The Statutory in duplum Rule as an Indirect Debt Relief Mechanism
| Jurisdiction | South Africa |
| Pages | 352-375 |
| Date | 25 May 2019 |
| Published date | 25 May 2019 |
| Author | Michele Kelly-Louw |
| Citation | (2011) 23 SA Merc LJ 352 |
The Statutory in duplum Rule as an Indirect Debt
Relief Mechanism*
MICHELE KELLY-LOUW**
University of South Africa
1 Introduction
In 2007 it was estimated that the size of the South African consumer-credit
market was some R800 billion.
1
At the end of June 2008 it was estimated that
consumers owed credit providers about R1,12 trillion in household debt.
2
Two
years later, at the end of June 2010, the total outstanding consumer credit
balances (or gross debtors’ book) was R1,15 trillion.
3
The number of
applications received for credit increased by 503,500 from 6,04 million in
March 2010 to 6,54 million in June 2010, representing an increase of 8,34 per
cent (an increase of 17,13 per cent when compared to the same period in
2009).
4
At the end of June 2011 credit bureaux had the records of 18,84
million credit-active consumers.
5
These statistics illustrate the sheer size of
the South African consumer-credit industry and show a steady growth in the
size thereof.
Consumer credit is an important part of today’s society. Credit can and
often does uplift the lives of consumers. For many consumers, being able to
obtain credit is the only way that they can afford to buy things, especially
expensive things such as houses, flats, land, motor vehicles and furniture.
Credit also allows consumers to pay for the cost of building their own home
or making improvements to their existing one. Consumers use credit to pay
for their consumables and necessities (clothing, food, fuel and utilities), as
well as for their own or their children’s tertiary education. Many types of
credit purchases are made on a regular, sometimes daily, basis. Therefore,
many consumers have credit cards, vehicle and asset finance, home loans,
personal loans, study loans, or clothing store accounts. However, making use
of credit is not without its drawbacks. For some consumers, mainly those in
* This article is based on my inaugural lecture as Professor of Banking Law in the Department of
Mercantile Law, delivered at the University of SouthAfrica in Pretoria on 6 October 2011.
** BIuris LLB LLM LLD (Unisa). Professor of Banking Law in the Department of Mercantile Law,
University of South Africa, Pretoria. e-Mail: kellym@unisa.ac.za.
1
See the National Credit Regulator’s Annual Report (2007) at 9, available at http://www.ncr.org.za
(last accessed on 1 September 2011); and M Kelly-Louw ‘The Prevention and Alleviation of Consumer
Over-indebtedness’ (2008) 20 SA Merc LJ 200 at 200. In this contribution, words in the singular also
mean in the plural and vice versa, and words in the masculine also mean in the feminine and neuter.
2
See the National Credit Regulator’s Annual Report (2008/2009) at 16, available at http://
www.ncr.org.za (last accessed 1 September 2011).
3
See National Credit Regulator’s Consumer Credit Market Report (Second Quarter) (June 2010) at 1,
available at http://www.ncr.org.za (last accessed 1 September 2011).
4
Ibid.
5
See Anon ‘Credit Activity Increases’ (20 September 2011) Legalbrief Today, available at
http://www.legalbrief.co.za (last accessed 22 September 2011).
352
(2011) 23 SA Merc LJ 352
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the low- and middle-income groups, the use of credit may actually worsen
their financial circumstances, particularly where reckless lending and/or
borrowing takes place.
6
In the late 1990s and early 2000s it became clear that the levels of
consumer over-indebtedness had spiralled out of control and that many
consumers, particularly consumers from the low- and middle-income groups,
were in a position where they could no longer properly service their debts.
7
The mechanisms for preventing over-indebtedness at that time were either
non-existent or ineffective. Providing debt relief to already over-indebted
consumers, for example by the granting of an administration order,
8
was also
hampered by the deficiencies of the available mechanisms, which were
limited in their operation, did little to assist already over-indebted consumers
and did not effectively promote their rehabilitation. The high levels of
over-indebtedness of consumers and the lack of proper mechanisms to prevent
and relieve over-indebtedness were some of the reasons why the National
Credit Act 34 of 2005,
9
fully in operation since June 2007,
10
was created.
11
The drafters of the National Credit Act (‘the Act’) went to great lengths to
incorporate in it a series of mechanisms aimed specifically at preventing
consumers of credit agreements from becoming over-indebted in the first
place. The Act introduced a whole range of direct
12
and indirect
13
measures
designed to prevent (a) possible overspending by consumers, and (b) credit
providers from granting credit to consumers who cannot afford to repay either
the credit (loan) amount or the interest payable thereon. These various
preventative measures are aimed at increasing the level of consumer
awareness regarding the risks associated with using credit, improving
6
See M Kelly-Louw ‘Consumer Credit’ in The Law of South Africa vol 5(1) 2 ed (replacement
volume) (2010) (WA Joubert (founding editor) and JAFaris (ed)) (hereinafter ‘Kelly-Louw LAWSA’)
par1atp4.
7
For a brief discussion for some of the reasons causing the high level of over-indebtedness, see
Kelly-Louw op cit note 1 at 203–206.
8
For a discussion of administration orders, particularly the problems experienced with this form of
debt relief, see A Boraine ‘Some thoughts on the reform of administration orders and related issues’
(2003) 36 De Jure 217 and A Boraine ‘The reform of administration orders within a new consumer
credit framework’ in Michelle Kelly-Louw, James PNehf & Peter Rott (eds) The Future of Consumer
Credit Regulation (2008) 187–216.
9
Act 34 of 2005. Hereinafter ‘the National Credit Act’or simply ‘the Act’.
10
See Proc 22 in GG 28824 of 11 May 2006 for the operational dates of the different sections of the
Act.
11
For a detailed summary of the various reasons why the National Credit Act was created, see
Kelly-Louw op cit note 1 at 203–7.
12
For example, the prohibition of reckless lending by credit providers (ss 78, 80–4).
13
For example, placing the duty to educate consumers about credit and credit rights (s 3(e)(i) and
s 16(1)(a)) on the National Credit Regulator (established in terms of s 12); including limiting and
prescriptive provisions regarding various forms and aspects of credit marketing and advertising
practices (ss 74–7), placing a duty on a credit provider to make proper disclosures of information (ss 92,
93 and 107-115), giving a consumer the right to receive information in plain, understandable and an
official language (which includes the credit agreement) (s63 and 64), and including provisions to
prevent high interest rates and other costs of credit (ss 100–7). For a discussion of the indirect measures
of the Act aimed at preventing consumer over-indebtedness, see Philip N Stoop ‘South African
Consumer Credit Policy: Measures Indirectly Aimed at Preventing Consumer Over-indebtedness’
(2009) 21 SA Merc LJ 365.
STATUTORYIN DUPLUM RULE 353
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