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Article by listed attorney: Fawzia Khan

Section 129 of the National Credit Act compels every credit provider, e.g. the bank, to send a letter to a customer who is in arrears with his payment, drawing the default to the notice of the customer. This notice must be sent to the address which the  customer has indicated in the agreement, as being his chosen domicilium. Should the bank not follow this step, it cannot institute any legal action against the defaulting customer.


What happens however, when the bank has proof it sent the notice, but the customer says he did not receive it? Sadly for consumers, the courts interpreted Sections 129 and 130 in the NCA as simply a requirement to despatch the notice, regardless whether the debtor received the notice or not. In 2010 the Supreme Court of Appeal, in Rossouw and Another v Firstrand Bank Ltd, confirmed this position.

In June 2012 this changed when the Rossouw decision was challenged in the Constitutional Court, on the basis that it was in conflict certain provisions of the Constitution. The couple that took their matter to the Constitutional Court had a home loan with the bank. They then fell into arrears with their bond repayments. A notice was sent by registered mail to their post office box. The bank later issued summons against the couple and asked for an order declaring their immovable property “executable”. The bank obtained default judgment and a writ of attachment on the property. The couple said this was the first time when they became aware of the judgment. The couple brought an application for rescission of the default judgment and said they never received the notice because the postal services diverted the notice to the wrong post office. Even though it was accepted by the courts that the letter never reached the couple, both the High Court and Full Court refused to grant the rescission application. Finally the couple approached the Constitutional Court for relief. Three organizations namely the Socio-Economic Rights Institute of South Africa, the National Credit Regulator, and the Banking Association of South Africa, were admitted as friends of the Court and all made submissions to the Court. After hearing all arguments, the Constitutional Court found in favour of the consumer and granted the couple the application for leave to appeal and rescission of the default judgment. Good news for the consumers is that this ruling has changed the way in which the issue of the notices are to be now dealt with and how the courts are required to interpret Section 129 and 130 of the NCA.   

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