Know your rights – Credit Health Article

Clarifying Emolument Attachment Orders, illegal judgements and the In Duplum Rule

Do you have a garnishee order against your salary where your employer is deducting money from your salary and paying it over to your creditors? Do you know how this process occurred and what your rights are?

Emolument attachment orders (EAOs) are commonly, but mistakenly, referred to as ‘garnishee orders’. An EAO is granted in terms of the Magistrates’ Courts Act 32 of 1944 (MCA) and orders an employer (referred to as a ‘garnishee’, hence the confusion) to make deductions from a debtor’s salary or wages and pay these over to the creditor or his/its attorneys.

An emoluments attachment order can be obtained in one of the following three instances:
• Where the court has authorised it;
• Where the judgment debtor has consented to it; or
• Where the creditor first sends a registered letter to the debtor advising him or her that the judgment debt plus costs is still unpaid and warning that an EAO will be issued if not paid within 10 days. The creditor must also file an affidavit at court to confirm the outstanding amount.

The second and third instances create problems. In the case of a written consent, the clerk of court has no way of verifying that the debtor actually signed the consent or ascertain the reasonableness of the instalments consented to or even the circumstances under which the consent was obtained.

A recent debt summit showed that there is still continued widespread abuse and exploitation of garnishee orders together with judgments granted on irregular procedural steps.

With these illegal judgments and orders often comes excessive accumulation of interest. Time and time again debtors find themselves paying of a debt that seems to never reduce, and in fact increases, despite numerous payments made towards the Creditor. The In Duplum Rule protects debtors from exploitation by ensuring that their creditors cannot allow interest to accumulate indefinitely. Even though the In Duplum Rule has been a part of South Africa’s law for more than 100 years this rule is often ignored enabling creditors to claim indefinite amounts of interest for an indefinite period of time. The In Duplum Rule states that unpaid interest on debt owing ceases to accumulate once it reaches the amount of the capital sum. In other words, if you owe R50 000, the interest and fees cannot exceed R50 000. The In Duplum Rule does not apply only to borrowed money, but to all debts (including judgement debts) arising from a capital amount that is owed.

There is a clear and continuous abuse of power by lenders who permit interest to accumulate unchecked resulting in exploitation of borrowers. It is now time for debtors and consumers to enforce their right and seek appropriate relief.

This means that even if you owed the money to the creditor at the time judgment was granted, it may be rescinded in court, provided is was taken in an irregular manner in terms of Court Rule. Once rescinded the judgment listing will subsequently be removed from you credit records.

 

Can’t get a home loan? Help to get a home loan and buy a property with Rent to buy or rent2buy

] 25 Mar 2014

 

So many South Africans cannot get a home loan because they do not have the required 15 percent deposit or enough savings to cover the transfer duty and bond costs that have to be paid out-of-pocket to buy a home.

Essentially, the Rent-to-Buy approach involves the prospective homeowner securing the ideal property at today’s market value by signing a rental agreement on the property for 12 or 24 months, with the option to buy the property at the end of the rental period at a fixed purchase price at the commencement of the agreement.

Others have impaired credit records that exclude them from obtaining home loan finance, while some are considered high risk by the banks because they already have extensive credit commitments and lack sufficient affordability.

This is according to Meyer de Waal from Oosthuizen & Co Meyer de Waal Attorneys, who says if you cannot obtain a home loan from the banks, don’t give up on your dream of owning your own home.

He says while it requires a slightly longer-term strategy, there is an alternative approach: Rent-to-Buy or Rent2buy.

De Waal explains that before granting a home loan, banks will require a good credit rating and proof of affordability that the prospective homeowner can pay the home loan instalments each month – and, most likely, a deposit.

He says if prospective homeowners cannot fulfil all of these requirements immediately, they will have to wait longer to own their own home, while they build up a good credit record, proof of affordability and a deposit. But, he says this could mean losing the opportunity to buy the ideal property or paying more for a property a year or two down the line. Rent-to-Buy is the solution to this problem, he says.

Essentially, the Rent-to-Buy approach involves the prospective homeowner securing the ideal property at today’s market value by signing a rental agreement on the property for 12 or 24 months, with the option to buy the property at the end of the rental period at a fixed purchase price at the commencement of the agreement.

During the rental period, the prospective homeowner pays a rental that is slightly higher than the average market-related rental and equivalent to the monthly instalments on a bond for the property. This allows him to build up proof of affordability over the rental period, as well as time (six to 24 months) to rehabilitate and maintain a solid credit record.

Furthermore, a portion of the additional rental can be credited to the buyer on transfer to be used as a deposit when the property is bought at the end of the rental period.

As such, the benefits for buyers include taking immediate occupation of their dream home and securing the property at a purchase price based on today’s buyers’ market, without the immediate upfront requirements of a deposit, bond approval and payment of transfer duties, legal costs and bond registration costs. While the buyer is occupying the property, he has the time to build up the deposit, a solid credit record and proof of affordability.

The seller also benefits as the buyer assumes responsibility for the levies, rates and taxes, and maintenance, and receives an above-average rental income, which can be insured through the unique Rent-to-Buy insurance product to ensure the rental is received in full and on time each month and to cover the costs of recovering outstanding rentals or evictions.

De Waal says the Rent-to-Buy concept will help prospective home buyers who cannot obtain a bond now to make their homeownership dreams come true, while also relieving distressed or keen sellers from the financial responsibilities involved in owning a property.

He says it is a win-win situation for all involved and a practical alternative for those who have found their dream home but risk losing the opportunity because they cannot get bond approval immediately.

For more information, visit www.irent2buy.co.za.

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The Importance of creating a Trust

An Inter Vivos Trust is the most effective form of estate planning in the sense that on the one hand a separation of legal ownership and administrative control occurs and on the other hand a separation of beneficial ownership occurs.

Below are a few ABC’s pertaining to the establishment of a Trust:

How is a Trust created?

Step one is to consult a Legal Practitioner to ascertain whether the establishment of a Trust would be suitable for you.

Secondly if it is appropriate, a Trust Deed Agreement will be drawn up, as this is the foundation for the establishment of the Trust.

Once the requirements which are set by the Master of the High Court are met, the Deed is registered with the Master and the Master then issues the formal Letter of Appointment which enables the Trustees to act.
There are certain key features which are fundamental to the establishment of a Trust:

• The Founder who is also known as the Donor is the person who forms the trust,
• The Trust Deed is the instrument which gives legal recognition to the Trust,
• The Trustees manage the Trust assets,
• It is important to appoint an independent trustee to co-manage the trust
• The Beneficiaries are the members who qualify to benefit from the Trust.

The advantages of creating an Inter Vivos Trust:

• A Trust survives the life of an individual in the sense that it can provide continuity, which ensures that the affairs of the deceased continue after such death and without any interruption,
• Trust Assets are generally protected from claims which may arise from matrimonial or relationship disputes,
• A Trust can protect one’s assets from creditors,

A Trust can be employed for the benefit of someone who is either physically or mentally disabled or who is under the age of 18.

 

The administration of a Vivos Trust:

• It is important  that the trust at all times be administered property to provide the maximum security and protection of trust assets.

Meyer de Waal & acknowledgement to Schoeman attorneys

 

Property Finance & Property Purchase – Be on top of your game when you apply for a home loan

WHY PAY THE BOND OF YOUR LANDLORD? – SECURE YOUR OWN PROPERTY WITH RENT2BUY

We are excited to share the latest media cover on Rent2buy with you:

Read the article that appeared in Property 24 on 18 March – http://www.property24.com/articles/finance-solutions-for-property-buyers/19535

GET ON TOP OF YOUR GAME
There are 20.1 million credit active consumers in South Africa and the shocking statistics are that almost 49 % of them have debt impairments.

During a workshop with a leading home loan institution we learned some valuable information how credit scores are compiled and we want to share this valuable information with you:

• 35 % of your credit score is made up of your “payment profile” –

o What is a payment profile you may ask?

Your payment profile – is the manner in how you do your regular monthly payments – are you paying all your accounts on time and the full amount required every month? If not so – then you stand the chance of being listed a “slow” payer and then your credit record may show a low score.

“Why do I need a good or a high credit score?” – you may ask – The answer is simple – Every time you apply for credit – the credit provider looks at your credit score and if you have a low credit score – they will either decline your credit application – or load your interest rate – as you may be a risk to them – as you conduct has shown that you do not keep to the payment structure required to pay off your loan.

HOW DO I MAKE SURE THAT MY PAYMENTS ARE MET ON TIME?

Our answer –

• take control of your budget – make use of free budgeting tools – like Mobile2budget. http://www.mobile2budget.com

• Plan your budget and track each rand that you spend.

• Make sure that you pay all your accounts – earlier rather that one day late.

GET ON TOP – FIND OUT WHAT IS MY CREDIT SCORE?

If you are interested to move forward – please complete the link below “top of your game”

GET ON TOP – HOW TO BUY YOUR FIRST HOME –

WORKSHOPS – HOW TO BUY YOUR FIRST HOME

We have commenced with the 2014 workshops –

HOW TO BUY YOUR OWN HOME – and just completed the first of 3 x workshops and received fantastic feedback from the participants.

If you are interested to attend or find our more – please complete the link below “top of your game”

FOR MORE INFORMATION

For more information – what you require and to get a

My Budget Fitness consultant to contact you – pse provide us with more details – click on http://budgetfitness.maxrover.co.za/top-of-your-game/
– and complete the details.

Education for First-Time Home Owners

 

Finance solutions for Property Purchasers – Rent2buy

Over the last few years, many South Africans have seen their dreams of owning their own home dashed due to the difficulty in obtaining a home loan and the cost thereof.

The Rent-to-Buy (R2B) concept allows home buyers to secure and occupy the home they want now, even though they cannot obtain a home loan.

This is according to Meyer de Waal from Oosthuizen & Co Meyer de Waal Attorneys, who says however, South Africans should not abandon their dreams of owning a home, but should rather look for solutions to the challenges they are facing.

A major challenge is that banks are declining almost half of all home loan applications, and those who are self-employed have little chance of obtaining finance. The availability of finance for buying a home is likely to become even more constrained if the government’s proposed credit amnesty comes into effect, which will make the banks even more stringent in their credit criteria as they will be unable to assess consumers’ full credit histories.

It is also expensive to get a home loan because the banks are no longer lending at the prime rate, which now stands at nine percent, but apply prime plus rates, which impact the monthly repayments significantly. This often makes the repayments unaffordable in light of consumers’ already tight budgets, given the skyrocketing costs of living, as well as the high level of South Africans’ debt-to-income ratio.

The recent surprise interest rate hike may well signal the upturn in the interest rate cycle, with higher interest rates coming sooner than expected, and this will further increase monthly home loan repayments. In addition, prospective buyers must have substantial savings because the banks are demanding deposits as high as 15 percent, and buyers must also cover the significant costs involved in buying a property such as transfer duty and bond costs.

However, De Waal says there are a number of ways in which South Africans can overcome these challenges. “The first is to manage your money prudently, ensuring that you can save a little every month after paying all your expenses and build a solid credit track record. This will significantly improve your chances of getting a home loan approved. The second is to look for alternatives such as the Rent-to-Buy approach and instalment sales.”

The Rent-to-Buy (R2B) concept allows home buyers to secure and occupy the home they want now, even though they cannot obtain a home loan. Essentially, the home buyer rents the property at a higher than average rental for a year or two, with the option to buy the property at the end of the rental period, but at a purchase price fixed at the beginning of the rental period.

Over the rental period, the potential homeowner builds up a solid track record of paying a monthly rental amount equivalent to monthly bond instalments, which will provide the banks proof that the buyer can afford the bond repayments. In addition, the monthly amount paid above the market-related rental can be used to build up a deposit. In this way, buyers can secure and occupy their dream home now, while building up a payment track record and saving up a deposit which will greatly improve their chances of obtaining a home loan at the end of the rental contract.

Another option is an instalment sale, in which the buyer offers to pay the seller monthly instalments over five years to settle the purchase price. Often, the buyer will simply take over the seller’s current bond repayments, with a commitment to settle the full outstanding bond amount within five years, either by paying additional amounts into the bond over the five-year period or by obtaining a loan to settle the much-reduced balance before the end of the five-year period.

This approach is made possible through the Alienation of Land Act, which provides solid protection for both the seller and the buyer through a specialised contract between the parties. The benefit to the buyer is that he does not have to obtain a home loan, while the benefit for the seller is that the property can be sold immediately, which is often the most important consideration for many distressed sellers who simply can no longer afford the property, need to relocate urgently for work purposes or want to vacate the premises as soon as possible following a death or divorce.

De Waal suggests that South Africans who are serious about owning a home and cannot obtain home loan finance should seek expert help to make their homeownership dreams come true. He says don’t simply abandon your dreams of owning a home. There are alternative approaches beyond getting a bond application approved, and with the right expertise and assistance, you can make your dream a reality, he says.

For more information, visit http://www.irent2buy.co.za.

 

Credit Amnesty – Latest – Feedback from Experian

Further to our previous communication outlining the published ‘Removal of Adverse Consumer Information and Information Relating to Paid up Judgements Regulations 2014’, a delegation from the Credit Bureau Association (CBA) met with the Department of Trade and Industry last week to seek further clarity on the Regulations.
Based on feedback from that meeting, we can confirm:
• The effective date of the Regulations is 1 April 2014;
• Effective 1 April 2014, credit bureaux are prohibited from making any information which qualifies for removal in terms of the Regulations, available to credit providers or other parties who may request it; and
• The information that qualifies for removal by no later than 1 June 2014, is adverse consumer credit information (as defined in s1 (a) to (d) of the Regulations) and paid up judgements as held on the database at 1 April 2014.
The DTI also clarified that the removal of adverse consumer credit information applies only to the status codes assigned to the various categories of adverse behavioural and adverse enforcement actions, and does not apply to the removal of the payment profile information. Thus, for those data suppliers who are members of the Credit Providers Association (CPA), they will continue to view payment profile information supplied by the various CPA members. Ensuring this information is up to date is therefore of benefit to all parties.
The DTI further confirmed that with respect to the on-going removal of all paid up judgement data, credit providers will be required to furnish all registered credit bureaux with information relating to paid up judgements within seven days of receipt of payment of the capital amount.
With effect from 1 June 2014, credit bureaux are also required to remove paid up judgement data within seven days of receipt of proof of payment. The DTI confirmed that in the event of a data supplier failing to respond to a request from a credit bureau to verify proof of payment, where this is received from a consumer (or their agent, attorney or the likes) within the seven day period, the credit bureau must remove the judgement from the record. To this end, we expect the current proactive engagement of the industry to discuss the operational implications of the new regulations to result in a solution(s) that will ensure efficacy for all parties in implementing processes that meet the requirements of the new regulations.
Experian has as its current priority the requirement to ensure compliance by 1 April, 2014. Our account managers will be engaging with you directly to discuss the impact on our consumer information data systems and related services.
In respect of the obligation which prohibits the credit bureaux to make available any information which qualifies for removal in terms of the Regulations, from 1 April 2014, we would like to inform you that to ensure that Experian is compliant in this regard and to allow for the relevant system changes to be implemented, we will suspend the processing of both scheduled and ad hoc batches between 28 March and 2 April 2014 (inclusive). As has been requested, we ask that should you anticipate that you will require batches to be processed during this time, that you submit your requests and input files by no later than 25 March 2014. Any batch requests received beyond 25 March will be processed for release after 2 April 2014.
Please do not hesitate to contact your account manager should you require any additional detail.