The National Consumer Tribunal (NCT) has cancelled the registration of a Cape Town debt counsellor following a court judgement.
Christopher Bornman, a Cape Town debt-counsellor’s registration was cancelled by NCT with immediate effect on 13 December 2010. This was in response to an application brought by the National Credit Regulator (NCR). This was done as a result of numerous complaints the NCR received from consumers.
Christopher Bornman, a Cape Town debt-counsellor’s registration was cancelled by NCT with immediate effect on 13 December 2010.
This was in response to an application brought by the National Credit Regulator (NCR).
This was done as a result of numerous complaints the NCR received from consumers.
Bornman had subsequently lodged an appeal against the decision and the said appeal was heard by the North Gauteng High Court during September 2011.
Through its Honourable Judge Ranchod, the North Gauteng High Court handed down a judgment on 28 March 2012, where Bornman’s appeal was dismissed with costs.
“The effect of the judgment is that the NCT’s decision is final and Bornman’s cancellation as a debt counsellor remains in force,” says Advocate Zweli Zakwe, acting manager for investigations & enforcement at the NCR.
The Judge ruled in favour of the NCR and the appeal dealt with the following:
- Bornman acted in the capacity of both attorney and debt counsellor and in that capacity he levied a fee of 10 percent collection commission from consumers.
Bornman’s Counsel advanced legal argument that the collection commission was in fact a retainer for legal work to be performed by Bornman in his capacity as an attorney.
The Court held that a debt counsellor fulfils a statutory function and as such may not deviate from his prescribed functions.
- The Court held further, that in terms of Bornman’s conditions of registration he was prohibited from levying the 10 percent collection commission neither in his capacity as debt counsellor nor in his capacity as an attorney as this compromises his independence in the role of debt counsellor and creates the potential for a conflict of interest.
- Bornman advanced the argument that the complainants who submitted complaints to the NCR should have been joined to the application and by failing to have joined them, the National Credit Regulator cannot request a refund for these consumers.
The court held that the Regulator is not required to join every complainant as a party in matters where a debt counsellor is to be prosecuted.
- Bornman would in certain instances send a Form 17.1 and Form 17.2 notification in terms of Section 86 read with Regulation 24 of the National Credit Act in one document to credit providers with a provision stating that should they not respond to the said notices they would be deemed to have accepted same.
The court held that in doing so, Bornman had effectively denied the consumer a proper system of debt restructuring as contemplated in the NCA as neither the NCA nor the Regulation provide for these forms to be combined.
Through its Honourable Judge Ranchod, the North Gauteng High Court handed down a judgment on 28 March 2012, where Bornman’s appeal was dismissed with costs.
- The court further held that the NCA only provides for natural persons to be registered as debt counsellors. Therefore, by including on his attorney letterhead that he is a debt counsellor, Bornman was acting in contravention of the Act as this creates a misleading impression to consumers that any funds received by Bornman in his capacity as a debt counsellor from consumers are protected trust funds.
- Bornman further appealed against the decision of the Tribunal that he was ordered to refund all past and current consumer clients the amounts paid by them as debt counselling fees.
He alleged that that Tribunal lacked the authority to grant such order and the Regulator monitoring and deciding which fees Bornman was legitimately entitled to for services rendered is inappropriate as it renders the Regulator executioner of its own relief.
The Court held that the Tribunal may make an order for refund of these fees by the debt counsellor and the Regulator could monitor same.
- The Court therefore, dismissed Bornman’s appeal in all the circumstances with costs.
- This is an industry changing judgment for the Regulator, which confirms that only natural persons may act as debt counsellors and debt counsellors should abide by their conditions of registration, the provisions of the Act and the fee guidelines the Regulator has endorsed.
Failure to do so will result in enforcement action being taken against such debt counsellors with serious repercussions for their non-compliance.
Bornman has continued to operate after the cancellation of his registration due to the fact that he had appealed and all his consumers were still with him.
The client’s files now need to be surrendered to the NCR for handover to a new debt counsellor, adds Zakwe.
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