In a statement released on Tuesday, the National Credit Regulator (NCR) said it was looking for a declaratory order from the North Gauteng High Court “to obtain legal clarity on the effect of section 124 of the National Credit Act 34 of 2005 on the common law set-off.”
Common law set-off happens when two people owe each other money and the debts are essentially cancelled out by setting them off against each other.
The NCR is arguing that as the legislation currently stands, common law set-off has been superseded by section 124 of the Act.
“The typical application of the common law set-off is found in the banking industry where a bank would transfer funds from a consumer’s savings account to settle an outstanding balance on the credit account without the consumer’s authorisation. The consumer’s savings account is debited in order to settle a debt owed under a credit account”, Nthupang Magolego, Senior Legal Advisor at the NCR explained.
Section 124 of the NCA states that “before making a single charge or the initial charge of a series of charges to be made under a particular authorization, the credit provider must give the consumer notice in the prescribed manner and form, setting out the particulars as required.”
Magolego said that the practice was placing consumers under significant financial strain as they’re often left with little or no money to live and pay other creditors.
“The position of the NCR is that a bank must obtain the consumer’s authorisation to transfer funds from the consumer’s savings account to settle the debt owed to the bank under a credit agreement,” she said.