Who can collect my debt and how?

Failing to pay a debt leads to the start of the debt collection process. Several laws, including the National Credit Act, and the Debt Collectors Act outline the rights and responsibilities of both debtors and debt collectors. This ensures that you are treated fairly and an ethical process is followed.

The debt collection process

If you default on a debt, a number of steps will take place:

• The creditor will issue a letter of demand in terms of the National Credit Act.
  
  
• If you fail to respond and settle the debt, it is handed over to a debt collector who acts on the creditors behalf to collect the debt. The amount collected is paid over to the creditor as per their agreement with the debt collector.
  
  
• The debt collector will contact you via email, phone call, or a personal visit to discuss your outstanding debt. They will use the contact information on record and the onus is on you to make sure your information is correct. It is considered a legal contract, whether you respond or not. The debt collector must provide you with certain information about the debt, including (among other things) the name of the creditor and the amount owed. This is known as validation information.
  
  
• If this fails, the creditor may seek a court order to take additional steps to recover the debt.
  
  
• Once a court order is granted, the sheriff may have the legal right to seize assets or property in order to recover the debt, but this involves a strict legal process that protects debtors from illegal repossession of their property.

The creditor, or the debt collector authorised by the creditor, can report the debt to the credit bureaux, which will impact on your credit score.

Regulation of debt collectors

All third-party debt collectors must be registered with the Council for Debt Collectors. They must also adhere to the Code of Conduct which was adopted by the Council for Debt Collectors when the Debt Collectors Act was promulgated.

Attorneys who collect debts are registered with the Legal Practice Council, but they voluntarily register with the Council for Debt Collectors so that they can charge a fee for their services, which is regulated. Only registered debt collectors may charge fees.

If a company collects their own debts, the internal debt collector does not need to register with the Council for Debt Collectors. They also cannot charge debt collection costs as set out in Annexure B of the Debt Collector’s Act.

Debt Collectors Code of Conduct

All registered debt collectors have to adhere to the Code of Conduct. This means that they must always be just, fair, and honest while respecting the confidentiality of your information. Any debtor’s information they provide to a creditor or credit bureau must be truthful and verifiable.

They are also prohibited from humiliating or threatening you and are not allowed to:

• Demand payment without disclosing the creditor, the amount outstanding, or their own identity;
  
  
• Collect more money than what is owed, except for interest and legally allowed costs;
  
  
• Misrepresent themselves or threaten legal action with no intention to follow through;
  
  
• Threaten violence or property damage;
  
  
• Use obscene or threatening language;
  
  
• Abuse, harass, or intimidate you or your family in any way, including excessive personal visits or phone calls;
  
  
• Call or park at your home or work, embarrassing you;
  
  
• Damage your reputation by threatening to disclose private information; or
  
  
• Threaten to inform your employer of your debt before obtaining a judgment.

If they contravene this code, you have the right to complain.

Complaints must be submitted in writing and under oath to the Council for Debt Collectors. Click here for contact details.

Debt collection costs

Third party debt collectors may recoup certain debt collection costs, which are strictly regulated and set out in an annexure to the regulations under the Debt Collectors Act. Tracing fees and transport costs cannot be charged, and costs must not exceed the capital amount owed or R1 023, whichever is less.

In addition, R82 can be charged if the debtor is dissatisfied with the charges and the case is referred to the magistrates court for recalculation of the costs. A cost of 10% of each instalment received can also be charged, with a maximum of R509 per instalment.

 
Fees earned from debt collection

Third party debt collectors are also paid a fee for their services, and this is agreed upon by both the creditor and the debt collector. It is usually a percentage of the amount they collect, and it is paid by the creditor. This is not regulated by the Council for Debt Collectors and is a contractual agreement between the parties.