Proper Notice In Terms of the National Credit Act
Written by Yvette Cluver and Nqgabutho Khumalo
Baliso v FirstRand Bank Limited t/a Wesbank (CCT150/15) 
The Constitutional Court of the Republic of South Africa (“Constitutional Court”) recently ruled on a case relating to section 127 (2) of the National Credit Act 34 of 2005 (the “Act”).
In Baliso v FirstRand Bank Limited t/a Wesbank (CCT150/15)  ZACC 23 (4 August 2016) (the “Baliso judgement”) the court decided on the way in which consumers surrender their debt and how credit providers deal with procedures when requesting goods from the consumer.
Section 3 of the Act provides that the purpose of the Act is to “to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers.” It is in consideration of section 3 of the Act that we look the Baliso Judgment.
Facts Of The Case
Mr Baliso (the applicant) owed FirstRand Bank Limited (the respondent) an amount of R224 880.27 outstanding from a credit agreement in terms of the Act. FirstRand Bank Limited instituted an action against Mr Baliso in the Western Cape Division of the High Court in order to receive payment from Mr Baliso. FirstRand Bank Limited instituted its claim based on section 127 (2) of the Act. This claim provided that Mr Baliso failed to fulfil his obligation in terms of the credit agreement. Mr Baliso filed an exception in response to FirstRand Bank Limited’s claim. He alleged that FirstRand Bank failed to follow the correct procedures when filing the section 127 (2) notice.
Section 127 (2) provides that “within 10 business days after the later of-receiving a notice in terms of subsection (l)(b)(i); or receiving goods tendered in terms of subsection (l)(b)(ii), a credit provider must give the consumer written notice setting out the estimated value of the goods and any other prescribed information”.
The question before the court was whether the notice sent by the credit provider by ordinary mail complied with section 127 (2). The Western Cape High Court dismissed Mr Baliso’s exception and upheld FirstRand Bank Limited’s claim for payment. It is at this point that Mr Baliso pursued the matter by lodging an appeal in the Constitutional Court.
Constitutional Court Judgement
In the Baliso Judgement, the Constitutional Court did not hold a unanimous decision. The court looked at section 127 (2) of the Act, which provides for the surrender of goods. In the majority judgement, Froneman J held that the section 127(2) notice is important because it “provides the consumer with vital information about whether she is likely to benefit from the sale of the goods, or will still be liable for payment of some money to the credit provider after the sale”. The consumer can settle the agreement by returning the goods to the credit provider, who in turn can re-sell the goods. This will settle the agreement.
The court further held that Mr Baliso raised the exception based on the fact that the section 127 (2) notice was sent via ordinary mail, and FirstRand Bank Limited in its particulars of claim did not allege to have sent the notice by ordinary mail.
In his dissenting judgment Zondo J held that sending the section 127 (2) notice by way of ordinary mail did not comply with the section and that notice must be sent by registered post. The court held that FirstRand Bank Limited failed to comply with section 127 (2) because the notice was sent after the goods were sold and that this was in fact incorrect procedure. The court further held that in terms of section 127, it can be concluded that a written notice by the consumer is a wish to surrender the goods, and the credit provider will submit a notice reflecting the value of the goods to be surrendered. The credit provider is obligated to set out the value of the goods and any other information set out and/or required by the Act.
The court dismissed Mr Baliso’s appeal.
The Baliso Judgement is important as it highlights whether a credit provider that dispatches a section 127(2) notice to a consumer by ordinary mail is in compliance with section 127 (2) of the Act or not. The Act is important because it affects anyone dealing with the credit industry such as credit grantors, credit grantees and intermediaries.
Credit providers need to note that if improper notice is given, the provisions allowing for the sale of the goods becomes inoperative and the credit provider’s claim for repayment of outstanding monies in the case of a shortfall on the settlement value of the goods will fail.