A comparison between formal debt administration and debt review - the pros and cons of these measures and suggestions for law reform (Part 1)

Abstract

Roughly a decade ago, after complaints from consumers about abuse of the debt administration procedure, the Department of Justice and Constitutional Development launched a project aimed at reforming this procedure This project was however suspended because of an independent initiative by the Department of Trade and Industry to reform consumer protection legislature, culminating in the National Credit Act of 2007. Sadly, when instituting the debt reviewing procedure in the National Credit Act the legislature let pass a golden opportunity to properly and completely revise the law regarding debt relief measures. In addition the legislature did not properly consider the relationship between debt review and other existing debt relief measures, in particular the administration order. The aim of the first part of this article is therefore to analyse administration as set out in the Magistrates Court Act and debt review as set out in the National Credit Act, and in doing so to identify certain positive and negative aspects of both these procedures. In the second part of this article a comparison between administration and debt review is drawn and suggestions for possible legal reform are made. The authors suggest that South Africa is in need of a complete reformation of its debt rescheduling measures and that the legislature should make provision for a single measure applicable to all debt rescheduling cases. With regard to the comparison drawn between administration and review, the authors highlight the main issues the legislature should, according to them, take into accordance when contemplating such a new rescheduling process.