Capitec Bank Limited v Mahlangu

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: TV Ratshibvumo J and MT Mankge J
• Judgment Date: 25 October 2021
• Docket Number: A16/2020
• Hearing Date: 10 September 2021
• Citation: 2021 JDR 2640 (MN)

Ratshibvumo J:

[1]

Introduction

This is an appeal against the judgment of the Magistrate for the District of Thembisile Hani, held at Kwamhlanga (the court a quo) in which the Magistrate found that the credit agreement between the credit provider (the Appellant) and the consumer (the First Respondent) was reckless in terms of section 81 of the National Credit Act no. 34 of 2005 (the Act). The court a quo proceeded to declare that the First Respondent was over-indebted and that he must not enter into any further credit agreement until his obligations have been fulfilled.

[2]

The above order was made after an application for debt review was brought by the debt counsellor (the Second Respondent) following a request to her by the consumer. The consumer and the credit provider were cited in the court a quo as the first and the third respondents respectively There were eight other respondents who were the creditors to the consumer who are not parties to this appeal. Only the Appellant appeals against the finding by the court a quo. The appeal is against the finding of recklessness on the part of the Appellant by the court and not against the further part of the order in which the First Respondent was declared over-indebted. The Appellant also appeals against the costs order in which it was ordered to pay the costs on client and attorney scale. The appeal is unopposed, with the Second Respondent having chosen to abide by the outcome of this appeal, to avoid further litigation expenses.

[3]

Before the court a quo.

2021 JDR 2640 p3

Ratshibvumo J

The application was brought by the Second Respondent after she had investigated the First Respondent's over-indebtedness and made a preliminary finding to the effect that the credit agreement entered into between him and the Appellant on 15 May 2013, was reckless. On 28 August 2018, Second Respondent sent the notices to all the creditors as envisaged in section 86(4) of the Act. She further requested all the documents on which the credit providers (in particular, the Appellant) relied on in providing credit to the consumer. By the time the debt review application was launched on 25 April 2019, she had not received any documents from the Appellant. Her preliminary finding was made for reason that no proof of affordability was made available to her. She only had sight of the documents she had asked when they were filed alongside the answering affidavit prepared for the Appellant on 17 July 2019. The Appellant chose not to deal with its alleged failure to cooperate in its answering affidavit. In its heads of arguments, the Appellant avers that the Act does not impose any sanction on the credit provider who fails to comply with section 86(5)(b) (failure to cooperate with the debt counsellor).

[4]

The gist of the contention made out by the Second Respondent which formed the backbone of the findings by the court a quo is to be found in the table she prepared in her replying affidavit which she summarised as follows:

	Appellant	Second Respondent; Determination
Gross income	8 930.25	8 930.25
Other income	5 000.00	No proof of income; provided

2021 JDR 2640 p4

Ratshibvumo J

Less statutory deductions	819.25	818.67
Net income	13 111.00	8 111.58
Less living expenses	5 800.00	5 800.00
Less monthly debt repayments	761.00	761.00
Amount available to repay debts after expenses, debts that existed at the time of inception of the contract and statutory deductions but before new monthly instalment in terms of the credit agreement with the Appellant	6 550.00	1 550.58
New monthly instalment in terms of the credit agreement of the Appellant	2 782.79	2 782.79
Surplus or shortage of amounts left over after all debts obligations, prospects and financial means have been calculated	3 767.21	-1 232.21

[5]

It was submitted by the Second Respondent that according to section 78(3)(b) of the Act, the person within the consumer immediate family or household, who shares in the financial means also shares in the obligations and must be assessed together with the consumer. She averred further that the Appellant neglected to provide proof of the consumer's additional income. According to her, the Appellant did not conduct an affordability assessment in compliance with regulation 23A. She concluded therefore that the additional household income should have been calculated as zero. Failure to do this by the Appellant was presented as a direct cause for the consumer to approach the debt counsellor with request to be declared over- indebted.

2021 JDR 2640 p5

Ratshibvumo J

[6]

The Appellant contended on the other hand that the client-level calculation yielded a positive disposable income of R5 565.58 and the household-level calculation yielded a positive disposable income of R6 550.00. The client- level calculation, rather than the household-level calculation, was the one adopted and applied by the Appellant when deciding whether to grant credit to the First Respondent and the terms on which it would do so. For this reason, it was contended that it was not even necessary to obtain any proof of the household income as the credit was not approved based on the household-level calculation in the first place.

[7]

The court a quo accepted the submissions by the Second Respondent and found that the Appellant was reckless in entering into the credit agreement referred to above. In reaching this decision, the court a quo noted that the credit agreement in question was for an amount of R98 728.34, and was for a period of 64 months in which R2 782.79 instalments would be paid by the consumer. Before entering into this agreement, the First Respondent provided his salary slip and three months' bank statement to the Appellant. The court a quo accepted the Appellant's version to the effect that affordability calculation that was done on 15 May 2013 preceding the signing of the loan agreement was as follows:

Client affordability calculation:

Total income A		8 111.00
Client income (Nett salary)	8 111.00
Total expenses B		2 545.42
- Client's Living expenses	1 784.42
- Client's NLR & CCA instalments	761.00
Disposable income (A-B)		5 565,58

Household affordability calculation:

2021 JDR 2640 p6

Ratshibvumo J

Total household income A		13 111.00
Client income (Salary)	8 111.00
+ Client other income (in addition to salary)	0.00
+ Household income (other members of the household)	5 000.00
Total household expenses B		6 561.00
+ Client's NLR & CCA instalments	1 637.00
+ Household NLR & CCA instalments	0.00
+ Household Living expenses	5 800.00
Household Disposable income (A-B)		6 550.00

[8]

Court a quo noted that from the above, the affordability assessment reflected that the First Respondent's disposable income was R5 565.58 and the combined household disposable income was R6 574.00. Due to the fact that the First Respondent disposable income was lesser of the two amounts, loan was approved on the amount of R5 565.58 which was the First Respondent's disposable income. Relying on sections 81 and 78(3) of the Act and Regulation 23A(8), the court a quo found that the Appellant was obliged to include in its calculation any other adult person within the consumer's immediate family or household to the extent that the consumer or the prospective consumer and that other person customarily - (i) share their respective financial means and (ii) mutually bear the respective financial obligations.

[9]

The court a quo was of the view that the Appellant was reckless in its assessment in particular because,

"[T]here is no documentary proof of the income of the "household" income of R5 000.00. There is no indication what the relation between the consumer and the contributor of the household income is. There is no documentary proof of the "household living expenses." There is no documentary evidence on what contribution the consumer is making towards the household living expenses.

2021 JDR 2640 p7

Ratshibvumo J

Household expenses clearly are an indication that the consumer also contributes towards those expenses. Those expenses were not included in the consumer's affordability calculation of his assessment. No documentary evidence is attached. Thus the [appellant] failed to account for additional income amount of R5 000.00 and further failed to make a proper case how it relied on household income over the consumer's income." [1]

[10]

On appeal

The Appellant raised no new issues before us to those argued before the court a quo. The submissions made are to the effect that the court a quo erred in finding that the Appellant was obliged to do household income assessment in calculating the First Respondent's affordability as he qualified for a loan on his own individual assessment. The Appellant submitted therefore that there was no need to assess the household affordability or even require proof of the income thereof. It was further submitted that even if the loan was granted based on the household income assessment (of which it was submitted that it was not), there was no evidence or affidavit presented by the consumer that suggested that his household income disclosed prior to signing the credit agreement, was not true. It was submitted therefore that the court a quo erred in not accepting that the First Respondent had an additional household income of R5 000.00.

[11]

The...