This article is meant as an overview of the general debt collection process for recovering monetary claims. Please consult your attorney for further information in this respect.. The scenario illustrated in this article relates to what is commonly regarded as a “debt collection matter” in that an ascertainable and fixed amount of money is owed to a client (“the Creditor”) by a customer or client (“the Consumer”) as a result of non-payment of an invoice or account.

It is a well know fact of the credit industry that the earlier a Consumer is red flagged and handed over for debt recovery, the greater the potential is for a successful recovery, having regard that statistically the probability of a full recovery reduces significantly over time.

Once a Creditor has obtained a civil judgment against a Consumer for payment of a sum of money (“the judgment debt”), the Creditor is referred to as the “Judgment Creditor” and the Consumer is referred to as the “Judgment Debtor”.

The legal proceedings relating to the recovery of a judgment debt in South African law, is, strictly speaking, limited to either:

  1. The attachment and sale of the judgment debtor’s movable and/or immovable property by means of a Warrant of Execution and Sale in Execution; or
  2. The attachment of the judgment debtor’s salary or wages in instalments by means of an Emoluments Attachment Order (often referred to as a “Garnishee Order” by paymasters).

Ancillary to the aforesaid, certain Creditors may have further remedies available to them that may be exercised in various circumstances, such as:

  1. perfecting a Landlord’s Hypothec over a tenant’s goods by means of an Automatic Rent Interdict Summons or Attachment Application;
  2. the eviction of a defaulting tenant;
  3. the attachment of a lump sum or commission known to become due to a Consumer at a future date;
  4. the immediate sale of immovable property secured by a bond; or
  5. the perfection a notarial bond registered over the movable assets of the Consumer.

Other than the above formal methods of collecting debt, most attorneys have recognised the need to meet industry demands by utilising more dynamic approaches to debt recovery, such as the use of what has been termed “pre-legal” procedures.

Pre-legal procedures typically include the use of inexpensive technology such as e-mail, cell phone messaging (sms) and telephone calls, or the use of letters of demand, letters, faxes and personal visits to solicit payment, resulting in a more holistic approach to debt recovery process.

Pre-legal procedures also offer a consumer who is experiencing financial difficulties, with an opportunity to negotiate a settlement in instalments and is an extremely effective method of recovery if managed properly.

Lack of payment is typically only as a result of one of two factors: Either a Consumer is unable to pay the debt in a single instalment due to over-indebtedness, or s/he may have a dispute regarding the matter.

In both these instances, the use of pre-legal procedures may provide the Consumer with an opportunity to either make an offer to settle the balance owing in instalments or voice a dispute that may be resolved with the Creditor without having to institute legal action.

Both these instances potentially result in a legal costs saving for the Creditor and depending on the method used to secure the instalments, the Creditor’s legal position may be vastly improved by securing the means to a more effective recovery in the event of a Consumers failure to pay an instalment.

It could for instance place the Creditor in a preferential position to recover legal costs from the Consumer on a scale higher than he would be entitled to without a preceding written agreement regulating their business relationship and further secures the Creditor’s interest entitlement either at the legal rate of 15.5% per annum or at the agreed rate in terms of a prior written agreement.

The agreement allowing the Consumer to pay instalments normally takes the form of a written agreement such as an Acknowledgement of Debt, Consent to Judgment in Instalments and/or Offer to Pay in Instalments, which gives effect to the instalment arrangement and secures the Creditors rights to recover interest and legal costs.

Due consideration should also be given to the use of a formal legal demand preceding the institution of legal action, having regard that a legal demand secures a Creditor’s interest entitlement at the legal rate of 15.5% from the date of demand, even in the absence of an agreement to pay interest.

The Court’s have condoned the use of pre-legal procedures in terms of case law, by allowing the recovery of certain pre-legal costs from a Consumer, even in the absence of agreement.

Should the pre-legal procedure be unsuccessful, it is always open to the Creditor to instruct his/her attorney to proceed with the institution of legal action.

Before legal action is instituted though, care should be given to the provisions of Section 129, as read with Section 130, of the National Credit Act No. 34 of 2005, in terms of which it may be necessary for the Creditor, or his/her attorney, to issue a mandatory notice to the Consumer before any legal steps may be taken.

For more information regarding the content of this article, please contact our offices on +27 41 396 9224.