A number of debt collectors are still advising clients that they, the debt collectors, can recover the entire collection commission and debt collection costs from the client’s debtors – this is, simply put, illegal.

Prior to the enactment of the Debt Collectors Act, the only persons or companies able to legally collect the costs of debt recovery from debtors were attorneys. However with the enactment of the Debt Collectors Act in 1998, the law was changed to enable properly registered debt collectors to collect certain fees and commissions from debtors. The relevant section of the Debt Collectors Act being Section 19 [1] [b], which states:

“S19 (1) A debt collector shall not recover from a debtor any amount other than –

(a) the capital amount of a debt due and interest legally due and payable thereon for the period during which the capital amount remains unpaid; and

(b) necessary expenses and fees prescribed by the Minister in the Gazette after consultation with the Council.”

Currently the regulations passed by the Minister in terms of the Debt Collectors Act, include:

– numerous miscellaneous expenses for such things as letters, telephone calls and consultations, which amount cannot exceed the capital amount or R 600.00, whichever is the lesser; and

- a fee of 10% of the installment received up to a maximum of R 300 per payment.

A number of creditor clients have a provision in their standard terms and conditions with their debtors providing that they are entitled to charge the debtor the full cost of any collection commissions charged to them by the debt collectors. While it has become accepted practice to be able to contract with debtors to pay what is called attorney and client legal costs which are above the legally prescribed tariff set out in the High Court and Magistrates Court Acts (the so called party and party tariff) , this is not legally permitted in terms of the Debt Collectors Act.

I have confirmed that the above interpretation is what has been adopted by the Council for Debt Collectors, the legally created governing body of debt collectors, with the legal officer of the Council. In fact the legal officer advised that a number of debt collectors have been charged substantial fines, some running into hundreds of thousands of rands, for charging debtors more fees than the stipulated amount set out in Section 19 of the Debt Collectors Act.

We would therefore recommend to any companies using debt collectors for recovery of their bad debts to ensure that these good collectors acting as their agents do not act illegally in the debts they are collecting and thereby implicate your company in illegal activities.