Justice Budget: input by Commission on Gender Equality (CGE) and Board of Sheriffs

MINUTES
Introduction by Chairperson
The Chair commenced the meeting by stating their appreciation of the enormous amount of work that had been done by the CGE for the Budget Hearings. He addressed the letter received by the Committee from the CGE, which expressed their concerns that they were being treated differently from other chapter nine organisations. He apologised to the CGE and assured them they would not be treated differently, as they had allocated the entire morning for their submission.

He noted his caution when dealing with the CGE not to deal too much with their programs, but focus on their finances, as they were already doing this with the monetary committee.

He then directed the committee's attention to their presentation, stating that they should focus upon on two broad areas. First, the money received and how it was being spent and second the problems with the money and what was being done to rectify this.

Commission on Gender Equality (CGE)
Ms J Piliso-Seroke, Chairperson for the CGE, thanked the committee for allowing them to present and noted their sensitivities that CGE was often marginalised compared to other chapter nine organisations. She accepted their apology and introduced all members of their delegation.

She noted that in their written submission they had included information about CGE, as they wished to raise awareness about how much had been achieved since they had been in existence.

She began the presentation by reading the overview, which is a sets out the strengths, weaknesses, opportunities, threats and challenges of the CGE.

Chair thanked her for the very useful overview.

Ms C Majake (CEO), stated that the Commission continues to pursue the issue of bringing gender equality to South Africa, which was a daunting task, as they serviced the whole country, and a budget deficiency to cover to fulfil their mandate. She then turned the Committees attention to document of their presentation. She began with the introduction, explaining their mandate and the structure of their organisation. She stated the problem that the Commission only had offices in 5 of the provinces, making it very difficult to service the others, and they did not presently have enough funds to address this problem.

The Chair requested that instead of reading from their written submission, which could be done by the Committee members later, that they might focus on what had been accomplished since they had last interacted.

Ms Majake discussed their involvement in legal interventions of in several major cases, including the Amod case, S v Jordan, and Bannatyne v Bannatyne. They had also made some recent contributions to a number of policy institutions outside the CGE.

She commented on the increase in complaints about gender based violence, providing an example of a women that was abducted by an Egyptian man and kept in his house for ten days. The CGE intervened on this case and discovered that he had abducted four other women, and this was a case that they were presently monitoring closely.

She introduced the Legal Department, stating that they currently had three staff who were lawyers

Ms M Mashao MOD Legal described the Environmental Factors that Impact on the CGE. Namely, the public confusion over their mandate and the different roles of the Commission, as well as the debates over the need to collapse the Commission with the Human Rights Commission, both interfere with their work.

Ms Majake discussed the their plans to have gender-based consultants in all provinces, to look at their reporting system and consolidate in all provinces. There also had to be a review of the legislation regarding witchcraft. They also suggest a monitoring system to monitor gender main-streaming, which should move to a national level.

Their present plan of action is found in their submission, and lists the general areas they plan to embark upon in the present financial year. The budget is located at the end of the submission* and includes two sections. First, R17.3m was allocated from the government treasury, and the second portion is optional, and includes the R12m that they hope to raise from outside of government. This money is fundraised, and up to now they have approximately R1.1m. She added that most of their money was spent on administrative costs and salaries.

The Chair asked who had donated the R12m.

Ms Majake clarified that they did not have the entire R12m. This budget was what they had hoped to raise. To date, an undisclosed amount of money had been promised by the EU. They are presently being funded by the Canadian International Development Agency (CIDA) for restructuring. The first stage of this restructuring program is staring now, and CIDA is helping to identify how this restructuring should be accomplished.

The Chair asked if the money from CIDA was to perform an audit.

Ms Majake said yes.

The Chair then asked where this money was reflected in their submission.

Ms Majake said that it was not reflected because they were not receiving money, only technical assistance. If they had received funds it would be reflected in the budget.

The Chair stated that this needed to be a bit clearer in the report, as they needed to be able to determine if the donor funding or auditing would create any future budgetary obligations for them, for example, through the creation of new posts. He noted that he was nervous when donor's fund through projects that create infrastructure. Then, for example, if the donor money falls away, they would be responsible for supporting the new infrastructure.

Ms Teboho Maitse Commissioner, stated that with all their good intentions they would only be able to cover gender and poverty or gender and good governance if they are unable to raise the R12m. This is especially important given that elections are approaching.

She added that the CGE has never simply created posts because they received funding. They need to solicit funds to implement plans from the findings of their research on the complaints received. In this case there are no strings attached as it is part of the social funding aspect.

Ms Piliso-Seroke noted that although they presently have 60 staff members, this included a lot of interns. It is therefore misleading as these interns are not present at all times.

The Chair inquired about the problems they had received from their audited statements by Scopa and how this situation was resolved.

Ms Majake stated that the problems were related to fraud that occurred within CGE in 2001. Scopa wanted to know how it was dealt with. The money involved with the fraud was dealt with and the person expelled. They had made attempts to actually report the matter to the police, but were told that they needed to know the exact amount of money involved before they could investigate. R34 000 has been stolen by the electronic banking system that was once used. They no longer have this system.

The Chair said that people that commit fraud like this should definitely be criminally charged because if they are just simply removed they move somewhere else and commit similar crimes. He requested the name of the police person they had dealt with, as what they had told the CGE about having the exact amount of money was complete non-sense.

Ms Piliso-Seroke stated that his point was taken.

Ms Majake added that in the passed two years they had been able to get qualified financial statements.

The Chair said that this was excellent. He then expressed his concerns about the Strat Plan of the CGE, which focused on four points: violence, culture and good governance, with HIV cutting across all four. The four points were broad and the Committee was unaware of the particular programs they would be implementing to fulfil these points.

Ms Chohan-Kota asked what their budget had been last year and what they had been able to do with the extra money. She noted the synopsis of the main complaints received located in their submission, but wondered about the case backlogs and the actual types of cases being received. For example, under the heading violence in the graph, what types of violence did this include.

The Chair furthered the inquiry by asking what they considered a successful conclusion to a case.

Ms Chohan-Kota continued. The National Prosecutors Authority during their submission in the Budget Hearings, stated that in rape cases there were no clear statistics on success rates, except in special defence courts. She asked if they were concerned about this.

The Chair added that they had a warped view of not only the success rate, but also the number of rape cases and how many are prosecutable. Nine out of ten are not prosecutable as they do not constitute crimes.

Ms Chohan-Kota then asked about secure care facilities, which as supposed to house children who commit crimes. There are no severe care facilities for young women, so instead they are sent to prison. Given that these are enormously vulnerable groups, this situation requires immediate intervention.

Ms Mutsila asked with how the CGE interacted with the Human Resource Commission given their similar mandate, and whether they made sure they the two Commissions were not channelling resources in the same direction. She also asked about how they monitored gender based systems.

Imam Solomon commented that the role of the CGE was defined very defined very broadly, which could take the Commission into many things, including, HIV/AIDS, the Maintenance Act, and the courts. He suggested that this might be a problem because of frustration with the budget and personnel. If they defined their role more clearly, it would lead to greater certainty of operation. He then asked where the rest of the 12 Commissioners where, and why they did not attend this meeting.

Mr Magwanishe questioned 4.2.1.1. of the CGE annual report, wondering why cheques amounting to R3 506 were cashed with no signature and R26 788 were cashed with only one signature.

Ms Mahlawe stated that they were happy to see the Chairperson of the CGE in action, so that they could discover that they did not make a mistake in appointing her, and that the Committee appreciated the work that had been done. They had showed clear improvement since the Committees 2001 visit. She then questioned how they measured their production in the provinces in which there was no CGE office. She noted that the CGE had an opportunity to attend courts to see how cases are being processed.

The Chair requested that the Commission not make such general statements in their submissions as they were not helpful to the Committee. If they had a problem with a specific police commander with the implementation of the Domestic Violence Act, for example, they needed to know so they could intervene if necessary. He noted that they were aware that the CGE had a meeting with the Commissioner* as a result of his unfortunate remarks.

Ms Piliso-Seroke added that they did not have specific reasons for why the police did not implement the Domestic Violence Act (DVA). They had taken the opportunity during there visit with the Commissioner to discuss some of the problems that the police had with the implementation of the DVA. They discovered that many officers did not understand the DVA, and the need to have dis-aggregated from normal crime figures. From the statistics they do have, they discovered that the problem with implementation was due to a lack of resources, capacity and understanding of the Act.

Ms Mashao directed the Committee to the pie graph displaying a breakdown of the complaints received. They had tried to find out what the main problems were, by visiting police stations and courts, but there are problems with finding out specifics.

Ms Maitse noted that a similar problem as the one that Ms Chohan-Kota stated about the young girls in prisons, was occurring in rural areas. Some women that had been subjected to domestic violence were being put in jails, as the police officers tried to adhere to the principles of the Domestic Violence Act and separate the victim from the perpetrator. The CGE is presently in the exploratory phase of addressing this problem.

She also raised the issue of police not doing a thorough investigation on domestic violence, as some felt that it was not a serious issue. They conducted a study on female prosecutors, there placement and understanding of the DVA. They discovered that some females also have a poor understanding and implementation of the Act.

Ms Piliso-Seroke stated that they were not involved in visiting secure care facilities as this was related to children and the Human Rights Commission was responsible for this.

Ms Mashao stated that their backlog in the legal department was almost 90%. Most cases take time to process as they rely on other people, for example SAP. If they do not get the information needed on time, they will inform them of their power to subpoena under the Commission on Gender Equality Act 39 of 1996.

They considered a case successful if for example they had received a complaint from a female that required police enforcement, the CGE will alert SAP, and if they assist. Complaints will come back to them if they are not followed.

If it is a Human Rights matter the CGE will not deal with it, but will refer it to Human Rights Commission or other institutions with the relevant mandate.

Ms Majake responded to the Chair's concerns, by directing the Committee to Document A that listed the actual programs the budget was allocated to for this financial year.

In response to Mr Magwanishe regarding the unendorsed cheques, she stated that this matter was brought to the attention of the Bank through a letter expressing their great concern and noting they should stop the payment if the cheque is not properly endorsed.

She discussed the CGE's programs that affect the lives of rural women including access to clean water, sanitation, education and safe environment. Specifically, there were working on helping women who needed to collect water from crocodile infested water in one rural community.

She reiterated that they do not have offices in four provinces. Gauteng is operated out of the head office, which was not ideal and they aim to address this in the future.

Ms Piliso-Seroke addressed Imam Solomon's concerns about their mandate. There mandate is to promote, protect and monitor gender equality in South Africa, which is accomplished through three departments. They promote gender equality through their Public Education Department, where they hold campaigns and workshops throughout the country. They protect gender equality through their legal department. They monitor gender equality through their policy development and research. These three departments overlap, interact and promote their over-all mandate.

She added that the other Commissioners were unable to attend the meeting, due to a lack of funds to cover their transport. They were present in the submission, as they had all contrbuted.

Ms Majake stated that their budget was R17.3m this year, and was R14.4m last year. This increase in R3m. R1m of which is being spent on their flagship project, gender and poverty. The increase is not enough to assist them in addressing their mandate.

The Chair stated that the problem was also with the CGE, as they need to look at their programs. As far as he could tell, there was only one project where they were dealing tangibly with poor women on the ground. If they kept all their programs on an intellectual level, people would be unable to see their affect on average people. He hoped that they would do the CIDA audit with this in mind. Their intellectual component needed to be balanced equally with impacting women on the ground. This was the biggest problem with their budget, which was demonstrated with the 90% of cases outstanding in the Legal Department. The new money is allocated to the same department, and this needs to be reprioritised.

Ms Piliso-Seroke noted her respectful disagreement with the Chair because they have shifted their operations to the local government level, where the ordinary people are located. The complaints that they receive and address come from ordinary women.

The Chair asked how the Committee was to know this, as it was not reflected in the written submission.

Ms Majake stated that it there was a misunderstanding because of the manner of their presentation, because they really focus on women and men on a grassroots level. All of their sensitivity programs and awareness campaigns take place with local government in rural areas.

The Chair stated that the Committee was not suggesting that the CGE's work did not impact the lives of women. The presentation might just be wrongly angled, as the implication is that the work is focused in a certain direction. He noted that the CGE must equip the Committee better, so that they may fight for more money for them.

Imam Solomon clarified his previous inquiry, and commented that if the CGE would focus on one particular issue, for example maintenance collection or domestic violence, they may see direct results next year.

Ms Majake noted that they did not have the capacity to visit the courts on all matters as it would lead them all over the country, but they do ask for updates from the courts.

The Chair stated that no one else had prepared as well as the CGE, especially other chapter 9 organisations. He noted that the Committee would have preferred to have all of the Commissioners present, but they were sympathetic to the financial constraints. He proposed that the Committee go and visit the Commission on the next occasion. He stated that they appreciated the work that the Commission did, as they add tremendous value to the whole democratic process. Before the Commission was created the Committee felt that the status of women throughout the history of South Africa necessitated the creation of an independent body to address their needs. He added that they would support the Commission and fight for their improvement.

Ms Piliso-Seroke thanked the Committee for receiving them. She ensured the Committee that they would take their remarks very seriously. They would change the way they present and prioritise to benefit rural people. She concluded by stating that they wished their good relationship to continue.

Mr Makwetu, Deputy Chairperson, Board of Sheriffs, noted that they would present to the Committee not only their successes as well as their challenges. He continued through the powerpoint presentation.

The Chair asked about the new appointment of sheriffs, asking why they were still appointing a majority of white people.

Ms R Allie, Board of Sheriffs explained that the appointment process was not something that the Board is entirely invested in. Their interviewing committee has established certain criteria, but they have are often not used. The Department of Justice appoints an Advisory Committee. which consists of local magistrates, representatives from the law society and members of the local community ensure the appointments.

The Chair asked if they had a program to identify potential candidates beforehand, or if they simply searched after they advertised.

Ms Allie noted that had an extensive training program after the candidates are selected.

The Chair expressed his concerns that the Board should swiftly handling disciplinary problems.

Mr J Fourie, Board of Sheriffs, noted that they had a disciplinary board, which was bound by the Act, which they would like to have reviewed. The problem was that this process would be expensive. They have suggested using retired magistrates and prosecutors to permanently deal with disciplinary matters within the Board.

The Chair asked if the retired magistrates and prosecutors had responded positively.

Mr Makwetu stated that this was difficult to answer, and they were still in the initial stages.

Mr Fourie noted that they were expecting a country-wide decrease by 20-30% in the civil process received by sheriffs. The reasons were that now there were other ways of civil debt collection being used by firms. They are also new ways of by-passing normal summonsing. The Board's income on levies has also decreased.

Afternoon session
Board for Sheriffs cont…
Ms Allie stated that the Board for Sheriffs does not have sufficient resources to properly defend all its legal challenges, with the result that it cannot effectively serve as an appointment authority.

The Chair stated that it is the Minister of Justice and Constitutional Development (the Minister) that is the defendant in legal challenges, not the Board for Sheriffs.

Ms Allie stated that the Board for Sheriffs, as the appointment authority, is included as a co-defendant.

Adv Masutha asked the Board for Sheriffs to explain the more serious kinds of disciplinary cases it has had to deal with.

Mr Fourie responded that it is difficult to provide this kind of information, but stated that the Board for Sheriffs does have a mechanism in place to deal with these cases. The disciplinary process has been restructured, new personnel have been enlisted and the IT system is currently being finalised. This will allow the system to be accessed quicker.

As far as the serious cases are concerned, there have been very serious fraud cases. These would include trust monies that were defrauded and embezzled. There is one current incident in which the person involved in awaiting criminal charges. Others include petty offences such failure to answer letters and not responding to Board inquiries. These offences range from small to very serious.

A further offence would be failure to comply with the rules of the Sheriffs Act, especially the failure to adhere to the 31 July 2003 regulation which will require all sheriffs to hand in certain documents. There are mechanisms in place to deal with the sheriff who fails to comply with this rule, and they can even be fired for causing a delay in providing this documentation. In cases involving problem officers, it can b recommended that that sheriff be removed from office. It is also an offence if the sheriff delays in serving the court order to the intended recipient, but the judge would decide each case on its merits.

Ms Allie added that, apart from introducing a system for fines, the procedure has also been set up like an inspection system. The Board for Sheriffs also experiences problems with financial constraints, where the new sheriff might have administrative problems, or problems with trust funds and putting sound accounting practices in place. Instead of penalising the specific office one should rather look at developing and ensuring that office has the necessary skills. The problem here is that the Board for Sheriffs does not have the needed cash to provide this.

Adv Masutha asked whether the Board for Sheriffs has any internal complaints structure to deal with matters such as sheriffs involved in illegal auctions of assets attached.

Mr Fourie replied that the Board for Sheriffs does have such mechanisms in place, and such matters are investigated via the normal procedures. The current legislation clearly stipulates that sheriffs are not allowed to purchase any items offered for sale at a court auction.

Ms Chohan-Kota sought clarity on the criteria used to identify the specific area in the pilot project referred to in Point 3(2)(b).

Ms Bobuza responded that a total of 10 areas have been identified. Some alterations were made and there are now Acting sheriffs in those areas. A study has been conducted in which the Deputy Minister commissioned the staff in the office to delegate this authority, and two new sheriffs will be added here.

Mr Williams, Department, added that government has started with a pilot study in the vacant areas. There are problem areas. These are due chiefly to capacity problems within the Department, especially issues such as domestic violence. There will be some administrative problems. The appointments will be made by November 2003 and there will be competition between the sheriffs offices, but let's just see how it works out. If this pilot project is successful it will be extended landwide for all sheriff's offices.

Ms Chohan-Kota asked whether there are any supporting mechanisms associated to each of the sheriff's offices. The problem here is that it may be difficult for the twelve previously disadvantaged individuals appointed as the second sheriff to enter into the jurisdictional area, because the magistrate would have developed a relationship with the existing sheriff over time.

Mr Makwethu responded that the Board for Sheriffs will not be abdicating its involvement in this process. It is willfully involved.

Ms Chohan-Kota asked whether the new twelve individuals are not the same staff referred to in the Table, but will instead be filling existing vacant offices.

Ms Allie answered in the affirmative.

Adv Masutha stated that the Board for Sheriffs often say that they are unable to find a definite address for the person that has to be served with court documents. How does the Board for Sheriffs plan to resolve this, and what are court sheriffs supposed to do in such cases?

Mr Fourie responded that this does create the impression that if the court orders are not served to the correct person that the sheriff is not doing his/her job properly, and this has to be addressed. The disciplinary actions of the Board for Sheriffs has to be sped up so that it acts immediately. This will allow it to put the Board for Sheriffs to task. If the sheriff fails to respond to this call s/he will be charged with culpa. Mr Fourie stated that the current system work well, and he is satisfied with them completely. He reminded Members that each complaint lodged is dealt with in a balanced fashion.

Furthermore, it is possible for the Board for Sheriffs to find those areas and individuals where the sheriff could not serve the court document. The Board for Sheriffs has proposed that the current domicilium citandi et executandi rules be changed, so that the sheriff can demand proof of identity when serving the court order.

The Chair stated that he is encouraged not only by the manner in which the Board for Sheriffs is composed, but also in the way it is operating. Yet it is unconvincing in dealing with the appointment mechanism as it is wholly inadequate, and the Department is exposing itself to possible legal challenge. The Board for Sheriffs has to report back to this Committee in two months, together with the Minister, on the revised appointment mechanism, even if it means the entire existing appointment mechanism has to be changed completely.

The Department has to find funds to create a pool of people that can be trained in this field so that they are entitled to apply for the position once it becomes vacant, such as the case currently with prosecutors.

Mr Makwethu replied that the Technikon South Africa (TSA) is currently providing a course for such persons, and it does not focus on sheriffs exclusively. It includes government departments and office staff. It aims to do just as the Chair has recommended: fill posts that may become vacant in future.

Ms Chohan-Kota requested the Board for Sheriffs to provide a map of the entire country that indicates where exactly the different sheriff's areas are located, because the current demarcation is inaccurate. This map should also indicate those offices that are not economically viable.

Adv Masutha asked whether the Board for Sheriffs keeps statistics on the underlying causes of its current problems.

Ms Allie replied that the Board for Sheriffs has installed a new identification system which enables it to develop statistics around the problematic sheriff's offices.

The Chair stated that one database is needed to identify these problem areas.

The Chair stated that the introduction of the Board for Sheriffs' plan via the pilot project is too slow, and six areas should be addressed as soon as possible. What does the Department plan to do if that pilot project is unsuccessful? Government cannot wait so long. This plan has to be implemented in those areas which have been identified as economically viable, such as the large cities. This would ensure a proactive approach. It could even happen that the pilot projects unearths new problems in the plan, and then more time has to elapse before those problems are solved.

Mr Williams agreed that the current standards for appointment are bad, but it is being addressed. The acting appointments area actually retired personnel, who are only filling the post until new staff are appointed.

Proposed Amendments to the Debt Collectors Act of 1998
Presentation by Council for Debt Collectors
Adv J Noeth, Chairperson of the Council for Debt Collectors (the Council), stated that the Council had received a total of R1,1m from the Agency for Development during August 2002. Most was spent on infrastructure and appointing the limited number of staff of the Council. The main difficulty experienced is that staff do not have a fixed income, because it is not certain exactly how many debt collectors there are in South Africa. The Council was told that there are currently about 20 000 debt collectors operating in South Africa. The Council was told that about 8 000 would register per month since the coming into operation of the Debt Collectors Act (the Act), but this has not happened. To date only 500 debt collectors have registered with the Council.

The Council currently works with a budget of R10 000, which has not materialised until very recently. It appears that it is the small businesses that are registering with the Council, not the large ones. The Council wanted to talk to the ADRA about this and it was visited by a delegation of eight ADRA officials. The Council was told that companies or close corporations have to pay an annual registration fee of R300, as opposed to R200 to the public. ADRA maintained that this was how the regulations were drafted. Government has not yet supplied its legal opinion on this matter, even though it was promised.

Advocate Noeth speculated that the real reason is that the regulations clearly set out what debt collectors are allowed to charge the public, and the public is correct is calling for this amount to be taxed in the Magistrate's Office. Debt collectors are allowed to charge a maximum of R500, yet despite this they are exceeding this cap and are collecting large amounts from the public illegally. More debt collectors have registered since this discussion with ADRA, but a large number of businesses have still not come forward.

The Council has always been careful to keep within its allocated budget. But it does need more staff. It is currently has three staff members, all women, with one being white and the other two are black women. Mr O de Meyer is the Acting Executive Director, because it is not certain at what level the post is needed. The Executive Director position will be filled after August 2003, depending on the Council's workload and the number of debt collectors that register with it. The Council is currently doing a wonderful job and often receives compliments from the public.

The problem is that only one staff member deals with debt collectors, and this person cannot effectively deal with the workload all alone.

One of the more problematic provisions is Section 23 of the Act which provides for the establishment of a trust account. This is fine in itself, except that it stipulates that interest paid by the debtor on the trust account has to be repaid to him/her. It would be very expensive to put an IT system in place to adequately regulate this situation. Various auditors were consulted on this plan, and they all concluded that it would be an impossibility to regulate this practice. This provision has to be amended because the only viable solution that would address it imposes a huge administrative burden, and the institution would not be able to recover the costs of implementing and operating that IT system.

The biggest problem with the Act is that it does not bring the attorneys profession within its ambit. The Council's concerns in this area are covered in Point 8 of the submission (see document attached). The Code of Conduct contains strict rules that have to be adhered to, and costs can be withdrawn if they are not. Those not involved in the debt collectors industry are not subject to the control of the Act. The attorneys then make use of this loophole by appointing persons to do their debt collecting function, but these persons or institutions are registered as staff of the attorneys. This is done despite the fact that they clearly do debt collecting work.

The Council has received complaints from people who deal with the furniture and motor industries. People in these industries fall outside the scope of the Act because they collect their own debt, and they do not follow the proper legal procedure. The result is that no legal action can be taken against them under the current legislative framework. Point 11.5 of the Submission is relevant here.

Mr de Meyer added that the problem here is that these people employ independent agents who register as debt collectors, and are not employees of that institution. Yet it has to be noted that in recent times the banking groups have told their debt collecting agents to register with the Council. Here too attorneys would use these agents as debt collectors, and they are not employees of the attorneys. They are the attorneys' debt collecting agents and have to register. The problem is that the attorneys themselves advise these debt collectors not to register, because they are aware of this loophole in the legislation.

Adv Noeth stated that all attorneys should be brought within the ambit of the Act, but when he proposed this to the attorney's profession he was met with strong resistance. He stated that he is of the opinion that if attorneys employ a third party to collect their debts, they should be made subject to the Act.

Discussion
The Chair asked Adv Noeth to explain whether the term "debt collector" has been defined by any piece of legislation.

Adv Noeth responded that it is defined as anyone who collects a debt on behalf of another for remuneration. This definition also excludes attorneys.

The Chair asked why attorneys are excluded.

Adv Noeth replied that this is a problem because their debt collecting practices are now not controlled by the Act.

The Chair stated that unregistered debt collectors must simply not be allowed to collect debts if they have to registered.

Adv Noeth responded that this will be the position only after 11 August 2003. A situation similar to the recent debacle with the new drivers licenses is expected, where businesses will frantically begin registering on 10 August 2003. After 11 August 2003 no debt collector will be allowed to operated unless it has registered.

The Chair asked whether the Act stipulates that debt collectors cannot collect more than a stated amount.

Adv Noeth replied that the Act only applies to registered debt collectors, and clearly stipulates a limit. The problem here is that attorneys are not subject to this Act.

The Chair asked how the Act could be changed to remedy this.

Adv Noeth responded that it would be difficult to do so, unless the public refuses to pay.

The Chair proposed that the current system under Section 23 of the Act, as referred to earlier by Adv Noeth, be left as it currently stands. This Committee will think about this matter and will consider possible solutions to the problem created. The Council has to get together with the Department to begin drafting amendments to the Act.

The Chair stated that he agrees with Adv Noeth that attorneys have to be brought within the ambit of the Act. Sanctions have to be imposed on those who instruct their debt collectors not to register. This has to be made an offence.

Adv Noeth replied that the Act is very much needed to protect the public. Appropriately qualified accountants and legal services are needed to investigate such complaints.

Adv Masutha agreed that this area has to be regulated, because the debt collectors are currently taking the poor for a ride. At what point in the proceedings can the fees structure be changed, so that the debt can be recovered from the debtor?

The Chair asked what limit is imposed by the law on the amount of interest the creditor can charge on the debt amount. The legal problem here is that no contractual relationship exists between the debt collectors and the debtor, only between the creditor and the debtor. How then is the debt collectors able, legally, to collect the debt from the debtor?

Adv Masutha proposed that the debt collectors cannot claim the amount owed until more has set in, because it is only at this point that the debt becomes due and payable. There can thus be no attempts to collect the debt before mora has set in. If fees were to be charged before this date it would amount to a clear departure from the existing common law principles. Would attorneys be able to charge costs for the letters of demand, for example, send to the debtor before mora has set in?

Adv Noeth responded that the Council only controls the matter once the task of recovering the debt has been handed over to the debt collector. The prescribed fees applicable here are stipulated in Annexure B of the regulations to the Act. It provides that the total amount of the fees charged cannot exceed the capital amount owed, or R500, whichever is the larger. There is also a cap for installments paid by the debtor, which is 10% of the amount or R250. These monies can be taxed in the Magistrate's Office.

The Chair asked just how much different the fees structure is for attorneys.

Adv Noeth replied that their fees are much higher.

The Chair asked what the Regulations say about the point at which the debtor has to start paying these fees.

Adv Noeth responded that this will only take place after the debt has been collected. Perhaps they should be compelled to ensure that their debt collectors in fact register, bearing in mind that the deadline for registration is August 2003. The Minister himself has pledged much support for this, and the August deadline will not be extended to accommodate those that have not registered by that date.

Adv Masutha asked whether these debt collectors use summons at all when recovering the debt.

Adv Noeth answered in the negative.

The meeting was adjourned.

Appendix : Suggested Amendments to Debt Collectors Act

SUGGESTED AMENDMENTS TO THE DEBT COLLECTORS ACT 114 OF 1998, THE REGULATIONS AND OTHER RELATED MATTERS

1.INTRODUCTION

1.1 At the outset we wish to express our appreciation to you for allowing us to address you on the practical implications of the Debt Collectors Act, and our experience since the implementation of the Act. As you are aware the Act was implemented with effect from 7 February 2003. Since then we have been in-undated with enquiries and complaints in particular from members of the public. It is obvious that there is a great need for the control envisage by the Act and strict compliance with the provisions of the Act.

1.2. It was soon clear that the Act urgently needs certain amendments. We have endeavoured to briefly sketch these amendments and other related matters in the following paragraphs. We will appreciate an opportunity to meet with you and fully elaborate especially on those amendments which should, in our opinion still be addressed in this session of Parliament.

1.3 Your kind and urgent consideration of the following matters discussed below is appreciated.

2. AMENDMENTS TO THE ACT

2.1 INTEREST ON TRUST ACCOUNT
2.1.1 In terms of section 20(3) of the Act, all interest, if any, on the trust account a debt collector must maintain shall be paid to the person on whose behalf the money as deposited. The Estate Agents Act 112 of 1976, the Sheriffs Act 90 of 1986 and the Attorneys Act 1979, do not contain a similar provision. Debt Collectors complain that it will be very difficult, if not at all impossible, for most debt collectors to comply with section 20(3). From our own enquiries it is clear that to create an IT- program to fulfill this function is very costly. The result is that the small business debt collector will as a result of this provision be forced out of his or her job. We receive many enquiries from people who intend to start this kind of business but it would appear that this particular provision is a huge obstacle. Existing debt collectors also complain that this particular provision is impossible to comply with. The larger companies and close corporations will be able to afford special IT- programs which will assist them in complying with the provisions of the Act. The smaller firms and individuals will, however, not be able to afford such programs. It must also be borne in mind that the banks require a minimum fee to open a trust account. They furthermore charge a monthly fee to keep the account in operation. These fees vary from bank to bank and may amount to as much as R100.00 per month. Some persons who register will in terms of their contracts or manner in which they operate, not be handling any money which has to be deposited into their trust accounts. They none the less must have a trust account and pay the bank charge to comply with the Act. Furthermore, the trust account must be audited on a yearly basis, which will be costly, even in those cases where the account will not have transactions. A debt collector will not be able to offset these costs against any source (compare attorneys, estate agents and sheriffs who can offset against interest earned). The repayment of the interest to the debtor is not cost effective where the collected amount is small.

2.1.2 It must also be borne in mind that one of the objectives of the Act was to encourage natural persons to conduct business as debt collectors and to register as such. This would certainly contribute to more jobs being created. Section 20 of the Act, as it is framed this stage, however, discourages some persons to enter the debt collecting business.

2.2 SUGGESTED AMENDMENT

2.2.1 It is suggested that section 20 (3) be amended as follows:

"Interest on money in an account mentioned in section 20(1) shall, be paid in the prescribed manner to the Council by the debt collector concerned: Provided that, before debt collector pays the interest to the Council, he or she may deduct his or her expenses incurred in respect of his or her trust account, from the interest accrued on the trust account in accordance with a tariff and procedure prescribed by the Board."

3. WHO IS TO TAKE CHARGE OF A TRUST ACCOUNT WHERE A DEBT COLLECTOR CEASES TO OPERATE AS A DEBT COLLECTOR?

3.1 The Debt Collectors Act and Regulations are silent on the question who is to take charge of a Trust Account should a debt collector for some reason or other ceases to operate as a debt collector. The Estate Agents Act, 1976 and Regulations as well as the Attorneys Act 1979 contain clear provisions as to how such an account should be dealt with. It is suggested that the Act and Regulations be amended to urgently make provision for this obvious lacuna of the Act.

3.2 SUGGESTED AMENDMENT

3.2.1 The Estate Agents Act and Regulations could serve as a guide in this regard.

4. REFERENCE TO SECTION 18 IN SECTION 10(1)(a)(ii) OF THE ACT

4.1 The disqualifications to register as a debt collector are contained in section 10 of the Act. In terms of section 10(1)(a)(ii), no person shall be competent to be registered as a collector if he or she has been found guilty of improper conduct in terms of section 18. Section 18, however, does not deal with improper conduct, but with the return of the certificate of registration in the instance where the registration of a debt collector is withdrawn by the Council or a Court. The section that deals with misconduct is section 15 and not section 18.

4.2 SUGGESTED AMENDMENT

4.2.1 The reference to section 18 in section 10 (1)(a)(ii) should be substituted with section 15.

5. A TRUST

5.1 Section 8 and 10(1)(b) of the Act make specific reference to a company, its directors and a close corporation and its members. In Regulations 2(2) and 6, a distinction is made between companies, close corporations, directors, members and officers of companies and close corporations and natural persons. A Trust is not mentioned in the Act or Regulations. A Trust is a legal entity, and the question that arises is whether a Trust can be registered as a debt collector as the Act presently reads. If the answer is yes, the further question that arises is whether the Trust should be treated in the same manner as a company or close corporation. Must the employees of a Trust be treated as officers or natural persons? The Council is of the view that this is a deficiency in the Act which should be rectified. We have already received an application from a Trust to be registered.

5.2 PROPOSED AMENDMENT

5.2.1 The Act should be amended to include a Trust, the Trustees and employees of such Trust.

6. ADMISSION OF GUILT FINE

6.1 In terms of section 15(3)(c) of the Act, the Council may, if it finds a debt collector guilty of improper conduct impose on him or her a fine. No provision is made in the Act to allow a person charged the option to pay an admission of guilt fine. This will mean that a person who is charged with improper conduct of a less serious nature will have to appear before a disciplinary committee, notwithstanding that he or she is prepared to plead guilty and pay a fine. Disciplinary hearings can be very costly. It is recommended that the Act should be amended to provide for the payment of an admission of guilt in cases where the debt collector is prepared to admit his or her guilt and pay an admission of guilty fine. Such provision is regarded as essential.

6.2 SUGGESTED AMENDMENT

6.2.1 It is suggested that the following be inserted in the Act:

"If a person registered in terms of the Act is alleged to be guilty of improper conduct and the Council on reasonable grounds is of opinion that it shall impose a fine on conviction after an enquiry under section 15, the Council may issue a summons prescribed on which an endorsement is made by the Council that the debt collector may admit that he or she is guilty of the said conduct and that he or she may pay the fine stipulated without appearing at the said inquiry. Should the person admit his or her guilt and pay the fine, it will be deemed that he or she had been convicted by the Council on the charge and such conviction can be proved as a previous conviction against the person concerned, should he or she again be convicted of improper conduct."

7. CHANGE IN REGISTERED PERSON'S STATUS

7.1 An employee who leaves the employment he or she was at the time of registration can start a debt collecting business for his or her own account without the Council being aware of the change in such person's status. There is also no obligation on any company, close corporation or natural person to notify the Council of any changes in the information supplied to the Council at the time of registration as debt collector. It is essential that the Council be informed of any changes since registration to enable the Council to have up- to- date record of all registered debt collectors.

7.2 SUGGESTED AMENDMENT

7.2.1 The Council is of the view that an amendment of the Act will not be necessary to deal with the problem, as this can be done by an amendment of the Regulations. If it cannot be done by regulation, then an amendment of the Act is needed.

7.2.2 The following should be considered to rectify the omission in the Act and /or0 Regulations:
i) "Every registration certificate issued in terms of these regulations shall remain the property of the Council.

ii) The holder of a registration certificate shall inform the Council within 14 days of any change in the information supplied to the Council at the time of applying for the issue to him or her of such certificate and, if the information appearing on the certificate is no longer applicable or has changed, such certificate shall forthwith be forwarded to the Council for appropriate amendment thereof or for the issue of a new certificate in substitution thereof.

iii) If a registration certificate was issued to an agent or employee of a debt collector. referred to in paragraph (a) and (b) of the definition of debt collector in section 1 of the Act and such person ceases to be employed or associated with the employer, the employer shall within 14 days of such person ceasing to be in his or her employ, or to be associated, inform the Council of that fact as well a furnishing all available information concerning the whereabouts of such employee or agent."

8. REGISTRATION OF PERSONS NOT IN THE EMPLOY OF AN ATTORNEY, BUT WHO, AS AGENTS COLLECT DEBT ON BEHALF OF AN ATTORNEY

8.1 It has recently been brought to the attention of the Council that some debt collectors indicate that they are not going to register with the Council as they will be providing "administrative functions" for an attorney. The attorney will apparently be the one dealing with the process documents and the courts. As attorneys are excluded from the Debt Collectors Act, neither the collector nor the attorney will be registered.

8.2 In terms of paragraph (a) of the definition of "debt collector", a debt collector is a person other than an attorney or his or her employee or a party to a factoring arrangement, who for reward collects debts owed by another on the latter's behalf.

8.3 Paragraph (b) refers to a person other than a party to a factoring arrangement, who in the course of his or her regular business, for reward takes over debts referred to in paragraph (a) in order to collect them for his or her own benefit.

8.4 In terms of paragraph (c) of the definition, a person who as agent for a debt collector mentioned in paragraph (a) or (b) of the definition, collects debts on behalf of such debt collector, is also a debt collector and has to register as such.

8.5 Whilst an attorney has been specifically excluded from paragraph (a) of the definition, no mention is made in paragraph (b) to an attorney. It can thus be argued that if an attorney for reward takes over debts in order to collect them for his or her own benefit, he or she will have to register as a debt collector, as well as the agent who collects such debts on behalf of the attorney. Paragraph (b) must, however, be read with section 8 of the Debt Collectors Act. In terms of section 8, no person, excluding an attorney or his or her employees, shall from a date fixed by the Minister, act as a debt collector unless he or she is registered as a debt collector. As an attorney and his or her employees are excluded, it would appear that a person who as an agent of such attorney collects debts on such attorney's behalf is also excluded and needs not register as a debt collector. The only "agent" that has to register is a person who collects debts on behalf of a debt collector who is obliged to register as such, in terms of the Act.

8.6 Although the Council is of the view that, a person acting as an agent for an attorney have to register as a debt collector, this is not a clear cut case and it could be argued that the agent need not register. If that is the case, the Council will have no control over the activities of an agent employed by an attorney who do exactly the same as the agent or employee of a debt collector registered in terms of the Act. Such agent will be able to do as he or she likes and the Council will not be able to act against him or her. This will be an untenable situation.

8.7 There are indications that existing debt collectors are reverting to this practice to avoid registration in terms of the Act.

9. SUGGESTED AMENDMENT

9.1 Paragraph (c) of the definition of "debt collector" in section 1 of the Act should be amended to state clearly that any person who as an independent contractor collects debts on behalf of a debt collector or an attorney has to register.

10. ATTORNEYS WHO CARRY ON DEBT COLLECTION ACTIVITIES FROM SEPARATE PREMISES OR UNDER A NAME DIFFERENT FROM THAT OF HIS OR HER ATTORNEY PRACTICE

10.1 According to information received by the Council, the market place is rife with rumors that certain major debt recovery agents, in order to avoid paying registration fees and be bound by the Act and Code of Conduct, are considering reversing their firms into legal practices with an attorney taking over their business even at a nominal fee.

10.2 Another disturbing allegation which came to the Council's attention is that a firm of attorneys which specializes in debt collecting and operates this under an entity separate from their legal practice, intends registering twenty (20) of their debt collectors in term of the Act. The balance of the employees, over a thousand, will be treated as employee of the firm of attorneys.

10.3 If these allegations are correct, it is clear that the purpose is to defeat the objectives of the Act. The Council will only have jurisdiction over the few employees who are registered whilst the Council will not have jurisdiction over the other employees who are the majority. They will also be collecting debts and in all probability as in the past for the collection entity, in whose employ they were whilst not subjected to the Council' jurisdiction.

10.4 As the main objective of the Act is the protection of the public, any action to defeat the purpose of the Act should be put to an end and the exemption of attorneys from the provisions of the Act should be reconsidered. This especially applies to those whose practices mainly concentrate on debt collecting.

11. OTHER RELATED MATTERS

11.1 Delay in registration by debt collectors

11.2 We were originally informed that there are 20 000 plus debt collectors to be registered. We are nearly four months into the registration process and only about 300 has registered up to date.

11.3 Rumour has it that there are deliberate attempts to withhold registration up to the last minute. The reason for this is apparently three fold:

i) To find ways and means to avoid registration.
ii) To cash in on as much as they can in other ways on the lay public until the last minute.
iii) To overwhelm the Council's limited staff at the last minute with applications or registration.

11.4 We are of the opinion that this matter can fruitfully be addressed during the Justice Vote.

11.5 Actions by debt collectors excluded from the Act

11.5.1 We have received complaints that large firms in the furniture and motor markets who collect debts are guilty of serious contraventions of what is forbidden in terms of the Act. In view of the fact that they are excluded from the Act, the Council cannot act against them. It is also unfair that there are one set of rules for registered debt collectors and no control whatsoever for those who are not covered by the Act.

11.6 The Council's limited budget

11.6.1 There are indications that certain debt collectors intend to challenge the Act to avoid registration. The Council has very limited funds and will need assistance from the State Attorney to address such applications.

Adv JJ Noeth (SC)
Chairperson: Council for Debt Collectors

OA de Meyer
Acting Executive Director

2003/05/23