File Photo: IOL
The High Court ruling against Standard Bank that the common law set-off does not apply to credit agreements subject to the National Credit Act (NCA) should not be seen by consumers as providing debt relief.

The judgment in the case brought against the bank by the National Credit Regulator (NCR), means that banks cannot take money from your current account to pay off credit card debt.

Benay Sager, chief operating officer of debt counselling firm DebtBusters, says you shouldn’t overlook the fact that, although the banks can no longer claim credit card debt from another account, the debt is still owed.

The common law set-off applies when two parties owe each other and the debt of one is set off by the debt of the other. The banks have applied this by transferring funds deposited into your bank accounts to settle debt on a credit agreements without your authorisation.

The NCR had sought an order from the high court that the common law set-off has been superseded by section 124 of the NCA, and the court found in favour of the regulator.

Nomsa Motshegare, chief executive of the NCR, says the ruling means banks must obtain your permission before transferring funds from your bank account to pay off your debt.

Sager says: “The ruling is generally positive, as it ensures that consumers will not end up with unnecessary cash-flow shortages. However, consumers shouldn’t think that this ruling means the banks will ignore the debt. There are other avenues for creditors to reclaim unpaid debt, up to and including going to court for a judgment.”

He says that by the time a bank has resorted to setting off credit card debt, you may already be in bigger financial trouble. “The bottom line is: don’t ignore their warnings. Do something about it, and if you’re not sure what or how, get professional help.” 

PERSONAL FINANCE