SECOND ANNUAL REPORT ON THE ACTIVITIES OF THE COUNCIL FOR DEBT COLLECTORS- 1 MARCH 2004 TO 28 FEBRUARY 2005
1.1 We believe that the Council for Debt Collectors has since its inception played a critical role and has made progress in facilitating the development of the debt collecting sector. It has also made great strides in improving respect for debtors rights and dignity. We are confident that the direction that the Council has taken in creating a sustainable industry and protecting the public is the correct one and bearing fruit.
1.2 However, it is still early days in the existence of the Council and there are many significant challenges ahead. The primary challenge is for the Council to further improve the professionalism of debt collectors and to increase the level of awareness amongst the general public of the existence of the Council, its role and functions and to achieve this, the general public must be provided with the necessary information. To achieve effective education and communication the Council endeavours to ensure that communication tools employed are relevant and achieve maximum impact. To what extent the Council will be successful, is, however, dependant on the financial abilities of the Council.
1.3 The Council will ensure that it continues and increases its efforts to stamp-out malpractices when it occurs and act against those debt collectors that engage therein.
1.4 After having successfully handled the initial registration of debt collectors the Council realized that in order for it to carry-out the objectives of the Act, it had to plan ahead. For this reason the Council during August 2004 held a special meeting over two days at which the Councils strategy for the future was discussed in depth. After intense discussions the Vision and Mission of the Council were formulated as follows:
Vision: "The Council for Debt Collectors will effectively carry-out the objectives of the Act and seek to be a recognized leading world class Statutory Council that provides services for the benefit of our stakeholders, the public and the economy."
Mission: " To exercise control over the occupation of the Debt Collector on an ongoing basis by:
- ensuring compliance with the Act, Regulations and Code of Conduct
- recruiting, training and developing our staff in order to effectively carry-out the objectives of the Act
- providing services with the appropriate technology and in a cost effective and customer friendly manner
- encouraging the training and development of Debt Collectors
- ensuring quality in all we do
- developing our Council members and intellectual property resources through the network with strategic alliances and industry contacts.
1.5 After formulating the Mission of the Council the debate turned to exactly what the values of the Council should be and the following values were adopted:
1.6 Project leaders were appointed to act as custodians of the strategic goals set by the Council at the workshop.
2. Grant received from the Swiss Agency for Development and Cooperation
2.1 It must be emphasized that if it was not for the grant received from the Swiss Agency for Development and Cooperation it is to be doubted whether the Council would by now have been operational. They enabled the Council to become fully operational, self sustained and an independent body. At the end of the project period the Swiss Agency was furnished with a narrative report and financial statements covering the full project period. After having received a detailed account of the money entrusted to the Council to get the Council established, the following letter was addressed to the Council:
"We thank you for the Final Report and the audited financial statement on the establishment of the Debt Collectors Council Project covering the entire project period from 12 August 2002 till 31 July 2004.
As both the reports fulfill our requirements, we will transfer the final amount of R16374 to the Debt Collectors account.
We are happy to read that the project did achieve the goal set and that the Council developed and adopted its own strategy for the future.
We would like to thank you for this very satisfying and successful co-operation. It was a special pleasure for us to be able to accompany the Council for Debt Collectors on its way to a fully operational, self sustained and independent body.
To you, Mr Noeth and Mr de Meyer, we would like to express our special thanks for having been so much committed to this project. We wish you and your organization all the best for the future."
3. Financial Overview
3.1 The Council is a self sustaining body. Its only income is from the registration and annual subscription fee payable by debt collectors. As a result of very strict control being exercised and a conservative approach to spending, the Council has been able not only to meet its commitments but was also able to build-up some reserve funds for future projects. Care has been taken of every cent and account can be given for all the money entrusted to the Council. The independent auditors have also approved the Councils financial statements for the financial years that ended on 28 February 2003 and 29 February 2004, without raising any queries. The Council has no reason to believe that the same will not happen in respect of the financial year that ended on 28 February 2005.
4. Human Resources
4.1 The Council operates in a highly challenging environment and one of the strategic aims is to ensure that the organization has a healthy culture of learning.
4.2 The development of skills receives on-going attention and contributes to the high levels of commitment and motivation of the staff. The Council also believes that skills development is important from the employees prospective to ensure that they can fulfill their own aspirations and develop their career path.
4.3 The Council has a small staff component of only seven (7). Owing to their dedication and their strive for service excellence the Council is able to function efficiently. They also succeeded in building a good relationship with all stakeholders in recognizing their social responsibility to our stakeholders and community in which they operate.
4.4 The Councils staff is representative of different races and genders. The present staff component comprises 2 white males, 2 white females, 1 coloured female and two black females.
4.5 Although the staff component is small, they can amongst them speak most of the eleven official languages of South Africa. This contributes to effective communication with the general public.
5. Registration of Debt Collectors
5.1 The number of registrations approved till 29 February 2004 stood at 6580. Since this date there has been a steady stream of new applications to register. The number of debt collectors registered till 28 February 2005 stood at
This amounts to an average of over 40 per month since the first person registered on 25 February 2003. Anyone who has the slightest knowledge of what is involved in the registration of only one application will realize that this is an excellent achievement taking into account that applications are finalized without any undue delay. This could only be achieved due to the dedication of the members of the Executive Committee and the staff.
5.2 Although there was a steady stream of new applications for registration, this did not result in a marked increase in the number of debt collectors presently in the industry. A number of registered debt collectors requested that their registrations be cancelled as they are no longer doing debt collecting. A substantial number, although still registered, are also no longer doing debt collecting, but have failed as required by the Regulations to notify the Council of their change in status. These cases are all followed-up to ensure that the register of debt collectors is a true reflection of active debt collectors.
5.3 During the report year the Council refused .. applications. The main reason for this was that the applications were defective and the applicants failed to rectify the defects after the defects had been pointed out to them and they had been informed of the consequences should the defects not be rectified. In a number of instances the applications were refused because the prescribed fees had not been paid.
5.4 In cases the registrations of the debt collectors were withdrawn because of their failure to pay the prescribed annual subscription fee. In all cases the registrations were only withdrawn after the persons concerned were informed of the consequences of a failure to pay the prescribed fee and having been given an opportunity to submit, either personally or through a legal representative, reasons why the registration should not be withdrawn.
5.5 A matter of concern is that there are apparently still a number of persons involved in debt collecting who have not registered. As this is an offence such matters have to be reported to the police for investigation and prosecution. So far one person of whom the Council is aware has been prosecuted and sentenced. What is surprising is the fact that registered debt collectors are unwilling to lay charges with the police against unregistered debt collectors. Members of the public are more inclined to do so. The response of the police to these charges is, however, disappointing. The Council can only act as a complainant if it is put in possession of facts which prima facie show that a person is acting as a debt collector whilst not registered. A number of such matters have been reported to the police. The Council is also at present investigating the possibility to appoint private investigators to investigate some of these cases. The costs of such investigations is, however, a factor to be borne in mind.
6. Activities during the year
6.1 Last year the Council was under pressure to process the applications for registration. This year it mainly had to attend to the payment of annual subscription fees and related problems. Whilst the Council is thankful for the co-operation it received from most debt collectors there were unfortunately some who caused major problems for the Council and its staff resulting in unnecessary additional pressure being put on the staff and additional expenses. Although a subscription control list is sent to employers with the request to confirm that the particulars therein are correct, this request is not always acceded to. Even though the consequences, namely suspension of registration if the subscription fee is not paid, are pointed out to debt collectors, many fail to pay by due date. When payments are made into the Councils bank account, it is often made without any indication as to the purpose and on whose behalf the payment is made. Proof of payment is also not submitted to the Council. This makes it very difficult to reconcile statements and monitor payments and places an unnecessary additional burden on the staff. The follow-up on defaulters is also a very long drawn-out procedure before the Council can withdraw the registration of a debt collector who has failed to pay the annual subscription fee.
6.2 With the payment of annual subscription fees it also transpired that in many cases where a person has been registered as an employee of a debt collector, such an employee has long ago ceased to be associated with or to be in the employ of the debt collector. Neither the employee nor the employer, however, informed the Council as required by Regulation 2A.
6.3 Owing to the passage of time since such a person left the employ of the debt collector and the Council becoming aware thereof, the follow-up on these persons are difficult. Many of them do not respond to letters written to them. A concern to the Council is that there may be some persons who are in possession of a certificate of registration who are now collecting debt for their own account without the Council being aware of it and without a trust account. The Council is at present investigating two such cases. If this trend continues the Council will take appropriate steps to ensure compliance with the Regulations.
The fact that the present certificate remains valid until withdrawn, adds to problems experienced regarding the non-payment of fees. In order to address the practical complications the present certificate of registration creates, the Council decided to approach the Minister to amend the Act and Regulations to enable the Council to issue a certificate of registration which will only be valid for 12 months from date of issue. A debt collector will then be furnished with a new certificate on payment of the prescribed annual fee. This should, to a great extent, solve the problems presently experienced.
6.4 Another cause for concern is the late submission of audit certificates. The Regulation as presently formulated does not have a sanction for the non-submission of audit certificates. Although letters are written to defaulters, there is very little else that the Council can do to ensure compliance with the Regulation. As a result the Minister has been requested to amend the relevant Regulation to enable the Council to act in cases where audit certificates are not submitted.
6.5 The following facts regarding trust accounts have also come to the Councils attention:
6.5.1 Some debt collectors who did furnish particulars of a trust account when applying for registration apparently in fact never opened a trust account.
6.5.2 Other debt collectors who do not handle money closed their trust accounts.
6.5.3 In some cases the bank closed the trust account because there were no transactions on the account.
6.6 In terms of section 20 of the Act every person who practices for his or her own account must not only open a trust account, but shall maintain it for as long as such person is registered as a debt collector. No provision for any exceptions exists. The Council considers non-compliance with the provisions applicable to trust accounts in a very serious light and appropriate action is taken, especially against those who furnished incorrect information.
7. Complaints and Enforcement
7.1 In addressing debtors complaints, the Council makes every effort not to undermine the relationship between debt collectors and creditors on the one hand and between debt collectors and debtors on the other hand or to absolve either one of the parties of their obligations. This, however, does not mean that the Council does not take appropriate action where justified. The Councils message to debt collectors has been unambiguous, compliance with the Act, Regulations and Code of Conduct is non-negotiable.
7.2 As the public has become more and more aware of the Councils existence there has this year been an increase in the daily calls received not only from debtors but also from debt collectors seeking guidance. A fair percentage of the calls are from debtors complaining about the conduct of persons doing debt collecting but who are exempted from registering with the Council. As in the past, these complaints are referred to instances who may be able to assist them. A fair number of debtors who approach the Council are under the wrong impression that the Council can assist them with their debt problems or in solving disputes with creditors on their behalf.
7.3 One of the challenges that faced the Council during this year was to investigate complaints lodged as prescribed by the Regulations. In dealing with the complaints it became apparent that the provisions of the Act and Regulations are in many aspects unclear and ambiguous. The implementation thereof causes many problems in practice. The biggest problem is that no distinction is made between the investigation procedure and the hearing itself. Everything is intertwined. This problem necessitated the Council to request the Minister of Justice and Constitutional Development to consider amending the Act and Regulations. Proposals as to how the Act and Regulations should in the Councils view be amended were submitted to the Minister for consideration. If these amendments are granted, it will enable the Council to deal with complaints more speedily and effectively.
7.4 Although the Council experienced an improvement in the conduct of debt collectors, there is still a fair number of incidences that has to be investigated. During the year the Council received . complaints which complied with the Act and Regulations. In .cases the Council after investigation decided not to charge the debt collector concerned with improper conduct. In a number of instances the complainant after having had his or her complaint investigated indicated satisfaction with the outcome and requested that no further steps be taken. In a number of cases where disciplinary action was not deemed necessary guidance was nonetheless given to debt collectors to prevent a recurrence.
7.5 of the complaints received are still being investigated. In the investigations have been completed and a decision as to whether the debt collector should be charged is still to be taken. In .. of the complaints investigated it has been decided to charge the debt collectors concerned with improper conduct. These hearings will be finalized in the near future. The allegations at the basis of these charges are:
7.5.1 Use of an unregistered person to collect debts.
7.5.2 Operation without a trust account.
7.5.3 Non-compliance with the provisions of section 20 of the Act.
7.5.4 Misrepresentation of facts in contravention of paragraph 3 of the Code of Conduct.
7.5.5 Failure to notify the Council of any changes in the information furnished in the application for registration.
7.5.6 Trying to recover fees not allowed by the Act and Regulations.
8.1 Although there are still many challenges ahead, the Council and its staff can justly be proud of what has been achieved since 7 February 2003 when the Debt Collectors Act was put into operation. The Council can, however, not rest on its laurels but will continue to ensure adequate and improved debtors protection, laying of the basis for a sustainable industry and developing external confidence in the debt collecting industry.
Signed at Pretoria on this . day of March 2005.
Adv JJ Noeth S.C O A de Meyer
Chairman Acting Chief Executive Officer