law body tackles debt collection system  
10 March 2008   

 
The SA Law Reform Commission (SALRC) has made recommendations regarding the abolishment of administration orders.  The recommendations, to be considered by parliament, were handed to Justice Minister Brigitte Mabandla recently.  They are based on research conducted by the SALRC into anomalies in the debt collection and recovery industry.

Senior SALRC researcher Tienie Cronje said administration orders were carried out under the Magistrates' Courts Act, but the industry nevertheless had been left largely unregulated.  'We need as many people as possible to complete a questionnaire' In its review, the SALRC said there were several "abuses and practical problems" in the administration order system.

As a result, many poor people were left in debt forever.

In the course of the review of administration orders it became clear that many people are caught up in administration indefinitely because payments do not cover costs and interest on claims. "A provision is proposed that the orders should not lapse only when costs and creditors have been paid in full, but should lapse after a specified number of years," said the SALRC.

Other problems that were identified include:

• Administrators overcharge for remuneration and expenses.
• "Unsuitable" people are appointed administrators (for instance, people who themselves are under administration or people who have been struck off the roll of attorneys).
• Administrators don't distribute funds regularly and don't account to creditors properly.
• Administration orders aren't regulated properly.

The SALRC said the act didn't specify a time period for repayment of debt, which was "tantamount to keeping debtors in bondage for life".

Cronje said: "Administration orders can leave people in administration forever. But when it was first used it was meant to be both a debt relief and a debt recovery measure, but it has remained a debt recovery measure, which is unacceptable."  The "pro-poor" legislation had become a burden for people who were broke.

SALRC vice-chairperson Judge Willie Seriti said they were considering a time limit of five years for debtors to make repayments on their debt. Thereafter the debt would lapse.

Another problem was the lack of help for debtors. He said the systems and laws left much to be desired and something had to be done to help the huge amount of "people who have made this a huge business".  SALRC chairperson Judge Yvonne Mokgoro urged the public and concerned parties to make recommendations to the SALRC about the administration orders.

Cronje agreed: "We need as many people as possible to complete a questionnaire, which is available on our website. "We need to have measures that will get rid of administration orders and we need the public's help."

The commission further recommended measures to protect people who are over-indebted as a result of civil action. It also said creditors shouldn't approach a court to enforce a credit agreement on a debtor unless that agreement has been referred to a debt counsellor, a consumer court or an alternative dispute resolution agent.

Those interested in commenting on administrations order can view the SALRC's questionnaire at http://www.doj.gov.za/salrc/index.htm.

Hard copies can be obtained by calling 012 392 9580.
 
Xolani Mbanjwa, www.legalnet.co.za