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Managing agents and debt collection

22 Jan 2014

Managing agents, trustees and directors of community schemes may be falling foul of the Debt Collectors Act.

When the managing agent charges for each letter and telephone call (or other activity intended to encourage payment of the arrear amount), there can be no doubt that the managing agent is collecting the debt for reward.

This is according to Marina Constas, director of BBM Attorneys and co-authorofthebook,"DemistifyingSectionalTitle", who says if a managing agent is collecting debt on behalf of a body corporate or other community scheme for reward, then they are required to register as a debt collector with the Council of Debt Collectors. 

She says if the managing agent is a legal entity such as a company or close corporation, that entity must register, as well as every director or member thereof and every officer of the entity. 

Constas says there is no doubt that an effective managing agent has a pivotal role to play in ensuring that owners in Sectional Title schemes and other community schemes keep their levy accounts up to date, and invariably this includes the involvement of the managing agent in recouping arrear levies. It must be borne in mind however, that such efforts by a managing agent may well qualify as a ‘debt collector’, consequently requiring compliance with the Debt Collectors Act No. 114 of 1998.

“A debt collector is defined in the Act as, inter alia, a person who for reward collects debts owed to another on the latter’s behalf. The activities involved in the collection of a debt could be simply the sending of letters of demand and telephone calls calling for payment. Many, if not most, managing agents do attend to these steps when an owner has fallen into arrears with his or her levy account.”

Constas says when the managing agent charges for each letter and telephone call (or other activity intended to encourage payment of the arrear amount), there can be no doubt that the managing agent is collecting the debt for reward and falls squarely within the definition of a debt collector.

She says not so clear cut is the case of the managing agent who charges his monthly management fee, which includes letters and telephone calls to procure payment of arrear amounts. “On a strict interpretation of the words ‘for reward’, such a managing agent would still be a debt collector, as defined, since it does not matter whether the reward in question is charged individually or as part of a fee for other services as well.”

Although the registration process need not be repeated annually, every debt collector is required to pay an annual subscription fee to the Council, and failure to pay timeously could result in the withdrawal of registration. “In terms of the Act, failure to register with the Council is an offence and a transgressor may be liable on conviction to a fine or to imprisonment.” 

She says according to a source in the Council of Debt Collectors, it has to date not received a complaint which required a determination on the issue of managing agents qualifying as debt collectors, and that it was unlikely that prosecution would be recommended against a managing agent for failure to register as a debt collector in these circumstances. 

She says it must be borne in mind that every complaint is dealt with on its own merits. “Managing agents as well as trustees and directors of community schemes are encouraged to scrutinise their debt collection activities and the fees being charged and recovered from debtors to ensure that they are fully compliant with the Act.” 

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