Consumers interested in using debt mediation to resolve their financial difficulties were dealt a setback this month by the South African Constitutional Court, which issued a ruling that favors creditors over debtors.  According to the high court, credit providers are entitled to terminate any process of debt reviews after 60 days have elapsed. 

The National Credit Regulator for the nation warned that the ruling could have serious consequences.  Nomsa Motshegare, acting CEO of the organization, remarked that "defaulting consumers might be at risk of losing assets such as cars or houses in the event that 60 days have lapsed since they applied for debt review and their debt counselors have not yet obtained an order for the rearrangement of their obligations."

Debt Mediation Governed by National Credit Act

The ruling was based on the National Credit Act for South Africa, which became operative as of 2007.   Ian Wason, who serves as CEO of IDM Holdings, owner of a debt-counseling agency, welcomed the ruling, remarking that, "the more stick we’ve got with consumers to say ‘If you miss a payment you’ll fall out,’ that’s great."

Wason's praise for the ruling may be related to the current economic climate, with South Africans worried about the future much as are citizens of the United States and Western Europe.  "A lot of people are starting to give up again, saying: ‘Another recession’s on the horizon, I really need help’," Wason commented.