NCR v Zahid Adams t/a SA Credit Solutions (Pty) Ltd (NCT/116600/2018/57(1)) [2021] ZANCT 32 (14 August 2021)

IN

THE NATIONAL CONSUMER TRIBUNAL

HELD

AT CENTURION

NCT/116600/2018/57(1)

In the matter between:

NATIONAL

CREDIT

REGULATOR APPLICANT

and

ZAHID

ADAMS

RESPONDENT

t/a SA CREDIT SOLUTIONS (PTY) LTD(NCRDC426)

Coram:

Ms D. Terblanche: Presiding Tribunal Member

Dr L. Best: Tribunal Member

Dr M. Peenze: Tribunal Member

Date of Hearing: 4 August 2021, via Teams virtual meeting platform.

JUDGMENT

AND REASONS

THE

PARTIES

1. The Applicant in this matter is the NATIONAL CREDIT REGULATOR (“the Applicant” or “the NCR”), a juristic person established by section 12 of the National Credit Act 34 of 2005 (“the Act or “NCA”) as amended. The Applicant’s physical address is 127 15th Road, Randjespark, Johannesburg, Gauteng.

2. Ms Leanne Schwartz, a senior legal adviser in the Applicant’s investigations and enforcement department, represented the Applicant

at the hearing.

3. The Respondent is ZAHID ADAMS, (“the Respondent”) a debt counsellor under registration number NCRDC426, trading as SA Credit Solutions (Pty) Ltd situated at 1st Floor, Nedbank Building, 135 Main Road, Claremont, Cape Town.

The Respondent’s attorney of record, KJ Bredenkamp Attorneys, withdrew as attorneys of record for the Respondent on the morning of the hearing. The withdrawal was only communicated to the National Consumer Tribunal (“the Tribunal”) following a query by the Tribunal’s Registrar as to the attorney’s whereabouts immediately prior to the commencement of the hearing. The Respondent did not put in an appearance at the hearing.

JURISDICTION

5. The Applicant brought this application in terms of section 57 (1) of the NCA. The section provides for the cancelation of a registration on the basis of repeated failure to comply with conditions of registration, or repeated contraventions of the Act.

6. In terms of section 27 of the Act, the Tribunal has jurisdiction.[1]

7. In addition to its other powers in terms of the Act, section 150 gives the Tribunal the power to make an appropriate order concerning prohibited or required conduct in terms of the Act or the Consumer Protection Act, 2008.

8. This power includes declaring conduct to be prohibited in terms of the Act; interdicting prohibited conduct; confirming an order against an unregistered person to cease engaging in any activity that must be registered in terms of the Act; requiring payment to the consumer of an excess amount charged together with interest set out in an agreement; or any other appropriate order required to give effect to a right in the Act.

DEFAULT

HEARING

9. The Respondent opposed this application but failed to attend the hearing of the application.

10. Rule 24(1)(b) of the Tribunal Rules empowers the Tribunal to continue with proceedings in the absence of a party who is not the Applicant. In order to do so, the Tribunal must be satisfied that the party had been properly notified of the date, time and venue of the proceedings.

11. The Tribunal was satisfied that the Respondent had been issued with a Notice of Set Down of the hearing by the Registrar, same being

confirmed by the Registrar on the record.

12. The Tribunal further allowed for a 30 minute delay to the start of proceedings, in the event that the Respondent was delayed or may have been experiencing technical difficulties.

13. The Tribunal had due regard for sections 142(1)(b) and (d) of the Act which compel the Tribunal to conduct its hearings as expeditiously as possible; and in accordance with the principles of natural justice. The current application has been before the Tribunal for a lengthy period of time. It had already been set down for hearing on three occasions. The inability to proceed with the hearings of the merits of the matter has each time been at the instance of the Respondent’s application for postponement.

14. The Tribunal further considered that there was no attempt made by the Respondent to postpone the proceedings in accordance with Rule 18(3) of the Tribunal Rules.

15. The Tribunal proceeded to hear the matter on a default basis, as any further delay would be prejudicial to consumers and not in the interest of justice.

APPLICATION TYPE

16. This application is in terms of section 57(1) of the Act to cancel the Respondent’s registration as a debt counsellor.[2] The applicant seeks an order from the Tribunal:

16.1 Declaring the Respondent to be in repeated contravention of the following sections of the Act, its regulations and the Respondent’s

conditions of registration:

16.1.1 Section 139(4) which is an offence in terms of section 160(2)(d) of the Act;

16.1.2 Section 86(1) read with regulation 24(1)(a) and (c) read with regulation 24(3);

16.1.3 Section 86(6) read with regulation 24(6);

16.1.4 Section 86(4)(b) read with regulation 24(2);

16.1.5 Section 86(4) read with regulation 24(5);

16.1.6 Regulation 24(10);

16.1.7 Section 86(7)(c) and section 86(8)(b);

16.1.8 Section 52(5)(c); and

16.1.9 General conditions 2; 4; 9.1; 9.2; 11 and specific Condition B1

16.2 Declaring the Respondent to be in repeated contravention of Paragraph 1.7 and 1.8 of the Debt Counselling Fee Guidelines, which the Respondent undertook to adhere to in terms of General Condition 9.1;

16.3 Declaring the repeated contraventions as prohibited conduct in terms of section 150 (a); and

16.4 Cancelling the respondent's registration as a debt counsellor in terms of section 150 (g).

17. The Applicant further seeks the imposition of an administrative fine, which will be dealt with in the course of this judgment.

BACKGROUND

18. The Applicant received complaints from four consumers about the debt counselling practices of the Respondent. On the basis of these, the Applicant conducted an investigation into these practices. The investigation was authorised by the Applicant’s Chief Executive Officer (“CEO”) on 2 November 2017.

19. Two investigators were appointed to undertake the investigation; and duly did so, visiting the Respondent’s place of business on 23 November 2017.

20. The Respondent provided copies of the four complainants’ files, as well as an additional six active consumer files which were identified for selection by the Respondent. Upon examination of the files, it became apparent that the files contained limited information. The Respondent initially failed to provide any of the requested call recordings between the Respondent’s agents and consumers. These were eventually obtained by the Applicant.

21. The Applicant brought this current application during September 2018, duly served on the Respondent by courier.

22. The Tribunal has considered a previous matter brought by the Applicant against the Respondent. In that instance, following a proper hearing in the presence of both parties, the Tribunal issued judgment under case number NCT/22129/2015/140(1) on the 7th of July 2016.

23. The Tribunal ruled that the Respondent had contravened various sections of the Act and committed prohibited conduct in terms of Section 150(1) of the Act. The Respondent was interdicted from future breaches of the Act, requested to refund outstanding amounts to credit providers within three (3) months of the order and was further ordered to pay an administrative fine in the amount of R250,000.00 by the end of January 2017.

24. The Applicant confirmed that Respondent, despite demand, has failed to comply with the order of this Tribunal, said contempt being an offence in terms of Section 160(1)[3] of the Act.

25. The contraventions that formed the basis of the Tribunal ruling were identified during a previous investigation by the Applicant into the Respondent’s business practices as a debt counsellor. These practices were as follows:

25.1 The Respondent accepted consumers without completed Form 16’s;

25.2 Form 17.1’s were issued prior to the Form 16’s being signed;

25.3 The form 17.1s and 17.2s were dated on the same date;

25.4 The Respondent failed to verify the consumers’ expenses and obligations;

25.5 The Respondent failed to refer matters to a Court or a Tribunal and/or failed to refer the matters to a Court or a Tribunal within 60 (sixty) business days;

25.6 The Respondent failed to provide debt counselling services within a timely manner;

25.7 The Respondent failed to update consumer records on the debt help system; and

25.8 The Respondent failed to submit his compliance report and statistical return as is required in terms of the Act and his conditions of registration.

26. The majority of the contraventions that the Tribunal previously found are the same alleged contraventions which the Applicant avers in the current matter considered by the Tribunal, the overlapping contraventions being contraventions of:

26.1 Section 86(1) read with regulation 24(1)(a) and (c) read with regulation 24(3);

26.2 Section 86(4)(b) read with regulation 24(2);

26.3 Section 86(7)(c) and section 86(8)(b);

26.4 Section 52(5)(c); and

26.5 General conditions and specific condition of Registration.

IN

LIMINE MATTERS

27. During the hearing, the Tribunal firstly considered in limine matters as outlined in the Respondent’s answering papers, and the Applicant’s responses thereto.

Point in limine 1:

Initiation and consideration of complaint and scope of investigation

28. On its papers, the Respondent contested the consumer allegations relied upon as the basis for the investigation by the Applicant into its business practices. The Respondent raised objections in respect of the Applicant’s internal memorandum of authorization into the investigation, the initiation thereof and the investigation itself. The Respondent further insisted that the scope of the investigation should be limited to one consumer’s complaint whose details were set out within the memorandum.

29. At the hearing, the Applicant set out its submissions in response to the Respondent’s averments regarding the initiating complaint and the scope of investigation. As the starting point, the Applicant confirmed receipt of complaints from four consumers about the Respondent’s business practices as a debt counsellor.

30. The complaints received all concerned alleged contraventions of the Act, which contraventions if found true would constitute prohibited

conduct in accordance with the Act. The complaints provided the Applicant with a reasonable suspicion that the Respondent was contravening the Act and not conducting debt counselling in a manner consistent with the Act.

31. In terms of Section 136(1) of the Act, “any person may submit a complaint concerning an alleged contravention of the Act or a complaint concerning an allegation of reckless credit to the National Credit Regulator in the prescribed manner and form”.

32. The complaints received were not referred to the Tribunal previously, and as such the previous judgment did not provide recourse for the complainants.

33. Upon an acceptance of complaint/s, the Applicant may in terms of Section 139(1)(c) of the Act direct an inspector to investigate the complaint as quickly as practicable. With reference to Section 136 and 139 and further Section 140 of the Act, it is sufficient to demonstrate the existence of a complaint and/or complaints in order to establish a reasonable suspicion in order to direct an investigation.

34. The Applicant further submitted that the complaints were received in the prescribed manner and form prior to the Applicant’s initiation of the investigation. With specific regard to Section 136(1), Section 139 and Section 140 of the Act, it is surely clear that it was not the intent of the legislature that the complaints must be tested in any way. Following from that, the sections do not limit the nature of the investigation and/or the subsequent referral.[4]

35. The Applicant initiated internal authorization and approval processes for an investigation into the Respondent’s business practices as a debt counsellor.

36. Regarding the Respondent’s contentions concerning the authorization of the investigation, the Applicant submitted that the intention of the Applicant and the conduct to be investigated is clear from the internal memorandum requesting and approving same. There are no prescriptive Rules which govern the content of the memorandum or the particularity of such a memorandum. The aforesaid memorandum is an internal document. It is trite that the Respondent does not have the necessary knowledge as to the internal approval and authorization process employed by the Applicant nor was the Respondent a party thereto and can accordingly not raise objections against a process without knowledge.

37. The Applicant submitted that there were reasonable grounds on which initiate an investigation into the conduct of the Respondent

specifically pertaining to the complainants’ allegations regarding the Respondent’s business practices. The conduct

complained about could in all likelihood also affect other consumers. Accordingly, the Applicant has a duty to immediately investigate such complaints in order to prevent any such future conduct.

38. The Applicant submitted that the investigation was initiated in accordance with the principles as set out in Woodlands Diary v The Competition Commission 2010 (6) SA 108 (SCA) [2011] 3 All SA 192 (SCA) [2010] ZASCA 104; 105/2010 and The Competition Commission v Yara 784/2012 [2013] ZASCA 107; [2013] 4 All SA 302 (SCA); 2013 (6) SA 404 (SCA). The Applicant submitted that reliance can be placed on these cases as the Competition Act is similar to the National Credit Act and the powers exercised by both in respect of legislation are similar.

In the Yara decision Brandt JA held that “the commission does not really “initiate” or start a complaint. What it does is start a process by directing an investigation, which process may lead to the referral of that complaint to the Tribunal. It can initiate a complaint on the basis of information submitted by an informant, or because of what it gathers from media reports, or because of what it discovers during the course of an investigation into a different complaint and/or against a different respondent. Since no formalities are required by section 49B(1) all that is required is a decision by the Commission to open a case. The decision can be informal and may be tacit.”

Brandt JA held further that the decision in Woodlands does not provide support for the argument that there must be a strict correlation between the reference to the Tribunal and the complaint. It was further indicated that the purpose of initiating a complaint is to trigger an investigation which might eventually lead to a referral. It is merely the preliminary step in a process that does not affect the respondent’s rights. Conversely, the purpose of an initiating complaint, and the investigation that follows upon it, is not to offer the suspect firm an opportunity to put its case. The Commission is not even required to give notice of the complaint and of its investigation to the suspect. Least of all is the Commission required to engage with the suspect on the question whether its suspicions are justified. The principles of administrative justice are observed in the referral and the hearing before the Tribunal. That is when the suspect firm becomes entitled to put its side of the case.

In the Woodlands Dairy matter, Harms DP stated that “A complaint has to be initiated. The Commission has exclusive jurisdiction to initiate a complaint under section 49B(1). The question then arises whether there are jurisdictional requirements for the initiation of a complaint by the Commissioner. I would have thought, as matter of principle that the Commissioner must at the very least have been in possession of information concerning an alleged practice which, objectively speaking, could give rise to a reasonable suspicion of the existence of prohibited practice. Without such information there could not be a rational exercise of the power. This is consonant with the provisions of section 49B(2)(a) which permit anyone to provide the Commission with information concerning a prohibited practice without submitting a formal complaint”.

39. The Applicant submitted that all four complaints formed part of the scope of the investigation. All four complaints were received prior to the investigation and were in possession of the Applicant at the time of the internal request and subsequent authorization to initiate and investigate the business practices of the Respondent, which gave rise to the consumers’ complaints.

In the matter NCR v Lewis (Pty) Ltd v Another (NCT/27651/2015/140(1) [2016} ZANCT 33 9/9/16 the question as to whether the NCR was bound by the ambit of the complaint was considered. The question whether the NCR may investigate and refer other contraventions found and whether a clear and objective basis for these contraventions had to be established first were also considered. It was clear from the case at hand that upon a proper reading of the sections the nature of the investigation

was not limited nor that any complaints had to be evaluated or tested in any way. To demand that the referral corresponds with the contents of the complaint simply makes no sense if the complaint as initiated consists of nothing more than an informal decision to investigate.

Analysis and Conclusion

40. With due regard to the principles established and enunciated through the referred case law, it is clear that the Applicant was in possession of information, by virtue of the consumer complaints received, to warrant sufficient concern about alleged non-compliant

practices by the Respondent. Given the Applicant’s regulatory responsibilities regarding the rights of consumers and

responsibilities of debt counsellors, the Applicant could not turn a blind eye to complaints received. The Applicant was duty-bound, within the guardrails set out in the Act, to start a process by directing an investigation into the Respondent’s business practices.

41. The Tribunal is satisfied that it was within the Applicant’s regulatory responsibilities to accept and consider the consumers’

complaints. The Tribunal is further satisfied that, having done so, on the balance of probabilities the Applicant had reasonable grounds to suspect that the Respondent was committing prohibited conduct and to therefore authorise initiate the investigation, as it did.

Consequently, this point in limine must fail.

Point in limine 2:

Authority to depose affidavit:

42. On its papers, the Respondent contested that the official in the Applicant’s employ, namely the Manageress in the Investigations

Department was authorised to depose the affidavit that is the basis of the Applicant’s matter before the Tribunal. The Respondent

further denied that the facts within this founding affidavit were within the personal knowledge of the deponent, and accordingly denied that the allegations that same made are both true and correct.

43. The Applicant submitted that the Applicant is a juristic person and is only capable of performing its functions through its employees.

Further that the Manageress of the Investigations and Enforcement Department had knowledge of all investigations that were untaken by the Applicant. This is also demonstrated by the memorandum authorizing the investigation[5] which is attached to the Applicant’s Founding Affidavit, wherein the Manageress requested authorisation for the complaint to be initiated and authorisation for the subsequent investigation. The approval of the memorandum demonstrates the Executive Committees’

approval and knowledge of the Manageress’ title and her then authority to act on behalf of the Applicant.

44. Section 23(4) of the Act empowers the CEO of the Applicant to assign management and other duties to employees to enable the Applicant to fulfil its statutory duties. This includes to depose to affidavits used in support of applications which flow from approved

investigations undertaken by the Applicant.

45. The Applicant further submitted that it is further trite law that a Manager of a Department has personal knowledge of the matters within the Department.

In the matter of Firstrand Bank Ltd v Carl Beck Estate and Another[6], the Applicant, in that matter, applied for summary judgment wherein the deponent to the supporting affidavit was employed at the

Applicant as ‘operations manager arrears legal’. The Respondent disputed the personal knowledge of the deponent. In this regard the court held:

“In the present instance the deponent to the founding affidavit is the ‘operations manager arrears legal’, which title clearly indicates knowledge of arrears in moneys owing to plaintiff and legal responsibility thereof…

He is indeed pre-eminently the person who would have knowledge of the relevant facts.”

46. The aforesaid judgment, as well as judgment in the matter of Firstrand Bank Ltd v Carl Beck Estate and Another[7], were used in support of a summary judgment application in Firstrand Bank Ltd t/a Wesbank v Ego Specialised Services CC and others[8] wherein J Monama granted summary judgment where the legal manager of the Applicant deposed to the supporting affidavit, premised on the legal manager having had full access to all files and bank records in the legal department of the plaintiff.

47. In Barclays National Bank Ltd v Love[4] (quoted with approval in Maharaj at 424B-D) the following is said:

‘We are concerned here with an affidavit made by the manager of the very branch of the bank at which overdraft facilities were enjoyed by the defendant. The nature of the deponent’s office in itself suggests very strongly that he would in the ordinary course of his duties acquire personal knowledge of the defendant’s financial standing with the bank. This is not to suggest that he would have personal knowledge of every withdrawal of money made by the defendant or that he personally would have made every entry in the bank’s ledgers or statements of account; indeed, if that were the degree of personal knowledge required it is difficult to conceive of circumstances in which a bank could ever obtain summary judgment.

48. The Applicant submitted that the Manageress thus had the institutional authority as well as sufficient knowledge of the facts of the matter to depose the Applicant’s founding affidavit.

49. The Tribunal is satisfied that, by virtue of the responsibilities of her employment and occupation of the position of Manageress of the Investigations and Enforcement Department, said official had the institutional authority to depose to the founding affidavit. On the basis of her professional acumen in a managerial position, she was able to apply her mind and carefully consider the merits of findings of the investigation. Having done so would have placed her in a position to have sufficient knowledge of the facts at hand to depose to the founding affidavit.

Point in limine 3:

Applicability of previous Tribunal judgment

50. On its papers, the Respondent averred that the Tribunal judgment NCT/22129/2015/140(1) had no relevance or applicability to the

current matter being heard by the Tribunal. As a result, any reliance thereof by the Applicant was misguided and cannot be used to find or even suggest that the Respondent is guilty of the new charges levelled.

51. The Applicant submitted that the judgment is relevant in the following manner:

51.1 The judgment proves that the Respondent was previously found to have committed prohibited conduct, which conduct still persisted at the time of the investigation into the current matter. As such the Respondent is still continuously contravening the Act;

51.2 The judgment and previous findings made against the Respondent will have a bearing on the relief and administrative fine sought against the Respondent;

51.3 The fact that the Respondent was previously found to have committed prohibited conduct and the fact that the Respondent was interdicted from future prohibited conduct, are all factors that need to be considered in support of the Applicant’s current application for deregistration;

51.4 Any further breaches of the Act found after said judgment, must be considered as an aggravating factor to support the Applicant’s cancellation request and relief in respect of the administrative fine;

51.5 The Respondent has not made any attempts to comply with the Tribunal orders, including not having paid the administrative fine imposed;

51.6 It is reasonable to conclude and more so in the absence of contrary evidence, that the Respondent merely ignored the judgement of the Tribunal and by doing so, disregarded not only the authority of the Applicant but that of the Tribunal; and

51.7 The Respondent is in contempt of a Tribunal order, which is an offence in terms of Section 160(1)[9] of the Act.

52. The Applicant further submitted that:

52.1 No attempts were made to appeal the judgment nor has the Respondent attempted to review the decision of the Tribunal to date and as such any allegations made against the previous rendered judgment by the Respondent should be disregarded; and

52.2 The Respondent cannot at this juncture raise any objections against the previous judgment and this would also not be the appropriate forum to do so.

53. The Applicant correctly alerted the Tribunal that the Respondent has made no attempts to appeal or review any or all of the decisions contained in the Tribunal’s earlier judgment and order against the Respondent. There is no reason for the Respondent not to have been aware of the existence of such remedies as he himself is a registered attorney. Furthermore, in the course of preparing his submissions in this current matter, on two occasions the Respondent sought representation of two different registered attorneys who would surely have had the necessary expertise to advise of same. The Tribunal decisions in the judgment NCT/22129/2015/140(1) thus stand and may serve as points of reference. The Tribunal is satisfied that due regard could be had to the findings and order therein, particularly with regard to the relief sought.

CONTRAVENTIONS OF THE ACT, REGULATIONS, AND CONDITIONS

54. The Tribunal now considers the alleged contraventions of the Act, regulations and the Respondent’s conditions of registration as a debt counsellor.

55. Section 86(1) read with regulation 24(1)(a) and (c) read with regulation 24(3);

Section 86(1) of the Act states:

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

Regulation 24(1)(a) of the Act states:

“A consumer who wishes to apply to a debt counsellor to be declared over-indebted must Submit to the debt counsellor a completed Form 16”

Regulation 24(1)(c) of the Act states:

“A consumer who wishes to apply to a debt counsellor to be declared over-indebted must: Submit to the debt counsellor the documents

specified in Form 16”

Regulation 24(3) of the Act states:

“The debt counsellor must verify the information provided in terms of subsection (1) above by requesting documentary proof from the

consumer, contacting the relevant credit provider or employer or any other method of verification.”

Alleged Contravention

56. The Applicant alleges that consumers are contacted pro-actively through a telephone call by agents from the Respondent’s business and are offered services which purport to be a nature that will assist with debt stress relief. It is not clear that the service being offered is debt counselling. The Respondent initiates debt counselling processes without the clear consent of the consumer.

57. An examination of consumer files showed that consumers are accepted for debt review without a completed or signed copy of the Form 16 application. There was no evidence that the Respondent obtained any of the documents specified in a Form 16 in terms of Regulation

24(1)(c) of the Act or recordings evidencing that consumers applied for debt review, nor is there any proof of the verification process as entailed in Regulation 24(3) of the Act.

58. The Applicant avers that in the absence of the documents as per the prescribed Form, an application for debt review cannot have been accepted or have been made. When examining telephone call recordings, between the Respondent’s agents and consumers, there is no agreement by the consumer to enter the debt review process. No consequences are explained to the consumer. The process is not described in detail nor are the fees.

59. The Applicant avers that the Respondent is not involved in the process and that determinations are done by the agents on amounts provided. Despite having 48 hours to read and sign documents, the Respondent initiates debt counselling related processes immediately after the telephone call ends.

60. Proceeding to place consumers under debt review had dire consequences for complainants including accounts frozen and credit profiles updated to reflect debt review status; repossession of a motor vehicle in one instance due to with-holding of payments; and only becoming aware of debt review status through communication with the bank.

61. Section 86(6) read with Regulation 24(6)

Section 86(6) of the Act states:

“A debt counsellor who has accepted an application in terms of this section must determine, in the prescribed manner and within the prescribed time whether the consumer appears to be over-indebted”

Regulation 24(6) of the Act states:

“Within 30 business days after receiving an application in terms of section 86(1) of the Act, a debt counsellor must make a determination in terms of section 86(6).”

Alleged contravention

62. The Applicant submitted that the Respondent signed notifications to credit providers that consumers had entered into debt review as well as the notifications informing of the outcome of the debt review on the same date. The evidence of this practice appears from the form 17.1s and 17.2 s for consumers reflecting the same date. This clearly indicates that the Respondent could not have followed any proper procedures to determine over-indebtedness as this would have required first informing credit providers that a consumer had entered into debt review. Only thereafter could the Respondent have received and analysed documentation from credit providers; negotiated conditions of acceptance of re-arrangement of repayments; and necessary other administrative considerations. All these processes would have needed to be undertaken and an analysis completed before being able to come to a conclusion about over-indebtedness; whereafter the notification informing of the outcome of debt review could only have been prepared, signed and sent to interested parties.

63. Section 86(4) read with Regulations 24(2); 24(5) and 24(10)

Section 86(4) of the Act states:

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

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

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

(ii) every registered credit bureau.

Regulation 24 prescribes processes and time frames related to the submission of notifications and record keeping.

64. The Applicant made reference to consumer files examined during the investigation which showed cases where notifications where only

provided to credit providers upon requests requesting same; and files where the Respondent was unable to provide records of proof of submission of notifications.

65. Section 86(7)(c) read with Section 86(8)(b)

Section 86(7)(c) states that:

if as a result of an assessment conducted in terms of subsection 86(6) a debt counsellor concludes that the consumer is over-indebted, the debt counsellor may issue a proposal recommending that the Magistrates Court make either or both of the orders:

(i) that one or more of the credit agreements be declared to be reckless credit… and

(ii) and that one or more of the consumer’s obligations be rearranged….

Section 86(8)(b) states that:

if a debt counsellor makes a recommendation in terms of subsection (7)(b) and…

(b) if paragraph (a) does not apply, the debt counsellor must refer the matter to the Magistrates Court with the recommendation.

66. The Applicant demonstrated alleged contraventions on the basis of the examination of consumer files where – despite having made a determination of over-indebtedness - there were no debt restructuring orders or consent orders on certain of the files nor were there any applications to Court or to the Tribunal. There is further no evidence that any legal work commenced. Consumers were, however, charged legal fees. In other instances, consumers were charged legal fees for referral of their matter to the Magistrate’s court, whereas in actual fact consent orders were obtained from the Tribunal. Accordingly, consumers were over-charged.

67. The Applicant demonstrated that in particular cases the Respondent’s failure to refer matters to Court had resulted in credit providers eventually terminating the debt review processes in terms of Section 86(10). Coupled with the Respondent’s failure to distribute monthly payments, the Respondent’s conduct had grave repercussions. In at least once instance the consumer’s

vehicle was repossessed.

68. The Applicant contests the veracity of undated invoices of Attorneys latterly presented by the Respondent, as the Respondent has not been able to provide proof that there was any legal work done. This is evident as there was no issued court applications found in any of the sampled files. Further to this, the amounts on the Attorney’s invoices differ from the amounts paid and distributed towards legal fees as per the PDA statements.

69. In terms of Paragraph 1.4 of the Debt Counselling Fee Guideline[10] should a debt counsellor fail to submit proposals to credit providers or refer the matter to a Tribunal or a Magistrate Court within 60 business days from date of the debt review application, the debt counsellor has to refund 100% of the fee paid by the consumer

(excluding the application fee of R50.00).

70. The Applicant submitted that this practice by the Respondent is beyond only the consumers in the sampled files. Information extracted from the Applicant’s the Debt Help System identified numerous other cases where this contravention is evident. The Applicant provided details of numerous consumers who appear on a “status A” (applied for debt counselling and being assessed) or a “status C” (assessment resulted in a decision that the consumer is over-indebted). Should these consumers’ applications have been referred to a court or a Tribunal, the statuses would have changed to a “D3 or a D4”. Some of these statuses have remained unchanged since 2016.

71. The Applicant submitted that the Respondent has merely provided a general reason for failure to refer matters to the Court within the proposed 60 business days. Much of the reason for delays was shifted to the consumers without proof thereof.

72. Section 52(5)(c) and General and Specific Conditions of Registration

Section 52(5)(c) of the Act obliges the Respondent as a registrant to adhere to his Conditions of Registration.

General and Specific Conditions of Registration set out the Respondent’s obligations and duties that the Respondent must follow in order to 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 debt counselling into disrepute.

Alleged Contraventions

73. The Applicant submitted that the investigation found numerous instances where the General and Specific Conditions of Registration were contravened. Examples cited include non-disclosure of fee structuring; no written confirmation or acceptance of the legal fees or any pro-forma invoices; charging of legal fees despite no referral to a Court or to the Tribunal; and delayed distribution of payments to credit

providers – amongst others. These examples show that the Respondent’s conduct does not align with the purpose and requirements of the Act; does not result in a timely service and brings debt counselling into disrepute.

74. Similarly, the Applicant submitted that the Respondent contravened Paragraph 1.7 and 1.8 of the Debt Counselling Fee Guidelines by not adhering to obligations towards consumers regarding applicable fees and related debt counselling services.

ANALYSIS OF THE FACTS

AND CONCLUSION

75. As a starting point, the Tribunal returns to the fact that the Respondent did not appear before the Tribunal despite being notified

of the hearing into this matter. This is an indication of disrespect not only to the Tribunal, but more importantly to all consumers whose rights may be affected by the behaviour of the Respondent in the practice of debt counselling services offered.

76. The further implication of non-appearance by the Respondent is the Tribunal’s necessary reliance on the submissions on the

Respondent’s papers only. This has deprived the Tribunal of the opportunity to gather any clarifications and hear additional

ventilations. Where a hearing before the Tribunal takes place without oral evidence and on the affidavits alone, the appropriate test in deciding whether the applicant has proved his case, is that found in the case of Plascon-Evans Paints Limited v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A) at 634E to 635C, which has been applied by this Tribunal in previous cases[11]. Specifically, the applicant can only succeed if: When there is a dispute of fact, the version of the respondent must be accepted unless this version is “so far-fetched or clearly untenable that the court is justified in rejecting them (the allegations or denials of the respondent) merely on the papers.”[12]

77. In the instance of the current matter, the Tribunal noted that the Respondent’s averments on its papers are bald denials, without supporting evidence. The Tribunal therefore accepts the Applicant’s

version of the facts in this matter.

78. The Tribunal is satisfied that legitimate complaints were received, providing a valid basis for the investigation undertaken by the Applicant into the Respondent’s debt counselling business practices. The Tribunal confines its considerations to the findings of this investigation. The Tribunal has not considered additional complaints received by the Applicant after the conclusion of the investigation. Similarly, a tip-off received by the Applicant has not been taken into consideration.

79. The Applicant has placed convincing evidence before the Tribunal as set out in the investigation report and expanded upon by the Applicant’s submissions during the hearing. The evidence was provided on the basis of information – or the lack thereof – in the consumer files examined during the investigation. The evidence showed a pattern across consumer files.

80. The evidence, which the Tribunal accepts, shows that the Respondent has failed to perform debt counselling in a manner that is consistent

with the purpose and requirements of the Act. The Respondent failed to act professionally and reasonably in providing debt counselling

services to consumers and failed to provide such services in a manner that is timely, fair and proper.

81. The evidence leads the Tribunal to the conclusion that the Respondent conducted debt counselling in a manner that is contrary to the Act, the Regulations and his Conditions of Registration and as such the Respondent brought the Applicant and the debt counselling process into disrepute.

82. This evidence has satisfied the Tribunal that the Respondent repeatedly contravened the Act, Regulations and Conditions of Registration as set out in detail in paragraph 15 of this judgment, with the exception of section 139(4).

83. Consequently the Tribunal is satisfied that the Respondent engaged in prohibited conduct by contravening the identified Sections, Regulations and Conditions of Registration.

84. In the Tribunal’s view, these contraventions are sufficiently serious to justify cancelling the respondent’s registration as a debt counsellor.

CONSIDERATION OF AN

APPROPRIATE ORDER

85. The Applicant prayed for orders from the Tribunal as set out in paragraph 15 of this judgment.

86. The Tribunal did not find the Respondent to have not answered questions truthfully when questioned during the course of the investigation. At best, the Respondent was evasive about payment arrangements with regard to the previously imposed fine. The Tribunal will therefore

not make the order requested by the Applicant regarding contravention of Section 139(4), which is an offence in terms of section 160(2)(d) of the Act, as set out in paragraph 16.1.1 above.

87. In addition the Applicant’s requested seeks the imposition of an administrative fine.

Administrative fine

88. The Applicant has requested the Tribunal to impose an administrative fine.

89. Section 151 (3) of the Act sets out the factors the Tribunal must consider when determining an appropriate fine. The Tribunal proceeds to consider each in turn.

The nature, duration, gravity and extent of the contraventions:

90. Having regard to the complaints and the small sample of files and the contraventions identified from those files, the nature and extent of the contraventions warrants serious action against the Respondent. The Respondent’s contraventions are serious and appear to go to the heart of the Respondent’s business practices; and indicate a disregard for the rights of consumers. The nature of the contraventions is an on-going and common practice. Affected consumers are exposed to fraudulent conduct by being placed under debt review without providing consent to said process. The gravity of the offences depicts the Respondent’s callous disregard the Act and the Regulations.

Loss or damage suffered as a result of the contraventions:

91. Whilst the full extent of the damages suffered by the consumers is unquantifiable, consumers have clearly suffered financial losses.

Certain consumers lost assets due to terminations of accounts through no fault of their own, and solely as a result of the incorrect debt review practices of the Respondent. The Respondent failed to refer matters in a timely manner, if at all, to a Court or the Tribunal, thereby exposing such consumers to the termination of their credit agreements from the process in terms of Section 86(10) of the Act. Further where legal fees were charged and paid and no further action was taken, the consumers incurred a great loss.

Behaviour of the Respondent:

92. The Respondent had full knowledge of the requirements he was to fulfil as a debt counsellor and had no reason not to comply. He failed to adhere to his statutory duties and such behaviour cannot be tolerated by an individual who is required to assist already overburdened consumers. The Respondent is not operating his debt counselling business in a manner which is consistent with the purpose and requirements of the Act. Such behaviour is clearly not in the best interest of consumers and cannot be tolerated.

Market circumstances under which the contraventions occurred:

93. The prevailing market circumstances have placed consumers in economic difficulty with regards to meeting their credit commitments. The contraventions of the Act by the Respondent have exacerbated these financial difficulties for consumers affected by the Respondent’s

flagrant disregard for his fiduciary responsibilities as a debt counsellor.

Level of profit derived from the contraventions:

94. The Applicant did not place specific evidence before the Tribunal concerning the level of profit the Respondent has derived from the contraventions. However mere regard to the legal fees which were obtained in excess of the prescribed amount and/or obtained whilst there were no referrals to Court or the Tribunal, suggest clear financial gain has been derived through the Respondent’s

conduct.

Degree of co-operation between the Respondent and Applicant:

95. The degree of co-operation by the Respondent during the investigation is questionable as the Respondent was very particular and selective when providing files to the inspector and further failed to present all the documentation and recordings relevant to the sampled files and the complainants.

Prior contraventions committed by the Respondent:

96. The Tribunal found previously that the Respondent contravened the Act, and was fined R250 000.00 [NCT/22129/2015/140(1)]. The prior contraventions by the Respondent are similar if not identical to those that the Tribunal has again found. This indicates

repetitive prohibited conduct. The imposed fine has not been paid nor has the Respondent made any serious attempts to make arrangements to effect payment.

Finding

97. The Tribunal is satisfied that the nature of the Respondent’s contraventions and the consequent adverse reputational and financial

implications for consumers justify the Tribunal imposing an administrative fine on the Respondent. The Act was introduced into

the South African legislative landscape to curb precisely the types of contraventions that the Tribunal has found the Respondent to have practised. The Tribunal would therefore be failing in its duty were it not to send a clear message to the Respondent and other credit providers that the Tribunal will not tolerate credit providers contravening the Act. This is particularly pertinent given that the Tribunal previously ordered the Respondent to pay a fine, having been found to have contravened the Act, and which contraventions constituted prohibited conduct. The Respondent remains in contempt of this order, having not to date paid the previous fine; nor made any serious attempts to make arrangements to effect payment.

The amount of the fine

98. Section 151(2) of the Act states that an administrative fine imposed may not exceed the greater of 10% of the Respondent’s annual turnover during the preceding financial year; or R1,000,000.00.[13]

99. Given the gravity of the contraventions and the related implications for debt-stressed consumers, the Tribunal is persuaded that a strong message must be sent to all debt counsellors that they cannot escape complying with the Act. Regard must also be had for the behaviour of the Respondent which showed utter disrespect for a previous order of the Tribunal to pay an administrative fine arising from prohibited conduct.

100. The conduct of the Respondent has persuaded the Tribunal that an administrative fine, as a punitive measure, is appropriate. The

Applicant is urged to pursue the Respondent’s immediate payment of the fines as ordered by the Tribunal.

ORDER

101. Accordingly, the Tribunal makes the following order:

101.1 All the three points in limine are dismissed;

101.2 The Respondent has repeatedly contravened the following sections of the Act, Regulations and Conditions of Registration:

101.2.1 Section 86(1) read with regulation 24(1)(a) and (c) read with regulation 24(3);

101.2.2 Section 86(6) read with regulation 24(6);

101.2.3 Section 86(4)(b) read with regulation 24(2);

101.2.4 Section 86(4) read with regulation 24(5);

101.2.5 Regulation 24(10);

101.2.6 Section 86(7)(c) and section 86(8)(b);

101.2.7 Section 52(5)(c); and

101.2.8 General conditions 2; 4; 9.1; 9.2; 11 and specific Condition B1; and Paragraph 1.7 and 1.8 of the Debt Counselling Fee Guidelines;

101.3 The repeated contraventions are prohibited conduct in terms of section 150(a) of the Act;

101.4 The Respondent’s registration as a debt counsellor is cancelled in terms of section 150(g) of the Act;

101.5 The Respondent must appoint an independent auditor within 30 days at its own cost to audit all consumer files to establish if:

101.5.1 There are completed Form 16’s on all client files, confirming that consumers did apply and/or consented to be placed under debt review;

101.5.2 The Respondent adhered to the timeframes set out in Regulation 24(2) of the Act; and

101.5.3 There are amounts that consumers were wrongly or over-charged;

101.6 The Respondent must, at own cost, within 90 business days from the date of the finalisation of the audit report, remove the debt review flag from consumers’ profiles where the audit found no completed Form 16 on the client’s file;

101.7 The Respondent must refund past and present clients any amounts which the Respondent was not entitled to receive, or which exceeded the prescribed maximum amounts allowed by the Act, including legal fees;

101.8 Where no proof of debt restructuring orders can be found, the Respondent must refund all fees paid by the client, with the exclusion of the application fee of R50.00;

101.9 The Respondent must provide a written report to the Applicant detailing the identity of the consumers and the refunds made. This report is to be provided to the Applicant within 30 days after receipt of the audit report; and

101.10 The Respondent must pay an administrative fine of R350 000.00 (three hundred and fifty thousand rand) into the National Revenue Fund referred to in section 213 of the Constitution of the Republic of South Africa, 1996 within 30 days of the date of this judgment.

The National Revenue fund account details are as follows:

Bank:

Standard Bank of South Africa

Account name:

Department of Trade and Industry

Account number:

370650026

Account type:

Business current account

Branch code:

010645 (Sunnyside)

Branch code for electronic payments: 051001

Reference:

NCT/116600/2018/57(1)

(Name of depositor)

101.11 There is no order as to costs.

DATED AT CENTURION ON THIS 14TH DAY OF AUGUST 2021

[SIGNED]

Dr L. Best

Member

Presiding Member Ms D. Terblanche and Member Dr M. Peenze concurring.

[1] Section 27(a)(i) of the NCA provides that: ‘The Tribunal or a member of the Tribunal acting alone in accordance with this Act or the Consumer Protection Act, 2008 may adjudicate in relation to any application that may be made to it in terms of this Act in respect of such an application.’

[2] Section 57 (1) empowers the Tribunal to cancel a registrant's registration if the registrant fails to comply with a condition of its registration; contravenes the Act; or fails to comply with a commitment the registrant made when applying to be registered as a debt counsellor.

[3] “A person commits an offence who contravenes or fails to comply with an order of the Tribunal.”

[4] Par 28 in the matter of NCR v Pandero Investments 503 CC t/a Iwita Finance NCT/113131/2018/57(1) the complaint and wording of Section 136 was considered and the finding was made that the sections do not limit the nature of the investigation and/or the subsequent referral

[5] Page 75 to 78 of the record

[6] 56174/2007) [2008] ZAGPHC 423

[7] 56174/2007) [2008] ZAGPHC 423

[8] (47925/2011) [2012] ZAGPJHC 47

[9] Section 160: A person commits an offence who contravenes of fails to comply with the order of the Tribunal

[10] Should a Debt Counsellor fail to submit proposals to Credit Providers or refer the matter to a Tribunal or a Magistrate Court within 60 business days from date of the debt review application the Debt Counsellor has to refund 100% of the fee paid by the consumer (excluding the application fee).

[10] Should a Debt Counsellor fail to submit proposals to Credit Providers or refer the

matter to a Tribunal or a Magistrate Court within 60 business days from date of the

debt review application the Debt Counsellor has to refund 100% of the fee paid by

the consumer (excluding the application fee).

[11] National credit Regulator vs Standard Bank of South Africa Limited (NCT 29041/2015/140(1) NCA (2017 SANCT 118 (11 October 2017 at para 81; Mafadza vs Bidvest McCarthy Volkswagen Arcadia (Pty) Ltd (NCT /122593/2018/75(1)(b)[2019] ZANCR 113 (10 July 2019)

paragraphs 2 42 and 52.

[12] National Credit Regulator vs Lewis Stores (Pty) Ltd 2017 JOL 3799 (NCT) at para 32.

[13] In National Credit Regulator v/s Werlan Cash Loans the Respondent was found to have engaged in prohibited conduct and an administrative penalty was imposed irrespective of the fact that the Applicant did not present proof of the Respondent’s annual return. In the aforesaid matter the Tribunal was approached for the imposition of an administrative penalty due to the alleged repeated contraventions of the NCA by the Respondent. Specific reference was made to Section 151(2)(b) of the Act which refers to “the penalty not exceeding R1,000,000.00”. It was found that this provision means that where the annual turnover is unknown, the option the Tribunal has, is to impose this amount as a penalty.