Q&A Forum: How are fees and charges regulated in collection of arrear levies?

Another reader explores no-interest property finance option

Send your questions to money@arena.africa
Send your questions to money@arena.africa

Q: I received a summons for the payment of R17,000 to my body corporate. In October 2018, my insurance paid R5,150 for my arrear levies. My bill shows interest charges of R5,247, legal costs of R4,343 and assessment costs of R1,345. When I argued that the collection costs cannot be more than double the capital amount outstanding (the in duplum rule), I was told this applies to agreements under the National Credit Act (NCA), and only the interest rate provision is applicable to my bill. Is this correct? — Ncedisa Gongxeka 

Avitha Nofal, a senior legal adviser at the office of the Credit Ombudsman, responds. 

In terms of the NCA, the in duplum rule sets out that insofar as the interest calculation is concerned, the collective of the interest, initiation fee, service fees, credit insurance, default administration charges and collection costs which accrue during the time of your default may not exceed the unpaid balance of the principal debt at the time of default.  

An application for leave to appeal a December 2019 judgment on the interpretation of the in duplum rule is currently pending.

The rules, powers and functions of a body corporate as well as the liability to pay levies are set out in the Sectional Title Schemes Management Act (STSMA). The body corporate may appoint debt collectors to collect outstanding levies.  

While the initial request for payment would have been based on the body corporate rules as read alongside the STSMA, the handing over the debt would fall within the ambit of the NCA as an “incidental credit agreement”.

The prescribed interest rate of 2% a month, accumulated to 24% a year, can be charged on default payments within an incidental credit agreement.

In  terms of the National Debt Collection Act, which regulates the debt collection process, debt collectors can charge certain fees, as determined by the Council for Debt Collectors.

Provided that the debt collector is a member of the Credit Ombud, we would be able to help you relating to a dispute about credit information held by the credit bureaus.

Where the debt collectors are not members of the Credit Ombud, you may approach the Council for Debt Collectors to look at the costs and if the in duplum rule will apply.

Looking at interest-free property options

My wife and I are in the market to buy a house of R1.2m, but we’re against dealing in interest. We’ve heard about Islamic home loans that are interest free. Do we as non-Muslims qualify? If so, how much will our bond be over 20 years? — James K

Amman Muhammad, CEO of Islamic banking at FNB, responds:

FNB Islamic Banking’s products and services are offered to individuals and businesses and are available to all members of society, including non-Muslims. 

The FNB Islamic residential property finance product is based on the principle of diminishing Musharaka, a form of co-ownership. From the start of the agreement, the bank and you, the customer, enter into a co-ownership agreement linked to the property being purchased. 

You buy the bank’s share in tranches at an agreed profit rate, thus increasing your share until you have completely bought the bank’s share, making you the sole owner of the property.

To qualify for this property finance, you must individually or jointly meet FNB’s credit criteria. FNB Islamic Banking applies a principle of risk-based pricing which is primarily dependent upon the movement in the Islamic banking base rate (IBBR); your credit score; the property’s valuation; and your banking relationship with FNB.

The overall financing amount over 20 years will be determined using the loan amount and the agreed upon profit rate.

* Send your questions to money@arena.africa