In Duplum Interest and the National Credit Act
The common law in duplum rule holds that “interest stops running when the unpaid interest equals the outstanding capital.”
Confirmation that this ancient Roman doctrine was part of our law was eventually settled in the case of LTA Construction Bpk v Administrateur, Transvaal 1992 (1) SA 473 (A).
The NCA enacts the in duplum rule into legislation in Section 103(5) but the NCA takes the definition further than the common law definition of the in duplum rule, specifying that not only interest stops running when the unpaid interest equals the outstanding capital, that :
- initiation fees;
- Service fees;
- Credit insurance;
- Default administration charges; and
- collection costs
should be included, together with the interest in an aggregate amount which should not exceed the principal debt.
While there have been abuses in interest collection , particularly in the unsecured lending sector by including collection costs, which are the legal or debt collectors costs incurred in getting payment from the debtor it could mean in a long drawn out and costly collection matter, that the debtor frustrating the collections process, will result in credit providers getting less and less if and when the interest and legal costs be exceed the principal debt.