# Regulatory Compliance Category > National Credit Act Forum >  Interest on arrears

## Chatmaster

Now my wife is handing over a few naughty customers that didn't make payments as they were supposed to. Now her contract with her customers clearly state that they have 30 days to pay their account. If they do not pay it, she will ad 5% interest per month on the outstanding fee until it is paid. This contract was drawn up in cooperation with an attorney. Now the debt collectors says, nope the NCA prohibits a business from doing that, and they will only collect the original outstanding fee, plus legal costs.

Now this doesn't make sense to me. So if I am a clever ahole I can make a fee interest free loans and make payment just before the last whistle blows and wopee I score the interest from the money lying in my bank account or working for me in my business. Off course this makes no sense to me, to legalize theft in that manner  :Boxing: 

Can anyone confirm that this is the case?

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## Dave A

Ask the debt collection agency to quote the specific provisions of the Act that prevent the charging of interest in this case.

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## duncan drennan

It has been a while since I looked at it, but basically when you start to charge interest in that case it becomes an incidental credit agreement. The rules for incidental credit agreements and normal credit agreements are a bit different though.

This outlines which parts of the NCA are relevant to incidental agreements.

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## Sieg

Chatmaster: just one question: Why does your wife want to hand over the debts to a debt collector to collect and not the attorney who prepared the conditions of sale?

On another track: the debtor would, at the very least, still be liable for "_mora_" interest, which is at the legal rate, currently 15.5% per annum. I am not aware of any provision in the NCA which excludes the collection of the customary _mora_ interest. 

It may be possible to claim the interest in the alternative in a summons, i.e. claim interest per the conditions of sale alternatively the _mora_ interest. The Court (probably in this case a Magistrate's Court) would grant either or and this would allow your wife to at least claim some interest. 

Good luck. 

Sieg

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## Chatmaster

> Chatmaster: just one question: Why does your wife want to hand over the debts to a debt collector to collect and not the attorney who prepared the conditions of sale?


In the mean while the attorney became a client so my wife doesn't want to use them. She specializes in bookkeeping for attorneys and I guess she doesn't want to involve them with her bad clients. None the bad debt are from attorneys though... Is there a reason for not using a debt collector?

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## Karenwhe

Is the client a business? If so, I do not think the NCA applies at all. The NCA is a consumer act and there was clarification about this from the writers of the NCA on one of the legal websites. I think it was Ghostdigest.

If it is a person or a trust with under 1 million in assets then, from what I read then NCA applies.

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## Sieg

Chatmaster

I think the answer to your question re debt collectors is in the second part of my post: Would the debt collector know how to word or structure a summons for the claim of interest in the alternative?

Regards
Sieg

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## Chatmaster

> Is the client a business? If so, I do not think the NCA applies at all. The NCA is a consumer act and there was clarification about this from the writers of the NCA on one of the legal websites. I think it was Ghostdigest.
> 
> If it is a person or a trust with under 1 million in assets then, from what I read then NCA applies.


3 of them are sole proprietors and I believe they will be regarded as consumers. The others are CC's and Pty's I will confirm with our attorney what we can do there.

Sieg, thanks for your help, we now have a bit more to work with!

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## Karenwhe

I am not sure about this, but it is worth asking. If you have a consumer as a customer, I think there is a process that must be followed to enable the business to sue the consumer for debt. If that process is not followed, e.g. making sure that the consumer can pay the debt etc., it can become problematic.

I do know that some attorneys have all sorts of pre-documentation that the customer should sign before engaging with services, which protects the business if the customer is not paying.

I have seen this done, both with banks and other businesses. Fortunately, I don't need this stuff as NCA does not apply to immovable leases and the rest in immovable property is done by the bank.

I would check up on those documents to see if one can apply something which would make the collection and legal process easier.

Hope this helps.

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## enyaw

Looks to me -possibly, that the "contract" which your wife's attorney has drawn-up needs to be reviewed....what are the conditions of the contract? Is it possible that the overdue payment could fall under the provisions of "incidental" credit? Interest which in terms of Part C 42(1) Table A - could command a rate of 2% pm...depending ....more info is necessary...Wayne

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