Standard Bank will oppose a court bid by the National Credit Regulator (NCR), which wants a court to order that the common law set-off has been superseded by section 124 of the National Credit Act (NCA).<\/p>\n
\u201cAn application for a declaratory order on the effect of section 124 of the National Credit Act on the common law rule of set-off to obtain legal clarity, has been served on Standard Bank by the National Credit Regulator,\u201d Standard Bank spokesperson Ross Linstrom told Fin24 on Tuesday.<\/p>\n
\u201cOur interpretation is that the common law rule of set-off can be applied because section 124 of the National Credit Act does not replace or amend this rule,\u201d he said.<\/p>\n
\u201cWe are opposing the application.\u201d<\/p>\n
The NCR applied for a declaratory order in the North Gauteng High Court against Standard Bank, it said in a statement on Tuesday.<\/p>\n
\u201cThe NCR had received complaints from consumers, in relation to instances where the bank had taken monies, which had been deposited into their accounts held with Standard Bank and used these amounts to settle arrears on Standard Bank debts,\u201d Jacqueline Peters, manager of investigations and enforcement at the NCR, told Fin24 on Tuesday.<\/p>\n
\u201cConsumers in these instances are left with no monies for their ordinary day to day living expenses or other debt obligations, ultimately leaving already over indebted consumers in a far worse situation,\u201d said Peters.<\/p>\n
\u201cThe typical application of the common law set-off is found in the banking industry where a bank would transfer funds from a consumer\u2019s savings account to settle an outstanding balance on the credit account without the consumer\u2019s authorisation,\u201d said Nthupang Magolego, senior legal advisor at the NCR.<\/p>\n
\u201cThe consumer\u2019s savings account is debited in order to settle a debt owed under a credit account,\u201d said Magolego.<\/p>\n
Practice can put a consumer in financial difficulties – NCR<\/strong><\/p>\n The common law set-off is applied when two persons owe each other and the debts are extinguished by setting them off against each other, the NCR explained.<\/p>\n \u201cThis practice can put a consumer in financial difficulties since the consumer can be left with little or no money to pay other creditors or meet their living obligations,\u201d said Magolego.<\/p>\n \u201cThe position of the NCR is that a bank must obtain the consumer\u2019s authorisation to transfer funds from the consumer\u2019s savings account to settle the debt owed to the bank under a credit agreement.\u201d<\/p>\n Section 124 of the act says that \u201cbefore making a single charge\u2026 the credit provider must give the consumer notice in the prescribed manner and form, setting out the particulars as required by this subsection, of the charge or charges to be made under that authorisation.\u201d<\/p>\n An on-going issue between NCR and banks<\/strong><\/p>\n Clive Pillay, ombudsman for Banking Services, said in a 2009 note that the Code of Banking Practice \u201conly requires the bank to advise you afterwards that it has applied set-off to an account\u201d.<\/p>\n Banks have been going against the NCR’s recommendation for years.<\/p>\n \u201cThe National Credit Regulator does not agree with the legal opinions that the banks obtained and remains of the view that the banks may not apply set-off on any loan contracts entered into after 1 June 2007 unless it is done in accordance with the provisions of the NCA \u2013 Section 124.<\/p>\n \u201cThe current position however is that the banks are applying the common law principle of set-off despite the view of the National Credit Regulator.<\/p>\n \u201cUntil the issue is resolved by new legislation or a court of law the banks will therefore continue to apply set-off.\u201d<\/p>\n