We recently had a very interesting and important question from a client in the https://bills-of-cost.co.za/pick-our-brain/Pick our Brain section of our website. It dealt with the duplum rule as per Section 101 (1) g of the National Credit Act which, in short, determines that a Registered Credit Provider may not recover more than the original capital amount in interest, fees, expenses and collection costs.
The client’s question was: Does this mean that an Attorney’s fees and charges for work done on behalf of a Credit Provider are also capped under Section 101 (1) g of the Act? A good question because, if so, it will have a vast and detrimental effect on all Attorney firms, as the client correctly points out.
This question spurred a healthy debate amongst the Senior Practitioners with whom the issue was discussed. We also considered NEDBANK LTD & OTHER vs NATIONAL CREDIT REGULATOR & OTHERS 2011 (3) SA 581 (SCA) for guidance or indication how this Act may affect an Attorney’s charges when doing work for a Registered Credit Provider.
It appears that the Act is aimed at capping the Credit Provider only in terms of the duplum rule and does not necessarily extend to other service providers or stakeholders under the employment of the Credit Provider.
We therefore chose to answer the client’s question by differentiating between the relationship scenarios that are evident from the Act and the SCA Judgement: namely that the relationship between the Credit Provider and the end-user must be seen similarly to that which exist as between Party and Party.
The Attorney’s relationship is that of an Agent, as between Attorney and Client, and must be deemed to clearly stand apart from the first-mentioned scenario.
It is our view that an Attorney’s fees and charges must remain unaffected by the Act, that his Attorney and Client relationship with his Credit Provider must continue as per normal, as the Act (as per SCA judgement) is applicable on the Credit Provider and his end-user client only.
The fact is, should the Credit Provider choose to outsource the Collection function of their operation to Attorneys and should such costs exceed the provisions of the Credit Act, then the Credit Provider does so at his own peril. Any additional costs incurred in the collection will be for his own account.
We would love to hear more comment and views on this issue. Any responses that can bring clarity to this specific case will be posted here, so please, feel free to join the debate! And if you have questions on other matters pertaining to legal billing laws, do please post your queries on the Pick our Brain page.