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The South African Human Rights Commission (SAHRC) welcomed a judgment handed down by the high court in Johannesburg relating to interpretation of the National Credit Act (NCA), saying it would provide a much-needed safety net, properly insulating consumers from financial shocks.

The case was brought against Standard Bank by the National Credit Regulator, which sought declaratory relief that credit providers were not entitled to rely on the common law principles of the right of set-off to satisfy debts owed by consumers.

The principles allow banks the right to transfer cash from bank accounts to pay off other debts held with them, such as credit cards or loans.

The SAHRC, represented by the Legal Resources Centre, intervened in the matter as amicus curiae (friend of the court), as the matter raised important questions relating to the protection of the human rights of marginalised members of society.

“In particular, the application of the common law principles of set-off to these kinds of arrangements takes away the income that indigent debtors rely upon for subsistence, without their consent or without affording them the protection offered by the NCA,” the SAHRC said on Friday. “This type of action removes the ability of debtors to plan effectively for the future and/or to pay for the basic necessities that they require for basic survival.”

The commission submitted during the case that the court should take into regard the socio-economic and institutional impact of set-off and compare it to the debt review process on the one hand and the economic welfare of citizens on the other.

It said the use of the common law principles of set-off by banks often rendered debtors incapable of complying with their repayment terms, because the income with which they intended to make payment was claimed by the bank before they could honour obligations to other creditors.

“Accordingly, the SAHRC argued for an interpretation which would better promote the purport, spirit and purposes of the Bill of Rights and favour the dignity of the debtor,” it said. “The judgment has provided the much-needed clarity on the position in law and marks the end to a destructive practice wherein set-off is often-times applied without any notice to, or interaction with, the consumer.” 

 African News Agency (ANA)