Banks Automatically “Setting-Off” Debts

A case which many South Africans had faced; their banks taking money out of their account to settle debts, such as arrears accounts. Read on to see the new legal position in South Africa.

Recent Developments

In a recent ruling by the Johannesburg High Court, it was deemed illegal for banks to take money out of an account to settle debts without you specifically authorising it to do so. The National Credit Regulator (NCR) went to court with Standard Bank to challenge this practice.

How did this Happen?

Previously, banks were deducting money from your account as soon as you get any income to pay debts you owe them (a house bond would be an example).  The exact amount the financial institution could take was also not regulated.

While the bank argued that it was an essential practice for debt recovery, the learned Judge Keightley sided with the NCR’s argument that banks had privilege over other creditors, which meant that the consumer was left with no money to cover basic living costs. Essentially, it violates someone’s Constitutional right to property and dignity.

It was also found that this practice by the banks undermined debt review. The process of debt review is there to assist an over-indebted person to apply to court for a rescheduling of debt repayments with their creditors. 

The ruling comes not only as a victory for South African consumers but also as a minor assistance to help individuals properly manage their budgets.

Conclusion

If you need any assistance with debt collections or with bringing an application for debt review or having same rescinded, contact out firm and we will be happy to assist you with your needs.