Council for Debt Collectors: Annual Report briefing

JUSTICE AND CONSTITUTIONAL DEVELOPMENT PORTFOLIO COMMITTEE
28 March 2007
COUNCIL FOR DEBT COLLECTORS: ANNUAL REPORT BRIEFING

Acting Chairperson: Ms M Meruti (ANC)

Documents handed out:
Report by the Chairman of the Council for Debt Collectors
Report to the Portfolio Committee for Justice and Constitutional Development 1 March 2006 to 28 February 2007

Relevant documents:
August 2006 Letter from Committee Chairperson about 2006 Letter by Council for Debt Collectors

Audio Recording of the Meeting

SUMMARY
The Council for Debt Collectors briefed the Committee on its mandate and work, and highlighted some of it achievements over the past year. As a result of a communications campaign, which used print and radio media, its profile had been substantially increased. The number of members had grown 30%. There had also been an increase in disciplinary procedures, with 32 matters being finalised. It derived its income solely from members' fees, and as a result of good management of money had managed to keep the fees fixed for the past year. Members had been trained, and most were attending meetings regularly. There was a staff complement of twelve and most of the official languages were spoken. In 2007 the Council would continue its information campaign. Challenges included a lack of government funding and the delays in putting into operation the amending legislation.

Members asked for details of unregistered debt collectors, whether motor finance companies were included, details of Council meetings, the membership of Council, further details on the pending legislation, the publicity campaign, the need to concentrate in rural areas and funding. Members suggested that National Treasury, which had already refused one request, should be approached again, in view of the regulatory nature of the Council's work and the fact that it was dealing with public funds. The relationship with and membership by attorneys were raised, and the possibility of fidelity guarantees by the Council discussed. Members further questioned whether corporate governance principles were being applied, the gender and race statistics on new collectors, and the criteria for membership.

MINUTES
Ms M Meruti (ANC) was appointed as Acting Chairperson.

Council for Debt Collectors (CDC) Briefing
Adv Jasper Noeth, Chairman, Council for Debt Collectors, introduced his team and noted specifically that Ms L Morgan, Executive Secretary, CDC, spoke seven of the official languages and provided enormous assistance to visitors to the Council and in the Council's campaigns.

Adv Noeth told the committee that the Council had more than achieved its goals. The current trend was that there was an increase in the number of debt collectors and there was a growth rate of about 30% in registrations. The total number of registrations of collectors by 28 February 2007 was 12040, which he attributed to the successful 2005 and 2006 campaigns and the successful prosecution of transgressors.

Mr O De Meyer, Acting Chief Executive Officer, CDC, who was in charge of the campaigns, added that the estimated number of listeners was 15 million although the Council suspected that the actual numbers were higher than the given figure. He went on to say that the Council used various print and radio media for the campaign. Its biggest achievement was that the campaign was run in all 11 official languages and he tabled graphs showing the success of the campaign.

Adv Noeth tabled the information sessions and he said that the Council went out to various places throughout the country where it engaged with the debt collectors and tried to empower them with the provisions of the Act. He added that there was an increase in the disciplinary hearings and in two cases the amounts of R19 000 and R7000 plus interest had to be refunded to members of the public. Mr De Meyer added that pages 6-7 of his report carried a detailed report on the hearings and he said the Council had managed to close 32 matters, which was an achievement considering that a single case could take a long time.

Mr de Meyer reported that the Council's income was derived from the obligatory annual fees from the debt collectors, and because of the excellent control the fees had not increased. Most importantly, the Council had not lost money even though there was an attempt to defraud it last week. There were leads on the case that the Council was following. Mr De Meyer added that if the Committee needed more information than the summary before it the Council would be happy to oblige. Adv Noeth informed the Committee that from next year the Council was going to present the first independent report on finances.

Adv Noeth reported that the Council members had undergone two days of training on the provisions of the Promotion of Administrative Justice Act and the procedure and conduct of disciplinary hearings. Council attendance was tabled, and he informed the Committee that it was excellent except for the new appointees Ms Machaba, who was unable to attend any meeting due to prior obligations to the Family Court, and Ms Moletsane.

Mr De Meyer gave the details of the three new appointments. There was a staff complement of twelve, comprising of all races and both genders. Among the staff most of the eleven official languages were spoken.

Adv Noeth tabled the statistics on investigations and prosecutions. He highlighted that the Council received complaints relating to the conduct of debt collectors. 416 complaints that complied with the regulations for submission of complaints were received, and 67 further complaints that had not so complied. Two cases were part heard and 311 had resulted in a decision not to prosecute. 76 were still under investigation. 280 complaints were made over which the Council had no jurisdiction, and these were then forwarded to the relevant authorities.

Adv Noeth tabled the aims for 2007 and he noted that the Council anticipated the big and better campaign, the publication of an annual report, and improved IT systems.

The challenges included the delay in implementation of relevant legislation. It had been assented to by the State President but the Council did not know why it had not yet been implemented. The regulations requiring a debt collector to have his or her trust account audited could therefore not be amended so that the Council would have power to act against a defaulting debt collector. There was therefore insufficient investigating power given to the Council. It was not able to attach the trust account where the registration certificates were withdrawn. The playing fields were not yet level. There was some problem also with attorneys who also ran collection practices.

Discussion
Mr S Swart (ACDP) asked for a rough estimate of unregistered debt collectors and asked if the Council had any plan of action to deal with them.

Mr De Meyer replied that the Council did not know the exact estimate, but was able to confirm that there were a number of unregistered collectors. The Council had been assisted by the public in dealing with unregistered debt. This was because the more the public knew about their rights, the more they would insist on being furnished with a certificate from the person purporting to be a collector. As a result, many collectors were now forced to register. Secondly, the Council kept track of unregistered collectors through the payment of annual fees. If the debt collector failed to pay, he or she was given notice of suspension and allowed three months to pay the fees, failing which the Council would revoke the certificate. If the debt collector then failed to return the certificate the Council would make a follow up. In most cases where the Council had to make follow ups they had found that either the collectors had ceased debt collecting or their numbers were no longer in use, so that they had probably ceased business. Moreover, if the member of the public made a complaint the Council would ask them to lay a charge against the debt collector and if any information was given then the Council would utilise it to institute an investigation against the collector.

Mr L Joubert (DA) remarked that the Council should work towards including motor finance companies in the legislation. He asked if the Council had ever thought of increasing its meetings because currently the Council was only meeting about four times a year and, although they had been performing competently, he believed that more than four meetings were necessary.

Adv Noeth replied that the Council was actually supposed to be meeting only three times a year. The reason for the few meetings was that members of the Council were full time professionals in different occupations. They lived far from Pretoria and the traveling expenses were high. However if something urgent transpired then the Council normally had an emergency meeting in November. Apart from this, the three executive members met on a monthly basis to deal with important issues such as approving registrations and de-registrations, and these monthly meetings were in addition to the four annual meetings.

Adv Noeth commented that he agreed with Mr Joubert in terms of motor vehicle finance companies and other businesses that collected their own debts as the Council had no control over them. He however understood that the new National Credit Act contained restrictions on the businesses that conducted their own debt collections, but he was not sure if these conditions extended to the motor vehicle finance companies.

Mr Joubert asked for the occupations and the remuneration of the CDC members.

Mr Noeth replied that the Chair for the Council received R2 400 whilst the members received R1 754 per meeting. Currently there were two vacancies. Four members were debt collectors, Ms Wilken was a member of the Consumer Council, an attorney appointed by the Law Society of South Africa, Ms Machaba was an auditor with Price WaterhouseCoopers and Ms Moletsane was a civil litigator.

The Acting Chairperson asked for the procedure of screening people as she was amazed that the Council had employed personnel that were proficient in seven or more languages.

Mr De Meyer replied that the Council had been very lucky, and that Ms Morgan, being one of the first staff members hired, was one of those who spoke a number of the official languages. The Council did highlight in recruiting that multi-lingualism would be an added advantage, and it was a factor taken into consideration, although it was obviously not the only main reason for appointments. Other staff members were also proficient in many languages.

Ms S Camerer (DA) asked for the title of the August 2005 legislation and the specific terms of the amended provisions

Adv Noeth replied that the major legislative changes were contained in the General Law Amendment Act. This contained a number of other provisions, and this made it difficult for the Council alone to push for the Act to come into operation. This Act contained the provision that the Council could publish the debt collectors register on their website instead of the Government Gazette, which was cheaper and more up to date, being updated weekly. The other provision was in relation to attachment of the Trust Account and Council hoped to be able to obtain interest on the Trust Account.

Mr De Meyer added that the other main provision was that if a person failed to pay the annual re-registration fee within 21 days it was deemed that the person had withdrawn. This was in order to avoid the whole de-registration process as it was a cumbersome administrative matter. Secondly, it was necessary that the Council be given inspection powers as this would allow it to request bank account details and inquire about certificates. This was helpful in that Council would not have to wait on the public to lay a complaint before it could investigate the existence or otherwise of a certificate. He added that the Council was currently working on a case where a director who had resigned, so in principle the Council did not have jurisdiction over him. It might be that Council had jurisdiction to hold the director accountable for acts done in office, but to make this absolutely clear the Council had requested an amendment in the act in relation to jurisdiction.

Ms Camerer asked if the extraordinary response the Council had received was a result of the campaign, and asked if the Council intended to hold other campaigns. If so, she enquired how it would do so, and at what cost.

Adv Noeth replied that indeed it was because of the publicity campaign in May and June that the Council had received an overwhelming response in July and August. It would repeat the campaign this year from June to July countrywide. It would be more expensive than the past campaign, but the Council had more funds this year and was currently holding talks and getting quotations from publicity associations. He requested that if the Committee members were aware of areas where debt collectors were a problem they should inform the Council so it could concentrate in those areas as well. This request had also been made publicly, as Council was always attempting to empower the people through knowledge.

Ms N Mahlawe (ANC) remarked that the Council should concentrate on the rural areas because these were full of unscrupulous debt collectors. She added that the Council should also use local radio stations.

Mr De Meyer agreed and said that this was one of the measures the Council was concentrating on right now. There were proposals to visit Umtata, Queenstown, and Limpopo province.

Adv Noeth added that if she had any information regarding any particular individual she should not hesitate to give the information.

Ms Mahlawe told the presenters that recently she had been showered with complaints regarding debt collections and as a result would like to invite the Council to her constituency on 18 April so that the Council could address and educate the public.

Mr Noeth and Mr De Meyer gladly accepted the invitation.

Mr G Solomon (ANC) asked the Council whether it felt it should be funded by the government as it was clear that currently it was raising its own resources.

Adv Noeth replied that indeed the Council was not funded by government. Council was told at the outset that it must raise its own funds and it had come a long way. However, there were many actions it would dearly like to take, but was hampered by the necessity to keep a close control on funds. The Department of Justice suggested that as Council was a regulatory body, it should apply for funding, but a request to National Treasury to this effect was refused. He added that it would be useful if the Council received funding from the government to cover its fixed costs, such as salaries, so that the money the Council got from debt collectors could be utilised elsewhere.

Mr Solomon then asked why the Council was appearing before the Committee if it was not being funded by the government.

Adv Noeth replied that Mr De Lange requested that the Council appear before the Committee even though he was aware that the Council was not government funded, because it was a statutory body. Council had agreed to come because it not only gave it the opportunity to showcase its activities, but was also an effective way to be open about management of public funds.

Mr Solomon and other Committee members remarked that the Council should raise these points with National Treasury.

Mr Solomon informed the council that he was of the opinion that attorneys should not be debt collectors. This was because not only did they have a broader capacity to act but were possibly removing viable job options from the unemployed.

Adv Noeth replied that this was a sensitive matter. He was aware that the Deputy Minister Mr De Lange was looking into the matter but the Council was of the opinion that attorney debt collectors should be subject to the same provisions as this would even out the playing field. Secondly, it must be ensured that there was no confusion between the functions of the attorney and the debt collector. There was much public confusion about the two professions. The public was protected because fees relating to debt collection were limited. Council had also had a discussion with the South African law Society over these issues.

Mr G Mgwanishe (ANC) asked where the Council had received the statistics of the people who participated in the campaign.

Adv Noeth replied that the company that provided the statistics had monitored listeners in a similar way that the SABC listenership figures were monitored. He reiterated that he was of the opinion that possibly the number of people reached was higher than the statistics indicated. Some people had contacted the Council more than once.
Mr Mgwanishe asked whether the Council had implemented the principles of the King Report on Corporate Governance.

Mr Noeth replied that the Council had implemented an audit committee, risk policies, and an IT policy. It had drafted an audit draft charter that it was looking to implement. There were also other improvements, such as every member having to sign a declaration form that stated that he or she did not have an interest in any of the matters coming up before the Council. He said that the Council was looking forward to having an independent audit committee.

Mr Mgwanishe asked in which part of the country was there an increase in new debt collectors. He also inquired about the ratio of women and different races.

Mr De Meyer replied that he did not have the figures with him but he promised to send them on. He assured the Committee that many of the new debt collectors were women. It was difficult to assess the race, as some registered as close corporations whilst others worked as sole proprietors. He added that ultimately it was a person’s own decision to take up this particular line of work and the Council could only assist the new collectors with registration.

Mr Swart asked if there was any other protection for the public, such as trust accounts, and if there was any fidelity guarantee by Council if a debt collector disappeared with the money.

Mr De Meyer replied that there were no fidelity guarantee accounts because the Council did not have any funds to establish them. If Council was able to access the interest from the collectors' trust accounts, then the Council might start fidelity guarantee.

Mr Swart asked if there was any truth to the rumours that there were unscrupulous collectors who were collecting debts using physical violence and threats.

Mr De Meyer replied that the Council had never had any complaints where violence or threats were used.

The Acting Chairperson highlighted the 57 refused registrations. She asked for the type of investigations that would be carried out to determine who could become registered. She was concerned that some of the refused new debt collectors might be people blacklisted due to their own inability to pay debts, which in turn might have resulted from retrenchment from a former post.

Mr De Meyer replied that that section 10 of the enabling legislation contained the conditions relating to those who could register. There were four specific offences that barred a person from registering. These included violence and fraud. The Council would assess applications on this basis. Council did not have the power to deal with blacklisted people. He was of the understanding that the Department of Trade and Industry had the relevant power.

The meeting was adjourned.