Section 58 of the Magistrates Court Act allows debtors to sign a consent to judgment when a letter of demand or summons is served. This section provides creditors with a powerful tool to reduce the time and costs incurred when collecting outstanding debts and are an exceptional procedure whereby a creditor can obtain judgment without having to prove the claim. Various Magistrates’ Courts refused to grant a section 58 judgment based on reasoning that this is prohibited by the National Credit Act.
In the case of African Bank Limited v Additional Magistrate Myambo NO and Others an order was sought regarding the application of section 58. The judge ruled that the NCA does not repeal section 58 and that credit providers can rely on it to obtain judgment in cases to which the NCA applies.
In order to obtain a judgment by means of section 58, the creditor needs to comply with certain requirements, namely:
- The section 58 requirements as per the Magistrates Courts Act;
- The delivery of a section 129 (NCA) notice;
- Compliance with section 130 (NCA).
The summons or letter of demand served on the debtor must contain the allegation that the section 129 notice was delivered and a copy of the notice must be included. The section 129 notice must be in a clear and understandable language to enable the consumer to make an informed decision whether to sign the consent to judgment or not. The judge held that consent cannot be informed if the debtor is not aware of alternative legal remedies.
The debtor must furthermore be in default of the credit agreement for at least 20 business days before the creditor can approach the court for judgment.
It was further held that the Clerk of the court may refer the matter to the court in instances where there is uncertainty as to whether the consumer has been afforded the full benefit of the protective measures contained in the NCA or where it is alleged that the consumer is over-indebted. The magistrate may then also interrogate debtors and request proof of any fact or document to assist the magistrate in granting the order.
The judge made mention of the importance of cost-effective and speedy debt collection. Provided that the provisions of section 58 and those of the NCA are applied properly and with due regard to the parties’ rights, it is in the interests of credit providers and of consumers that the procedure be utilised.
About the Writer:
Annelene Dippenaar is an admitted attorney, practicing since 2006. She has advised various clients, including registered banks, credit providers and other listed companies on the National Credit Act 34 of 2005. Since 2010 she has been employed by Compuscan, a registered credit bureau, as legal advisor and compliance officer. Annelene obtained a BA. (Law), LLB and LLM at the University of Stellenbosch and is currently writing her doctors thesis.