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The CDC (Covid-Debt-Collection) of Arrear Accounts
05 August 2020  | Dries Knoetze | Views: 47
With South Africa feeling the full force of the Covid-19 pandemic, it is now clear that the world as we know it prior to Covid is far but a distant memory and that there is no clear indication as to when things will go back to normal, if ever.

Many South Africans have not only been victims to the virus, but faces economic distress due to amongst others, retrenchments, pay-cuts and the challenges of working from home.

Although various financial institutions like First Rand Bank, and banks alike, has implemented what they called "payment holidays" in an attempt to assist the consumer with their struggles, the everyday Joe on the street, is facing serious cash flow issues, which is leading to consumers prioritising their credit obligations and choosing which creditor to pay this month, is becoming a new norm.

The same pressure being felt by the Joe on the street is being felt by the High Industry suppliers as their statements and invoices and credit notes are not being paid, as most of the consumers are more focused on their cash flow as in relation to their obligations to pay for services rendered and parts supplied.

During this time I have heard various persons indicating that as a result of Covid-19 and the Nationwide Lockdown they, the consumer, are not obligated to pay their accounts, which is not the case in all circumstances.

Due to this reasoning I decided to read up on what a High Industry suppliers can do to collect their debt during Covid-19 and belief that the following tips as indicated by BIERENS DEBT RECOVERY LAWYERS may be of assistance.

The steps as indicated above are the following:

  1. Ensure written confirmation of your claim:
    Engage with your client to establish whether the consumer is able to pay any amount, as payment at this stage will ensure that the consumer’s liability cannot be disputed at a later stage.

  2. Attempt to resolve all disputes:
    As a result of the pandemic cash flow will become a huge issue not only for the average Joe but also the corporate client. The challenges are yet to come as South Africa is heading for an enormous economic recession. Rather engage with the debtor and accept a down payment arrangement or a lesser amount as to attempt to prevent legal battles at a later stage, which will cause a further constraint on your cash flow.

  3. Investigate the reason for non-payment or postponement of payment:
    As indicated above you will find some Consumers playing the Corona Card and often by debtors who are still fully operational. It is advisable to ask the debtor to provide you with documents to enable you to do a financial inquiry to establish if the debtor can or cannot meet its financial obligations. Logic dictates that a debtor who could not service his accounts prior to Lockdown cannot claim that lockdown was the reason why he/she/it cannot service his accounts now.

  4. Be aware of creditor agreements and companies splitting up into viable and non-viable parts:
    Various companies under financial difficult times open other companies in an attempt to move assets from the old financially struck company to the new company to prevent collection of the debt. Keep investigating the debtor and follow up, you will soon be able to establish whether collection is viable or not.

  5. Credit rating is a lot more difficult:
    Remain in contact with your debtor and carefully monitor his situation on a daily or weekly basis.

  6. Demand additional Securities:
    If the debtor cannot meet the payment agreement, investigate securities i.e. third-party pledging claims.

  7. Make use of retention of title:
    Retain the goods currently in your possession until your arrears account has been settled.

  8. Is an appeal to force majeure applicable?
    There is no question of force majeure if there is a reasonable alternative available.

  9. Be transparent on matters you cannot guarantee:
    Communication is key, Do not make guarantees which you will not be able to fullfil.

  10. Contract the jurisdiction of the appropriate court:
    Ensure that your contracts make provision for the parties to agree to a lower court’s jurisdiction in order to save costs of litigation. The rule of thumb in these uncertain times is to rather negotiate with your debtors as this pandemic has had a devastating effect on the case flow management of the courts in general. Prior to the pandemic the court systems were under pressure with backlogs and overloading and  as such this pandemic will cause serious delays in adjudication of matters.
Should you wish to settle with the debtor, you should however obtain the services of a legal professional in order to draft a settlement agreement, should the debtor fail to comply with the agreement.

Until next time.


Tags: #covid19
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