Banks can improve the beginning of the debt process

There will be many who will have welcomed this week’s decision by a full bench of the High Court in Pretoria that, from February next year, banks will have to bring court actions against defaulting mortgage bond payers in the lower, not the higher, courts.

This is primarily because the upper courts, which are there to deal with serious criminal and civil cases, say they are being overburdened by the insistence of financial institutions on prosecuting these matters.

But in the judgment, the court in Pretoria made it clear that the practice of referring foreclosure matters to the upper courts effectively meant denying poor litigants ready access to justice because costs are so much higher in the upper courts.

The judgment followed a ruling earlier this month which barred banks from selling repossessed properties on auction without a reserve price.

The two judgments, taken together, give ordinary consumers back some of their rights and give them breathing space when it comes to debt actions.

Banks are in a unique position in society: they are more than just businesses; they play a very important role in promoting the societal stability which comes through increased home ownership.

On the other hand, they are businesses, which must be allowed to recover money owed to them.

It is also a sad reality that many South Africans are either careless with their money, or ignorant about the implications of credit and debt.

What South Africans should be doing is looking to improve the beginning of the debt process, rather than the consequences at the end of it, when it all goes wrong for the borrower.

Banks can play a part by not only carefully vetting their customers for credit-worthiness, but also educating them about their responsibilities and the repercussions of defaulting.

For more news your way, download The Citizen’s app for iOS and Android.