Credit agreements: You must get a notice before being sued

 

“I received a summons today from a credit provider that gave me a personal loan. I admit that I have missed a payment or two on the loan, but did not think that I was that far behind. Surely they must at least have called me or written a letter asking me to pay up before running to court? It’s not even a big amount outstanding and now I may have to pay legal costs as well.”

As a consumer you have certain rights provided by the National Credit Act (“NCA”) which do not fall away when you default on your credit agreement. Section 129 of the NCA determines some of these rights by obliging credit providers to provide written notice to a consumer when that consumer defaults on payments under a credit agreement such as your personal loan. This notice therefore serves to warn you of oncoming litigation and a possible judgment against your name as well as informing you of possible steps to take to avoid further legal action. Simply put, this letter should assist you in planning your way forward and allow you to remedy your default and avoid legal steps which are expensive, time consuming and stressful. 

A Section 129 notice must always precede any litigation involving the enforcement of a credit agreement, and it has recently been confirmed by our courts that a credit provider cannot simply attach this notice to your summons, as this would defeat the purpose of the notice. 

A typical Section 129 notice (letter) should notify you that you are in default with your obligations under the credit agreement and will propose that you refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date.

Despite your rights, it remains important to recognise that if you are indeed in default, a failure by your credit provider to give you this notice does not extinguish their claim against you or excuse your default. It will only delay their enforcement of their rights under the credit agreement against you, and a court will afford you some time to make plans of repayment or to seek the advice of the above institutions. 

To help you enforce your rights and correspond with your credit provider, you may consider approaching an attorney for assistance.