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In Duplum Interest and the National Credit Act

13 August 2007 14 Comments

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.

14 Comments »

  • gorden said:

    can you please inform me of when did this law come into effect. the date and time if possible.

    thank you.

  • andrew said:

    can you please inform me of when did this law come into effect. the date and time if possible.

    As a poster above posted.

    thank you.

  • Just ice said:

    the NCA started to work 0n 1 June 2007

  • Brett Bentley (author) said:

    Please now bear in mind the NCR declaratory order judgment which we reported on at http://www.creditmanagement.co.za/?p=353, which held that:

    The NCA has expanded the legal doctrine of in duplum , with regard to credit agreements as define in the NCA, to include in addition to interest various costs specified in Sections 101(1)(b) – (g) . The court interpreted Section 103(5) to mean:

    a) the amount contemplated in sections101(1)(b) to (g) which accrue while the consumer is in default may not exceed, in aggregate, the unpaid balance of the principal debt when the default occurred;
    b) once the total charges referred to in section 101(1)(b) to (g) equal the amount of the unpaid balance, no further charges may be levied;
    c) once the total charges referred to in section 101(1)(b) to (g) equal the amount of the unpaid balance, payments made by a consumer thereafter during a period of default do not have the effect of permitting the credit provider to charge further interest while such default persists.

  • Malebo said:

    good day, what are the remedies if you are cherged costs that are double the amount of the capital owed?

  • Lee said:

    Hi there, so am I correct to say that if it is a 4 month loan for R2000, R250 initiation fee, 4% interest per month, R57 service fee per month, the total instalment is R669.85 pm and the outstanding debt at date of default (two months down the line) is as follow: Capital: R596, Initiation fee R0(charged upfront and settled with first instalment, interest for that month in which the default occured R46.76 and service fee of R57, then arrear interest of 4% per month plus cost of collections and tracing fees may never exceed the R596 which is the capital outstanding as at date of default.

  • In Duplum and the NCR Judgment | Bentley Credit Management said:

    […] we had commented on the in duplum rule and its connection to the NCA and also reported on the judgment of Judge du Plessis on the declaratory order brought by the […]

  • Neil said:

    If a person was put in administration before the 1st of June would the duplum rule still apply.

  • Dee MacOlive said:

    Can someone please tell me when work first started on our Credit Act, i.e. when was its developement started, what year?

  • Ian Dunnett said:

    Is there any difference between normal contracts and lending contracts with banks? i.e. my 20 year bond. Under normal circumstances if I took out a bond in the late 1908’s I would have been subject to interest rates flucuating between 15 and 25%. At 15% I will pay 219odd% of the capital over the 20 year life of the bond. How does the in duplum rule fit into this common occurance?

    With the advent of the Consumer Protection Act on 1 October 2010, we are likely to have a field day with Banks. If my bond is at 18 years, and I can prove that I have paid well over the capitalsum in interest.

    So can I now insist that the banks credit me with the interest in excess of the capital sum?

  • Employer’s Guide to Employment Attachment Orders | Bentley Credit Management said:

    […] read with National Credit Act, if the credit is a credit agreement  (see the article here and here on in duplum […]

  • Thihangwi Nelufule said:

    This website has really helped me a lot,i am a student currently doing my final year of LLB and i must say that i was inspired by the way you explained the in duplum rule.keep up the good work

  • suliman said:

    in duplum only applies only to arrears interest and not interest charged as per the contractual agreement

    1)interest is charged as per the contractual agreement

    2)when you default,(arrears)additional interest is charged on the arrears amount which credit providers call arrears interest,this arrears interest + any collections charges ,cost etc is not to exceed the unpaid balance of the principal debt (capital amount outstanding as at default)

    a) the amount contemplated in sections101(1)(b) to (g) which accrue while the consumer is in default may not exceed, in aggregate, the unpaid balance of the principal debt when the default occurred;

    My view is that we should not be too concerned on large agreements ,but small agreements < 15000 may be implicated by exhorbant cost should they default

    Hope this clarifies in du plum

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