I ‘Notice’ You ‘Noticing’ Me: A Critical Analysis of the Section 129 Notice of the National Credit Act, and Recommendations for the Implementation of a ‘Specialised’ Foreclosure Notice

• Date: 22 October 2021
• Citation: (2021) 33 SA Merc LJ 56
• Published date: 22 October 2021
• Pages: 56-88
• DOI: https://doi.org/10.47348/SAMLJ/v33/i1a3
• Author: Singh, C.

56

https://doi.org/10.47348/SAMLJ/v33/i1a3

* LLB LLM PhD (UKZN).

I ‘NOTICE’ YOU ‘NOTICING’ ME:

A CRITICAL ANALYSIS OF THE SECTION129

NOTICE OF THE NATIONAL CREDIT ACT,

AND RECOMMENDATIONS FOR THE

IMPLEMENTATION OF A ‘SPECIALISED’

FORECLOSURE NOTICE

CIRESH SINGH*

Attorney of the High Court

Abst rac t

Section 129 of the National Credit Act provides that a creditor may not

commence any legal proceedings to enforce a credit agreement before

rst issuing a section 129(1)(a) notice to the debtor. us, in a foreclosure

context, should a mortgagee wish to enforce a mortgage agreement, he

must rst comply with section 129(1) and deliver a section 129 notice

to the mortgagor. Should this not be done, any ensuing foreclosure

proceedings could potentially be excipiable. Accordingly, section 129

has been described as the gateway to litigation and compliance with

this section is paramount for debt enforcement. Unfortunately, section

129 has been the subject of much criticism and uncertainty due to

its ambiguous wording and the resulting interpretation. Much of the

uncertainty relates to the way in which the notice must be delivered and

the contents of the notice. With specic regard to foreclosure proceedings,

section 129 fails to alert the debtor about his rights and remedies and fails

to notify the debtor of the full consequences of foreclosure. Consequently,

the section has been amended several times. Unfortunately, the

amendments have not resolved all the loopholes in section 129,

and some of these amendments have created more uncertainty and

ambiguity. Case law has, however, provided some direction as to the

interpretation of section 129. Despite the amendments and case law

developments, uncertainty still exists, and clarity is urgently required

in relation to the interpretation and application of section 129 during

foreclosure proceedings. It is accordingly suggested that certainty can

only be achieved by implementing a specialised ‘foreclosure notice’.

Keywords: foreclosure, credit agreement, default notice, mortgage,

reinstatement

(2021) 33 SA Merc LJ 56

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I ‘NOTICE’ YOU ‘NOTICING’ ME: A CRITICAL ANALYSIS

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I INTRODUCTION

e National Credit Act 34 of 2005 (NCA) regulates most credit debt

enforcement proceedings and directly applies to mortgage debt enforce-

ment — otherwise known as foreclosure in South Africa.1 Before the

coming into operation of the NCA, the credit industry was regulated

by the Usury Act 73 of 1968 and the Credit Agreements Act 75 of 1980.

is legislation was largely creditor-orientated and provided limited

debt relief mechanisms to an over-indebted consumer. e introduction

of the NCA added a new dimension to credit debt enforcement as the

Act sought to curb the unregulated and harsh exercise of creditor rights

and created a realm of protection for debtors by levelling the playing

eld between the contracting parties.2

e NCA provides debtors with a framework which was previ-

ously non-existent in South African credit law. e NCA aords debt-

ors a chance to mediate, negotiate, rearrange, and resolve conicts with

creditors. is framework introduced a unique system of debt relief into

South African law by way of the debt review mechanism3 and the right

to debt reinstatement.4 Section 129 of the NCA is one of the measures

1 e word ‘foreclosure’ is not dened in South African law. e term ‘foreclosure’ is a

generic term used to describe the process in which a mortgagee enforces a mortgage agree-

ment by executing against the hypothecated immovable property where a mortgagor fails

to meet his mortgage bond repayments. e term ‘foreclosure’ will be used in this article

to describe the process in which the mortgagee enforces its security rights against the

mortgagor’s home.

2 See s 3 of the NCA which states that the purpose of the NCA is to, inter alia, promote

equity in the credit market by balancing the respective rights and responsibilities of credit

providers and consumers. See also Boraine & Renke, ‘Some practical and comparative

aspects of the cancellation of instalment agreements in terms of the National Credit Act

(Part 1)’ (2007) 40(2) De Jure 222; Govender & Kelly-Louw, ‘Delivery of the compulsory sec-

tion 129(1) notice as required by the National Credit Act 2005’ (2018) 21 PELJ 1 at 3.

3 is paper is not intended to provide a detailed exposition of debt review. For an anal-

ysis of the debt review procedure, see Van Heerden & Coetzee, ‘Debt counselling v debt

enforcement: Some procedural questions answered’ (2010) 31(3) Obiter 756; Van Heerden

& Coetzee, ‘Perspectives on the termination of debt review in terms of section 86(10) of the

National Credit Act 34 of 2005’ (2011) 14(2) PELJ 37; Roesto, Haupt, Coetzee & Erasmus,

‘e debt counselling process — closing the loopholes in the National Credit Act’ (2009)

12(2) PELJ 247; Otto, ‘Over-indebtedness and applications for debt review in terms of the

National Credit Act: Consumers beware! Firstrand Bank Ltd v Olivier: Case comments’

(2009) 21(2) SA Merc LJ 272.

4 e right to reinstatement provided for in s 129(3) will be discussed in part IV of this

paper. For an analysis of the right to reinstatement, see Steyn & Sharrock, ‘Remedying mort-

gage default: Nkata v FirstRand Bank Ltd’ (2017) 134(3) SALJ 498; Brits, ‘e “reinstatement”

of credit agreements: Remarks in response to the 2014 amendment of section 129(3)–(4)

of the National Credit Act’ (2015) 48(1) De Jure 75; Brits, ‘Purging mortgage default: Com-

ments on the right to reinstate credit agreements in terms of the National Credit Act’ (2013)

24 Stell L R 165; Scholtz et al, Guide to the National Credit Act (LexisNexis 2009) (loose-leaf)

12.10; and Brits, Coetzee & Van Heerden, ‘Re-instatement of credit agreements in terms of

the National Credit Act 34 of 2005: Quo vadis?’ (2017) 80(2) THRHR 177.

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58 (2021) 33 SA MERC LJ

specically put in place by the legislature to enhance consumer protec-

tion.5 Section 129 provides that if the consumer is in default under a

credit agreement, the credit provider —

‘(1)(a) may draw the default to the notice of the consumer in writing and

propose that the consumer refer the credit agreement to a debt counsel-

lor, alternative dispute resolution agent, consumer court or ombud with

jurisdiction, with the intent that the parties resolve any dispute under the

agreement or develop and agree on a plan to bring the payments under the

agreement up to date; and

(b) subject to section 130(2), may not commence any legal proceedings

to enforce the agreement before—

(i) rst providing notice to the consumer, as contemplated in

paragraph (a), or in section 86(10), as the case may be;

(ii) meeting any further requirements set out in section 130.

…

(3) Subject to subsection (4) a consumer may at any time before the

credit provider has cancelled the agreement, remedy a default in such

credit agreement by paying the credit provider all amounts that are over-

due, together with the credit provider’s default administration charges and

reasonable costs of enforcing the agreement up to the time the default was

remedied.’

Accordingly, it is submitted that the purpose of section 129 is not only

to inform the debtor of his default, but also to notify the debtor about

several remedies available to him under the NCA. e debtor’s remedies

include the right to apply for debt review in terms of section 86 and the

right to reinstatement in terms of section 129(3) of the NCA. One of

the main advantages of debt review and reinstatement is that it places

a moratorium or freeze on debt enforcement proceedings. Debt review

provides the debtor with a mechanism to rearrange his debt obligations

to aordable monthly instalments in terms of a court-approved debt

restructuring order. Importantly, while a debtor is under debt review,

a creditor is prohibited from enforcing any debt enforcement rights

arising out of the credit agreement.6 On the other hand, reinstatement

allows the debtor to cancel the eect of all debt enforcement proceedings

taken against him by his creditor upon settlement of the full outstand-

ing arrears and other default administrative charges. In other words,

once a debtor pays the outstanding arrears and default administrative

costs on his account, his record is wiped clean, and any legal proceed-

ings taken against him are cancelled and of no force and eect.

5 See Govender & Kelly-Louw, (2018) 21 PELJ 1 at 2.

6 See ss 80 and 88 of the NCA.

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