relating to her business practices as set out in the Applicant’s Founding Affidavit and put the Applicant to the proof thereof. The Respondent has thus failed to put any evidence before the Tribunal regarding how her business really operates and what can be done to ensure that the Respondent brings her debt counselling business practices in line with the National Credit Act. The Respondent has further done this in circumstances where she has failed to investigate the position within her own debt counselling practice herself in preparation for the Hearing, and in so doing has not put any evidence

before the Tribunal which could indicate if and how the matters can be rectified.

37. The Tribunal, in carefully considering an appropriate order, took cognisance of the fact that the Respondent currently maintains and manages the debt re-arrangements of 1 400 active paying consumers, and further employs a number of staff in her debt counselling business.

38. The Respondent does, however, need to demonstrate that her business practices are in compliance with her conditions of registration and with the Act and its intentions; and if need be to amend these practices such that there is no doubt that there is no contravention

of the Act.

Directive

39. Following the hearing, the Tribunal issued a directive setting out a number of actions for the Respondent to implement and comply with by a specified date, in order to demonstrate compliance with her conditions of registration and with the Act and its intentions,

namely that:

39.1 The Respondent does not employ any person to carry on the duties of a debt counsellor unless that person is duly registered as a debt counsellor and has quality assurance processes in place to ensure that administrative staff whom she may employ do not perform debt counselling duties, or lead consumers to believe that they are certified to perform such duties;

39.2 The Respondent undertakes an audit of all consumer files to ensure that each of these comply with the requirements of the Act;

39.3 Further that the audit ensures that no consumers who did not receive legal services, were charged for legal fees, and that in the event that a consumer was so charged, these fees be refunded;

39.4 That the Respondent pays at her own expense for a further investigation by the Applicant within the next three months from the date of issue of this judgment to prove compliance with the Act, and that the Applicant accepts this as proof of full compliance, failing which the matter should be referred back to the Tribunal by the Applicant for a hearing into the immediate cancellation of the Respondent’s registration.

40. The Respondent did not submit any response to the directive and thus the Tribunal must conclude that none of the actions were undertaken.

41. The Applicant submitted a response to the Directive, substantiating the initial application for cancellation of the Respondent’s

registration as a debt counsellor.

Order

42. Thus having duly considered all the submissions and the evidence before it, the Tribunal makes the following order:

42.1 that in terms of Section 57(1)(a)the registration of the Respondent as a debt counsellor be cancelled.

DATED THIS 8th DAY OF MARCH 2016.

_______

L. Best, Presiding Member

Prof B. Dumisa (Member) and Prof T. Woker (Member) concurring.