Fees a Debt Collector can Charge in South Africa
- Solvendi - A Tradition of Excellence
- 4 hours ago
- 4 min read
Falling behind on debt repayments can be stressful. If your creditor has hired a Debt Collection Agency, then that adds another layer of worry. One of the most common concerns in such situations is how much extra a Debt Collector is legally allowed to charge in South Africa. Well, the good news is that the law provides clear limits to protect you (the debtor), while also allowing creditors to recover their money. In this article, we will talk about how much fees a Debt Collector can charge in South Africa.
On what basis does a Debt Collector Charge Fees in South Africa?
The Debt Collectors Act 114 of 1998 governs debt collection in South Africa. The act requires all Debt Collectors to register with the Council of Debt Collectors, which oversees the industry. Importantly, it also sets out which fees may be charged to a debtor and how much those fees may be.
These fees are detailed in Annexure B of the Act above, which prescribes a list of expenses and their maximum amounts. Due to these regulations, the Debt Collectors cannot simply charge whatever they want. They must abide by this annexure.
Regulated Fees Under Annexure B
The law provides for a range of small charges that Debt Collectors can bill when carrying out specific tasks. Some of the examples are mentioned below.
- Communications via ordinary mail, registered letter, or e-mail: R21,00.- Necessary electronic communications: R3,00 (maximum of 10 electronic communications per month).- Necessary phone calls excluding consultations: R21,00.- Necessary registered Credit Bureau search: R14,00 (maximum of four searches a month).- Attending Taxation: R82,00.- Necessary consultation with debtor: R52,00.
For a full list, we highly recommend checking the link above.
These fees are to be paid by the debtor when a Debt Collector is appointed to handle debt collection-related matters.
In addition, Debt Collectors are permitted by law to take a fee for handling installments that they collect. This is set at 10% of the installment amount, but capped at R509,00 per installment.
Also, it is important to note that all Annexure B fees combined cannot exceed either the outstanding capital of the debt or R1023,00, whichever is less. For example, if you owe R800,00, the collection fees cannot go higher than R800,00, despite the collector's contribution in the debt collection. So, on the maximum side, you are expected to pay at least R1,023 in Debt Collectors' fees.
Commissions and Legal Fees
While Annexure B regulates what a Debt Collector can charge to a debtor, there are other costs that operate differently. Many collection agencies work on commission, charging the creditor a percentage of what they are owed. In South Africa, this percentage is not regulated by law and is determined by contract.
Oftentimes, the creditor is expected to pay from 10% to 20% of the collected debt.
Attorneys who provide debt collection services may also bill legal fees. These can include the following.
Pre-legal work, including letters of demand, negotiations and so on.
Litigation, meaning taking the matter to court. The fees vary depending on the complexity of the case.
Enforcement after judgment costs an additional 5-15% of the recovered amount.
These factors depend on the contract that a creditor signs with a debt collection agency, which serves as the framework for the services and fee structures.
Conclusion
A Debt Collector in South Africa can charge certain fees, but these are tightly regulated by law, as mentioned above. For ordinary debt collection activities, the maximum fees are relatively modest and the recoverable total is capped.
While creditors may face higher commissions or legal costs, debtors themselves are protected from excessive charges. Knowing these rules may empower you as a debtor and make this process less stressful for you. Furthermore, you (as a debtor) may also challenge unlawful fees and manage your debts more confidently.
What can Solvendi do for you?
If your debt has been handed over to collection agencies and you find that the installment you can afford to pay is not reducing the debt, then maybe you should consider Sequestration as an option.
Why? Simply put it means that you cannot move on with your life. Your credit record will be impaired indefinitely or for as long as it takes you to settle the debt, which means that you will not have access to credit in the future. This includes credit like vehicle and home finance. Sequestration can write off a large portion of your debt and you can rehabilitate or become credit worthy within 36-48 months.
If you require sequestration or liquidation services in South Africa, reach out to one of our experts at Solvendi. We are a leading insolvency firm in South Africa specialising in sequestration, liquidation, and credit rehabilitation. For more information, book a free assessment with one of our experts today and find the best solution for your financial situation.
Disclaimer: This article is intended for general informational purposes only and should not be interpreted as legal advice. Any actions taken based on the information provided are done so at your own discretion. Solvendi cannot be held liable for any outcomes resulting from such actions. We encourage you to consult with us directly before making decisions solely based on the content of this article.
Considering Voluntary Sequestration? We have legal experts with 20 years experience that can guide you through the process. Our main aim is to be as informative as possible. Let's Chat.
If you require advice with regards to Sequestration, Business Liquidations, Insolvency, Bankruptcy or Credit Rehabilitation kindly contact SOLVENDI as follows:
National: 087 220 0710
Head Office: 010 880 7589
Email: consultations@solvendi.co.za
Website: www.solvendi.co.za
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