Loans Debt Set – Off

Loans Debt set-off: How to curb banks taking your cash

Cape Town – Consumers seeking loans should ensure the lender is a different credit provider to the one they bank with, Summit CEO Clark Gardner said in reaction to court action being taken against Standard Bank.

The bank told Fin24 this week that it will oppose a bid by the National Credit Regulator (NCR), which wants a court to order that the common law set-off has been superseded by section 124 of the National Credit Act (NCA).

“The NCR had received complaints from consumers, in relation to instances where the bank had taken monies, which had been deposited into their accounts held with Standard Bank and used these amounts to settle arrears on Standard Bank debts,” Jacqueline Peters, manager of investigations and enforcement at the NCR, told Fin24 on Tuesday.

READ: Credit battle begins: NCR takes bank to court over common law set-off

“Consumers in these instances are left with no monies for their ordinary day to day living expenses or other debt obligations, ultimately leaving already over indebted consumers in a far worse situation,” said Peters.

NCA does not provide sufficient clarity – Gardner

Gardner said the NCR’s case against Standard Bank was yet another example of the NCA not providing sufficient clarity to all parties involved.

“In the case of setting off outstanding and arrear debts against savings one needs to look at how the set-off took place.

“Where the right authority was provided by the consumer to the credit provider then little relief can be provided. However, in many instances we have seen it would seem the set-off is done in a manner in breach of Section 90(2) (m) in that it gives priority to payments for the credit provider over any other credit provider.

“All credit providers should have equal opportunity to receive payments and therefore are required to make use of the standard or preferential debit order payments processes.”

Debit order mechanism is fairer – Gardner

Summit believes the debit order mechanism is a fairer process to set off payments in that the consumer authorises an amount and credit provider to be paid on a specified date.

“This should mean that the consumer is aware of the payment and can budget for it accordingly,” he said.

Gardner said the NCA and the evolution of the credit industry is planning to move away from leaving the consumer in desperate situations and instead ensure they are protected from unfair credit provider behaviour or from their own desperate behaviour.

“We strongly encourage this shift, which may mean unsecured credit is less accessible in the short term as only financially healthy and able consumers access such funding,” he said.

“The problem in allowing set-off, and I am not aware of the details in this case, is that the amount and date of payment can come as a complete surprise to the consumer who then can find them in the most desperate of situations financially,” said Gardner.

Advice to consumers

“Our advice to consumers to prevent set-off is to ensure that your lender is a different credit provider to the one you bank with,” he said. “This ensures that payments can only be collected via authorised debit orders, which have an effective dispute process where necessary.”

Further, if a consumer cannot afford all their debt repayments they should take effective action instead of hiding from their lenders or accessing additional credit, Gardner cautioned.

“Effective action varies from negotiating with your lenders, reporting reckless lending to the National Credit Regulator to approaching a reputable debt counsellor.”

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