The National Debt Collection Act 114 of 1998 is responsible for regulating the process of debt collection in South Africa.

Simply put - debt collection is when a credit provider, cessionary of book debt, attorney that is registered with the Law Society of South Africa, or a debt collector registered with the Debt Collectors Council, collects debt on behalf of the credit provider.

When clients fail to pay their accounts, the credit provider hands the account to the debt collectors who are tasked with collecting the money owed.

The debt collectors collect the outstanding amount plus lawful interest, admin costs and collection fees, which is by law capped to certain amounts. Debt collectors who are registered with the Debt Collectors council are allowed to charge for their services

Once an attorney receives instructions to collect a debt, they can either call, email, or SMS the debtor to inform them that their account has been formally handed over for collections. In this correspondence, the clients are informed that they have an option to settle their account but failure to do so will result with them being held accountable for legal costs.

Debtors that are not able to pay their debt in one all-inclusive payment are usually requested to sign an acknowledgment of debt. The purpose of this document is to assist the debtor with making payments in smaller installments and to regulate future payments.

When debtors do not comply with this acknowledgement by making late payments or no payments at all, it can lead to an attorney’s office having to call them, send them reminders, or to proceed in taking legal action against such a debtor with immediate effect.

It is important to note that section 1 of the National Credit Act defines a credit provider in respect of a credit agreement as follows:

1. An individual that supplies goods and services under a discount transaction, incidental credit agreement or instalment agreement
2. An individual that advances money or credit under a pawn transaction
3. An individual who provides credit under a credit facility
4. A mortgagee under a mortgage agreement
5. An individual that lends money under a secured loan
6. A lessor under a lease
7. An individual whom an assurance or promise is made under any other credit agreement
8. Any other individual who acquires the rights of a credit provider under a credit agreement after it has been entered into

Reference list:

National Credit Act 34 of 2005.

National Debt Collection Act 114 of 1998