Banks owed big bucks

IOU: South Africans owe banking institutions an estimated R1 billion

South Africans owe banking institutions an estimated R1 billion,  the Banking Association of SA has said in court papers, according to a report on Thursday.

This debt was contained in more than 38 million credit accounts tallied by banks from January to September 2011, the association said in papers submitted to the Constitutional Court on Wednesday.    

Beeld newspaper reported that the banking association asked the Constitutional Court to define the word “receive” for the purposes of section 129 of the National Credit Act.

Section 129 stipulates that creditors, including banks, have to notify debtors in writing that they are overdue and that legal action could follow.

For the purposes of this section, it was assumed that a debtor “received” a notification if the creditor sent it to the debtor’s chosen address.

However, in practice many debtors did not receive the notice because they changed address after borrowing the money.

This situation prompted the Institute for Socio-Economic Rights (ISER) to ask the Constitutional Court to make a ruling that a creditor must be able to prove in court that a debtor had received a notice of arrears.    

The banking association has countered that this would cost banks hundreds of million of rand a year.

The association wants the case referred to a high court, to allow for testimony about the far-reaching, damaging consequences of changes to section 129.