Debt Collectors Pack

Every business collecting debts on behalf of third parties for reward must register with the Council for Debt Collectors (CDC) before commencing operations. Application under s9 of Act 114 of 1998 requires: company registration (CIPC), proof of business address, fingerprints of all directors/members, declaration that no director/member has been convicted of an offence involving dishonesty in the preceding 10 years, proof of trust account at a registered bank (s21), and payment of prescribed registration fee. Penalty: Collecting debts without CDC registration is a criminal offence — fine or imprisonment up to 3 years (s15). Unregistered collectors cannot legally charge collection fees; amounts collected may have to be refunded.

Every natural person who personally collects debts for reward (whether as principal, employee, or agent) must be individually registered with the CDC. Application requires: SA ID or valid work permit, fingerprints, criminal record clearance, declaration of no disqualifying convictions, and payment of prescribed individual fee. The employer must verify individual registration before the person collects any debt on its behalf and retain proof of registration in personnel records. Penalty: Employing an unregistered debt collector is an offence (s15) — fine or imprisonment up to 3 years. The individual is also liable for prosecution.

Every registered debt collector must open and maintain a separate trust account at a registered bank in terms of s21 of Act 114 of 1998. All money collected on behalf of creditors must be deposited into the trust account without delay (within 1 business day of receipt) and held in trust until paid over to the creditor, less the collector's legitimate fees and charges. Money in the trust account is not available to the collector's creditors in the event of insolvency. The trust account must be clearly designated as a 'Debt Collector's Trust Account' and the bank must be notified in writing of the trust nature. Requirements: separate trust account records for each matter, monthly reconciliation, no overdrafts permitted, interest belongs to the creditor unless contracted otherwise. Penalty: Failure to maintain a trust account or misappropriation of trust money — fine or imprisonment up to 3 years plus civil liability to the creditor.

The CDC Code of Conduct requires all individual debt collectors employed by a registered business to receive ongoing training on: (a) the Debt Collectors Act and Regulations; (b) the CDC Code of Conduct; (c) prescribed Tariff of Fees; (d) debtor rights including prohibition on harassment, threats, debtor shaming, contact outside reasonable hours, and contact with third parties about the debt; (e) NCA s129 requirements for credit debts; (f) POPIA data protection; (g) prescription. Training records (dates, content, attendees, assessment results) must be retained for each collector and available for CDC inspection. Minimum annual refresher is expected; new collectors must complete initial training before collecting any debt. Penalty: Failure to train collectors — Code of Conduct violation; uninformed collector behaviour typically leads to complaints and disciplinary findings against the business.

Registered debt collectors must renew registration annually and pay the prescribed annual fee to the CDC. Both the business and every individual collector require renewal. Renewal fees are due by the anniversary of registration. Late payment may attract a penalty and, after persistent non-payment, suspension or withdrawal of registration by the Council. Renewal typically requires: confirmation of continued trust account, updated director/member declarations, payment of fees for each registered collector, and confirmation that no disqualifying events have occurred. Penalty: Operating with lapsed registration is equivalent to operating without registration (s15) — fine or imprisonment up to 3 years.

A complaints register must be maintained recording every complaint received from a debtor, creditor, or any third party about the debt collector's conduct. For each complaint record: date received, complainant details, nature of complaint, matter reference, response, resolution, and date closed. Complaints must be investigated and a substantive response provided within 21 days. Serious complaints (alleged misappropriation, harassment, tariff violations, unlawful collection) must be reported to the CDC. The CDC may investigate, conduct hearings, and impose penalties including fines, suspension, or withdrawal of registration. Records must be retained for at least 5 years. Penalty: Failure to maintain a complaints register or respond to complaints — Code of Conduct violation; disciplinary action by CDC.

Debt collectors receiving cash payments from debtors above the prescribed threshold (R24,999) must file Cash Threshold Reports (CTRs) with the FIC. Aggregation rules apply where multiple related cash payments together exceed the threshold within a 24-hour window. Reports must be filed electronically via the FIC's goAML system within the prescribed timeframe (typically 2 business days of receipt). Debt collectors are not themselves accountable institutions under Schedule 1 of the FIC Act in most cases, but the reporting obligation attaches where cash is received. Additionally, suspicious transactions (unusual patterns, structuring, third-party cash payments) should be reported as STRs regardless of value. Penalty: Administrative sanctions up to R50 million; criminal prosecution for non-reporting — imprisonment up to 15 years (s68 FIC Act).

The CDC Code of Conduct requires monthly reconciliation of the trust account. Reconciliation must confirm: (a) bank statement balance matches internal trust ledger; (b) every receipt is traceable to a specific creditor/matter; (c) every payment out is supported by authorisation; (d) outstanding creditor liabilities balance to trust account assets; (e) no trust money has been used for business purposes or commingled with business funds. The reconciliation must be signed off by a senior officer and retained for at least 5 years. Discrepancies must be investigated and corrected within 5 business days. Material discrepancies must be reported to the CDC. This is a core control — most trust account offences are detected first through reconciliation failures.

Debt collectors process large volumes of debtor personal information (ID numbers, employer details, bank account information, demographic data) and are responsible parties under POPIA. Requirements: (a) appoint an Information Officer registered with the Information Regulator; (b) conduct a PAIA manual identifying categories of information held; (c) obtain lawful grounds for processing (typically s11(1)(f) legitimate interest for collection); (d) provide debtors with a processing notice explaining what information is held, source, and rights; (e) implement technical and organisational security measures (access control, encryption, audit logs); (f) report data breaches to the Information Regulator within a reasonable time (typically 72 hours); (g) respect data subject rights (access, correction, objection); (h) retain data only as long as necessary for collection/legal purposes then delete. Penalty: Administrative fine up to R10 million; civil claims; imprisonment up to 10 years for serious offences (s107).

Before issuing letters of demand, summons, or attempting collection, the debt collector must verify that the debt has not prescribed under the Prescription Act 68 of 1969. Key prescription periods: (a) 3 years for most contractual debts including credit agreements, invoices, and services rendered; (b) 6 years for bills of exchange and certain other instruments; (c) 30 years for mortgage bonds, tax debts, and judgment debts. Prescription runs from when the debt becomes due. Prescription is interrupted by acknowledgement of debt (in writing), summons, or partial payment. Collecting a prescribed debt without the debtor's express written acknowledgement is a breach of the CDC Code of Conduct and may give rise to complaints. Post-acknowledgement, prescription restarts from date of acknowledgement. Penalty: Attempting to collect a prescribed debt where the debtor raises prescription — debt unenforceable; Code of Conduct complaint possible.

Where the debt being collected arises from a credit agreement regulated by the National Credit Act, the creditor (or collector on its behalf) must serve a valid s129 notice on the consumer at least 10 business days before commencing legal proceedings. The notice must: (a) draw the consumer's attention to the default; (b) propose that the consumer refers the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court, or ombud with jurisdiction; (c) be delivered by registered mail, sheriff, or another method contemplated by s130 and Kubyana v Standard Bank [2014] (CC). Failure to serve a valid s129 notice is a complete defence to collection proceedings and courts routinely dismiss matters on this basis. Retain proof of dispatch and delivery for every s129 notice. Penalty: Proceedings dismissed with costs; potential NCR complaint; wasted costs for creditor and collector.

Debt collectors may only charge fees in accordance with the prescribed Tariff of Fees under s19 of the Act. The tariff sets maximum fees for: letters of demand, tracing, handling fees, telephone and email correspondence, and collection commission. Fees must be itemised on statements provided to the debtor and creditor. The tariff must be publicly displayed at the business premises and made available to any debtor on request. Over-charging is an offence and any excess collected must be refunded. Key tariff items (GN R.1028 of 2002, as amended): letter of demand, service of summons, attendance on debtor, handling fee, collection commission capped per tariff. Penalty: Charging fees above the tariff — offence under the Act, complaint to CDC, refund to debtor, disciplinary action.

The trust account must be audited annually by a registered auditor and the audit report submitted to the CDC within 6 months of the debt collector's financial year-end (s21(4) of Act 114 of 1998). The audit report must confirm: (a) trust account was maintained separately from business accounts; (b) all money collected was deposited into the trust account within prescribed timeframes; (c) no unauthorised withdrawals occurred; (d) monthly reconciliations were performed; (e) trust balance at year-end is supported by outstanding creditor liabilities. Any qualification or adverse opinion must be disclosed to the CDC immediately. Penalty: Non-submission or adverse audit findings may result in suspension, withdrawal of registration, or criminal prosecution for trust account offences.