For the purpose of this article emphasis is placed on credit agreements which are not secured by mortgage bonds.

The very first aspect of formulating a cause of action by a credit provider against a consumer and in proving its case, is for the credit provider to allege and ultimately prove the terms of and the legal validity of the agreement.

Two sets of laws jointly regulate the determination of what the terms of the agreement are, namely:-

• The common law which is legal authority as to the basic principles whereby it must be determined what comprises an agreement which is valid and enforceable by law and whereby the terms of an agreement are ascertained. It essentially provides that an agreement requires a meeting of the minds of the parties thereto and a reaching of consensus between them;

• The National Credit Act which requires strict compliance with its requirement that the terms of an agreement which are invariably drafted in complicated legal terms, designed to deceive, mislead and confuse, must be explained as to its meaning, impact and consequences to a legally illiterate consumer to whom complex and technical legal terminology is materially incomprehensible. This requirement amplifies the common law requirement that the parties’ minds must have met – which is impossible when either the person representing the credit provider in the entering into the agreement with a consumer does not even endeavour to do so and if he / she did, he / she is legally unqualified to explain the terms to the consumer and the consumer consequently does not understand what he is about to agree upon.

In practice loans and variations thereof, whereby further credit is advanced from time to time, are entered into telephonically and such telephonic consultation/s is / are recorded mechanically, as the credit provider’s representative customarily advises the consumer at the commencement of the telephonic consultation/s. In practice, invariably, legal actions are based on a verbal agreement alleged to be recorded in a written document or a written agreement which requires the signature of both parties, annexed to the Summons, setting out elaborate provisions of the nature referred to above, which have not been drawn to the attention, let alone explained to the consumer at any stage. Under these circumstances the terms allegedly agreed upon do not even begin to meet the requirements of the common law and the National Credit Act, as a consumer cannot be said to have reached consensus with a credit provider on such terms under such circumstances.

It is, in almost all cases, alleged that the agreement relied upon had been mislaid or, as had been the case in respect of many actions instituted by ABSA, destroyed in a fire. In order to endeavour to overcome this difficulty, the credit provider annexes an “example” of the standard terms which it alleges applied.

This “example” relied upon is not the whole of the agreement and omits the variables / specific particulars which are stated to be applicable, which is the essential part thereof. The credit provider invariably does not state the basis on which it is alleged that the example of the agreement referred to is, in fact, a part of the agreement actually entered into and that this allegation is not based on speculation. The credit provider’s blank statement that it cannot locate the Application for Credit Card account is insufficient. The credit provider must allege and ultimately prove the full circumstances whereby it is unable to provide the true agreement in a manner which are legally acceptable as constituting admissible evidence in law, in the absence of which the agreement and the Court is / would be unable to verify that a copy of example of the agreement and the alleged reconstructed terms of the agreement (variables not recorded in the “example” annexed to the Summons) is indeed a true and correct version thereof and accordingly admissible as evidence to prove the true terms of the agreement.

In terms of the Court Rules, when a creditor institutes action based on an agreement, a copy of the agreement (it does not refer to an example of part thereof), if in writing, must be annexed to the Summons and it must be stated on which date, and at which place it was concluded and the name of the person who represented the creditor must be recorded. A failure to do so gives rise to the consumer to apply to Court for the agreement to be set aside on the basis that the issue of the Summons constitutes an irregular step or an Exception may be delivered on the basis that the Summons does not disclose a cause of action.

Ultimately, as already stated, all allegations in the Summons must be proved by the credit provider. This can only be done by the testimony of the person who represented the credit provider in the conclusion of the agreement. The question arises as to whether the credit provider has a record of who that person was, whether that person is still employed by it and if not, is willing and able to testify in the absence of any extraneous record identifying him / her as the qualified person and would be able to testify that the comprehensive terms of the agreement was brought to the attention of the consumer and more than that, that such terms were explained to the consumer, prior to the conclusion of the agreement and if he / she testifies that he / she did so, that he / she was legally qualified to have been able to render such explanation and if so, on what basis.

If the credit provider overcomes the hurdle referred to above, the next enquiry would be the extent to which it complied with the elaborate provisions of the National Credit Act and is able to prove such compliance. Any non compliance may result in a Court setting aside the agreement, whereby it would effectively be null and void. Should this be the case and the credit provider claims restitution of what had been performed in terms of the “void” agreement, namely repayment of the monies lent, without interest, it would have difficulty to do so, as invariably the voidness of the agreement had been occasioned by on unconscionable conduct on its part which would be penalized by legal prohibition to implement restitution.

Further articles will be forthcoming, dealing with the many hurdles that lies ahead once and if the credit provider has overcome the first hurdle, which includes aspects such as the setting aside of an agreement in respect of which a proper and detailed pre assessment of the financial qualification of the consumer to have qualified for the applicable credit was not done in accordance with criteria which are spelt out in the National Credit Act in detail and if done, that the consumer indeed so qualified and the basis upon which bank charges and interest had been calculated and that such calculations have been agreed upon with the consumer.

A further article will also deal with actions based on loans secured by Mortgage Bonds and the constitutional rights of the consumer to adequate housing.



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