National Credit Regulator takes bank to court over set-off practice

17 January 2017 - 13:06 By TMG Digital
Image: Gallo Images/iStock

The National Credit Regulator (NCR) on Tuesday said it has applied for a declaratory order “to obtain legal clarity on the effect of section 124 of the National Credit Act 34 of 2005 on the common law set-off”.

The regulator wants the court to declare that the common law set-off – which‚ it explained‚ “is applied when two persons owe each other and the debts are extinguished by setting them off against each other” - has been superseded by section 124 of the NCA.

NCR senior legal advisor Nthupang Magolego explained: “The typical application of the common law set-off is found in the banking industry where a bank would transfer funds from a consumer’s savings account to settle an outstanding balance on the credit account without the consumer’s authorisation.

“The consumer’s savings account is debited in order to settle a debt owed under a credit account.”

The NCR believes that a bank must obtain the consumer’s authorisation to transfer any funds from the consumer’s savings account to settle a debt under a credit agreement.

Magolego said the current “practice can put a consumer in financial difficulties since the consumer can be left with little or no money to pay other creditors or meet their living obligations”.

Section 124 of the act requires that‚ “before making a single charge‚ or the initial charge of a series of charges‚ to be made under a particular authorisation‚ the credit provider must give the consumer notice in the prescribed manner and form‚ setting out the particulars as required…”

The NCR said its application has been brought against Standard Bank in the North Gauteng High Court.

 – TMG Digital