1. Historical review

I.I Over the last decade there has been a boom in the growth of industries

which service the need of those sectors of society, who were previously to

a greater extent excluded from the services provided by traditional

lending institutions. The majority of these individuals are of the lower

income group. Over and above the easier obtaining of loans the

purchasing of goods on credit by previously disadvantaged people has

become more prevalent. Although the granting of credit has an important

place in our economy, the fact that credit and loans are granted to a vast

majority of the country's work force in the lower income bracket, led to

the inevitable scenario that individuals who historically were

disadvantaged and not used to managing finances, end up in debt. Once

in a debt spiral it is often very difficult to reverse the situation with the

result that creditors do not get paid.

The South African Law Commission in its report on debt collecting inter

aha stated:

" Par. 1.7: From the evidence it was clear that the amounts of money

owed to creditors by debtors who fail to pay, as well as the number of

debtors, had begun to take on enormous proportions in South Africa. It

was emphasized to the Commission that a culture of defaulting was

developing and that the large amounts of uncollected debts had a negative

effect on the economy and ultimately the rate of inflation. According to

the evidence the existing culture of default was aggravated by factors such

as unemployment, an unfavourable economic climate, the ease with which

credit could be obtained and the low deterrent value of statutory

provisions aimed at curbing debt by debtors"

1.2 As it is not objectionable for a creditor to expect of a debtor to pay his

debts, creditors more and more turned inter alia to debt collectors to collect

their debts for them and it is not surprising that having identified a huge

potential market, more and more persons started offering their services as

debt collectors.

1.3 Debt recovery agencies as extra-judicial institutions involved with the

recovery of pre-judgment debts serve as an alternative to the judicial

recovery of debt. However, as a result of the profession being unregulated

the Department of Justice and Constitutional Development (the

Department) received many complaints from members of the public that

debtors were allegedly frequently charged with extravagant fees from

private intermediaries for payment of their debts and that certain persons

who acted as debt collectors make use of unacceptable means to collect

debts on behalf of their clients. This situation, which affected mostly the

poorest people who lack capabilities to access the justice system, has not

only been acknowledged by the SA Government but also by the debt

collectors' profession themselves. As a result a recommendation by the

South African Law 'Comn•ussion that legislation be adopted to establish

control over the activities of debt collectors was accepted and the Debt

Collectors Act, No. 114 of 1998 was passed by Parliament. The Council for

Debt Collectors is not a regulatory body which has been forced onto debt

collectors, but a body which the majority of debt collectors wanted


1.4 The Act provides for the exercise of control over the occupation of debt

collectors and to legalize the recovery of fees or remuneration by

registered debt collectors. In the past a debt collector was not entitled to

legally recover any amount from a debtor.

1.5 The overall goal with the Act is to transform the debt collection system in

South Africa by monitoring the conduct and professionalism of debt

collectors and promoting a culture of good governance within the

profession, thus contributing to protecting the public at large as well as


1.6 The monitoring and regulatory mechanisms aimed at exercising the

effective management of and control over debt collectors and its

functionaries have been entrusted to a self-sustaining body, namely the

Council for Debt Collectors. The Council consists of a chairperson, a

magistrate, an attorney, four debt collectors, one person representing

consumer interests and two additional members. The present metnbers of

the Council are:

(i) Adv.JJNoeth(S.C) -Chairman

(ii) Mr R Mandelstam - a Magistrate

(iii) Mr H van Rooyen - nominee of the attorneys

(iv) Mr E Joubert, mr S Metisa and mrs R Ferreira- debt collectors

appointed in terms of section 3(2)(iii).

(v) Mrs Y Kwinana - appointed by the Minister in terms of section


(vi) MrsIWilken - appointed in terms of section 3(2)(v) as

representative of consumer interests.

At present there are two vacancies left by Adv. GCM Masemola and

mr CJ Senzani.

1.7 Although the Council for Debt Collectors was finally established in 1998

and the members of the Council appointed in 2000, the Council, due to the

unavailability of funds, was not able to start operating. Whilst the

Department recognized the importance of the Council, it was not in a

position to allocate funding to support the establishment of the Council

and negotiations were started to obtain funds from a donor.

1.8 Due to the efforts oTAdv. JJ Noeth S.C, the present Chairman of the

Council, mr. E Joubert, a member of the Executive Committee and the

support of the Department, the Swiss Agency for Development and

Cooperation, during August 2002, agreed to provide the initial funds to

enable the Coundi to commence with its operations. The first payment

amounting to R800, 000.00 was made in August 2002, followed by a

second payment of R600, 000.00 in December 2002. After the Council

provided the Agency with a certified statement of expenditure and an

audited financial statement for the period I August 2002 to 31 July 2003,

the third and last payment of R147 370.00 was received. A final narrative

report and a certified statement of expenditure for the entire project

period, I August 2002 till July 2004 has to be submitted to the Swiss

Agency at the end of July 2004.

2. Activities of the Council since I November 2002

2.1 During October 2002 the Council appointed an Acting Executive Director,

mr. OA de Meyer to set-up offices, create the necessary infrastructure and

to manage the office. He assumed duty on I November 2002. Once the

exact requirements for the position can be established from the workload,

the post will be advertised and filled on a permanent basis.

2.2 A secretary, me Lulekwa Morgan and systems manager, me Ronelle

Coetzer were appointed with effect from I November 2002 and 2 January

2003, respectively. The Council also appointed me Lillian Mabaso as a

general assistant with effect from 2 January 2003.

2.3 The Council's offices were furnished with good and practical second-hand

furniture, which were purchased at a very reasonable price. The telephone

lines and e-mail facilities for communication were installed. The Council

also installed a computer and electronic equipment to handle the

registration of debt collectors. The Council decided against the handling

of money at its office and encourages applicants to make payment of the

prescribed fees directly into the Council's bank account. The Regulations

have also since been amended to give effect to the Council's decision.

2.4 Since funds became available the Council lost no time to become

operational and was able to recommend to the Minister of Justice and

Constitutional Development (the Minister) to put the Act into operation.

This was done with effect from 7 February 2003. Regulations to achieve

the objects of the Act were also promulgated simultaneously with the

putting into operation of the Act.

2.5 Debt Collectors were given until II August 2003 to register. After that

date no person, excluding an attorney or an employee of an attorney or a

party to a factoring arrangement may for reward collect debts owed to

another on the latter s behalf. An unregistered person who for reward

collects debts owed to another on the tatter's behalf commits a criminal

offence for which he or she can be prosecuted.

2.6 The existence of the Council was brought to the public's attention by way

of press releases by the Minister and the Chairman of the Council. The

Chairman also took part in several discussion programs on the radio and

television. The Minister also at the request of the Council printed the first

registration certificate and the press who were present reported thereon.

The Act and Regulations are also available on the Council's website.

2.7 A code of conduct was adopted by the Council and published in the

Gazette on 16 May 2003. The code which is available on the Council's

website is binding on all registered debt collectors. It is expected of all

registered debt collectors to honour the letter and spirit of the Code of

Conduct. Non-compliance with the provisions of the Act, Regulations and

the Code of Conduct can result in a debt collector being found guilty of

improper conduct. If found guilty an appropriate sentence will be

imposed, which can if justified be the withdrawal of the debt collector's


2.8 The Council as a self-sustaining body must generate its own funds and is

in all respects a business. The Council must inter alia carry the costs for

having its property insured and pay VAT, Regional Services Council levy

and contribute to UIF, Workmen's Compensation and the Skills

Development Levy. The Council also had to apply to be exempted from

paying Income Tax. The Council's only source of income is the fee

payable on registration and thereafter the compulsory annual subscription

fee a registered debt collector has to pay.

2.9 To prepare a budget is not very easy, especially when one had to budget

for an organization like the Council, which had to start from nothing and

not knowing beforehand how many debt collectors would register.

Although some items could be determined with some measure of

accuracy, the Council had no real indication of what the costs of setting up

a Council, creating infrastructure and the running administration costs

would be. The Council as a result had to be very careful as to how-

available funds were spent. This is borne out by the fact that the Council

started of with only two staff members. In January 2003 a further two (2)

staff members were appointed. As from I August 2003 the Council also

appointed a legal assistant, Adv. Elizabeth Nieuwoudt, to investigate

complaints received .from the public and to lead the evidence at

disciplinary hearings. An accounting officer, me A. Smith has also been

appointed on a part-time basis. Had it not been for this conservative

approach and the dedication of the staff to their tasks, the Council would

not have been able to become fully operational with the limited funds

available to it.

2.10 During the beginning phase it was important for the Council members to

meet more often. All applications to register had to be approved by either

the full Council or the Executive Committee. As it was too costly for the

full Council to meet for this purpose on a regular basis the Executive

Committee had to consider the applications. The Executive Committee is

to be thanked for their dedicated efforts to deal with applications speedily.

2.11 As the debt collectors' profession had in the past not been regulated a

reliable figure of the number of persons in the profession was not readily

available to Council. A figure of between 10 000 and 20 000 was, however,

mentioned. To be on the safe side the Council's planning was based on a

figure of 10 000. As the Act legalized the recovery of certain fees and

expenses by a debt collector from the debtor, it was expected that this

would serve as an incentive for persons to register soon after the Act had

been put into operation. This did not materialize and by the 20th of May

2003 (more than 3 months after the Act came into operation) only 217

certificates of registration had been issued. When it became obvious that

the 10 000 originally envisaged will not register, the Council realized that

it will be unable to meet its future commitments with the funds that

would be available. The situation compelled the Council to consider

requesting the Minister to increase the fees payable by debt collectors. The

expert advise of an outside consultant was obtained to advise the Council

whether an increase was justified and if so what the increase should be in

order to keep the Council in a sound financial position. Notwithstanding

the expert's advice that an increase was due and inevitable the Council

delayed the increase for dedsion until after the final registration figures

on II August 2003 were available. After it was known how many debt

collectors registered the Council had no option other than to request the

Minister to increase the fees. The fees were increased with effect from 7

November 2003. In the case of a company, close corporation or trust the

registration fee and annual subscription fee are Rl 500.00, respectively.

For directors of companies, members of close corporations and trustees it

is R600.00. Officers of companies and close corporations and natural

persons must pay a registration fee of R400.00 and an annual subscription


2.12 As the news of a likely increase in the fees spread and debt collectors

realized that the cut-off date would under no circumstances be extended,

there was a dramatic increase in the number of applications to register. By

the 15th of August 2003,4310 debt collectors had been registered. The bulk

of these applications reached the Council during the final four weeks of

registration. Notwithstanding the severe stress the staff of four (4) and the

Executive Committee were placed under they ensured that all applications

which were received by the Ilth of August were duly considered by the

Council on that date before the Council's offices closed that evening. The

Council can justifiably be proud on what has been achieved with such a

small staff and limited resources.

2.13 Since the Ilth of August 2003 die Council still received a steady stream of

applications. It is surprising how many new-comers applied for

registration with the assistance of the Council's staff. In this manner the

Council contributed to job creation. The number of registrations approved

till 29 February 2004 stood at 6580. The following is a breakdown of this


Number of companies registered : 119

Number of close corporations registered: 361

Number of trusts registered : II

Number of directors registered : 268

Number of members registered : 538

Number of trustees registered : 18

Number of partnerships and sole

proprietors registered : 402

Number of officers of companies, close

corporations and employees registered : 4863

2.14 In 16 cases the applications to register were refused. The most common

reasons for refusal were incomplete application forms, failure to provide

the Council with particulars of a trust account or failure to pay the

prescribed registration fee. In all cases the applicant was given an

opportunity to rectify what was wrong, but failed to do so. A number of

applicants withdrew their applications after it was pointed out to them

that they were disqualified in terms of section 10 of die Act to register as

debt collectors.

2.15 In 4 cases the certificates of registration were withdrawn. The reason

being that the debt collector failed to pay the annual subscription fee after

being requested to do so.

3. Complaints by members of the public

3.1 The office of the Council is approached on a daily basis by members of the

public who either seek information or have a complaint. They can be

divided into the following categories:

3.1.1 Persons who only want to know whether a specific person is

registered or what a debt collector may or may not do.

3.1.2 The next category of persons, are those who are under the

erroneous impression that the Council can assist them with their

debt problems or disputes with creditors.

3.1.3 Another category, are those who have a complaint. The complaint,

however, does not concern a debt collector over whom the Council

has jurisdiction. It is complaints concerning attorneys who collect

debts or business entities who collect their own debts. As these

instances are exempted from registering as debt collectors, the

Council cannot investigate the complaints. The complainants are,

however, referred to the appropriate authorities who may be able

to assist.

3.1.4 The fourth category represents those people who have a complaint

against a registered debt collector. However, upon being informed

that the person should lodge a complaint in writing which must be

under oath as required by the Regulation, some complainants elect

not to pursue the matter any further.

3.1.5 The fifth category is those people who lodge a formal complaint

which complies with the Regulations. These complaints are

immediately fully investigated. Up-to the end of February 2004 the

Council received 24 complaints against registered debt collectors.

In Z cases the Council, after investigation, was satisfied that the

debt collector could not be faulted and that a charge of improper

conduct was not justified. In a few instances the Council found that

although the actions of the debt collector could be criticized, the

Council regarded it a case of de minimus non curat lex. In such cases

the complainant and debt collector concerned are informed of the

Council's decision. Guidance is given to the debt collector and he or

she is informed that a repetition could lead to him or her being

charged with improper conduct. So far it has only been necessary in

one instance to charge a debt collector with improper conduct. The

matter is still pending. Ten (10) complaints are still being


3.2 From the number of complaints the Council receive against persons not

being debt collectors in terms of the Act, it appeared that persons not

falling under the jurisdiction of the Council were making themselves

guilty of exactly that which the Debt Collectors' Act tries to prevent. A

meeting was consequently arranged with representatives of the Law

Society of the Northern Provinces. At this meeting it was decided that the

Council's Code of Conduct should be made applicable to attorneys who

do debt collecting. The representatives of the Law Society undertook to

pursue the matter further.

3.3 The Chairman of the Council and mr. Joubert, a member of the Executive

Committee also met with the Executive Director of the Consumer Credit

Association to discuss the complaints the Council receive regarding

business entities who collect their own debt. As a result of this meeting the

President of the Consumer Credit Association undertook to investigate

the possibility of making the Council's Code of Conduct also applicable to

members of his Association. It has also been agreed that complaints

against members of the Association will be forwarded to the Association

who will investigate such complaints.

3.4 If the Council's efforts in this regard succeed it will to a great extend make

the playing-field between registered debt collectors and others who also

do debt collecting more equal. It can also only be to the benefit of the

general public.

4. Unregistered debt collectors

4.1 In terms of the Debt Collectors Act, 1998 any person who after Ilth August

2003 for reward collects debts owed to another on the latter/s behalf and

who is not registered in terms of the Act, commits a criminal offence and

can be prosecuted. Such cases have to be reported to the SA Police


4.2 Whenever a member of the public or a registered debt collector brings it to

the Council's attention that an unregistered person is collecting debts,

they are advised to report the matter to the police and to provide the

Council with the necessary information in writing. The Council in cases

where the matter has been reported to the police, liases with the

investigating officer to ensure that the matter is investigated. Although

some persons are prepared to personally lay a charge with the police, it is

the experience of the Council that in most cases the person who contacts

the Council elects to remain anonymous or is not prepared to get involved

by laying a charge. What is surprising is the unwillingness of some

registered debt collectors to take an active part in the policing of

unregistered debt collectors and to lay charges against them. Whilst it is

the Council's aim to bring everybody under the umbrella of the Act, it

cannot act on vague allegations. Where the Council is placed in possession

of sufficient information the Council acts out of its own accord to lay

charges with the police. At present 9 such cases are under investigation by

the Police. A number of instances also registered after being contacted by

the Council.

5. The Council's vision for the future

5.1 Now that the registration process has been completed successfully, the

Council will concentrate on the main objective of the Act, namely to

protect the public by exercising proper control over the occupation of debt

collectors. The Council should also make sure that debt collectors who do

not register are prosecuted. The Council realizes that the transformation

process of the debt collectors' profession is a long term process. It is also

mindful of the fact that if it is unable to effectively monitor and exercise

control over the debt collectors' profession, the objective of the Act will

not be achieved. Complaints will have to be dealt with without undue

delay and where justified disciplinary action will have to be taken. The

investigation of complaints and disciplinary hearings will bring huge

costs for the Council. As this is still early days, it is very difficult at this

stage to establish with any certainty what the costs of investigating

complaints and the hearings are going to be.

5.2 To achieve the future objectives of the Council, the Council will inter alia

have to embark on an advertising campaign to inform the public of the

Council's objective. This will be costly. Although members of the public

contact the Council on an almost daily basis, it will increase as the public

becomes more and more aware of the Council's existence and objectives.

5.3 The Council also has a duty towards the profession and in order to

promote professionalism amongst debt collectors the Council will have to

assist in the training and empowerment of debt collectors. This is

especially so in the case of new-comers to the industry, many of whom

come from the previously disadvantaged sector of the population. The

funds available will, however, dictate to what extend the Council will be

able to do so during the coming year.

5.4 It should be borne in mind that with the registration process the Council

received double payments in respect of each successful registration. In

future the majority of the funds will be coming from the annual

subscription fees only. Because most debt collectors waited until the last

moment to register, the Council will for the first months of the financial

year have little income. The Council's budget for die year 2004 / 2005 was

drafted in the light of the actual expenses during the present financial year

and expected expenses during the next financial year. In drafting the

budget only income that can be expected from current registered debt

collectors was taken into account. Certain expenses had to be estimated,

for example expenses for disciplinary hearings and the investigation of

complaints. The Council should after two years be in a much better

position to draft a more accurate budget when comparable figures of the

past and tendencies are available. By following a very conservative

approach in drafting a budget, the income should be sufficient to cover

the expenses without having to make use of outside or reserve resources.

Signed at PRETORIA on this 3rd day of March 2004.

Adv. J J Noeth, SC Mr. 0 A de Meyer