On 30 May 2025, in the matter of FFS Finance t/a Ford Credit v Van Der Merwe (21308/2022) [2025] ZAWCHC 230 (30 May 2025), the Western Cape High Court dismissed an application for default judgment brought by a credit provider for repossession of a vehicle under a credit agreement governed by the National Credit Act 34 of 2005 (NCA), and emphasised the importance of meaningful engagement with financially distressed consumers prior to instituting legal proceedings.

FFS Finance t/a Ford Credit, a registered commercial bank, concluded a written instalment sale agreement with Van der Merwe for the sale and purchase of a 2015 Ford Ranger vehicle (the Agreement). Van der Merwe failed to make monthly payments in terms of the Agreement leading to Ford Credit cancelling the Agreement and claiming the return of the Ford Ranger vehicle.

Before litigation, Ford Credit served a section 129 letter in terms of the NCA on Van der Merwe offering alternative dispute resolution options. However, as no payment arrangement was reached because Van der Merwe could not meet the credit provider’s unilateral terms, the matter proceeded to court.

In evaluating this matter, the Honourable Judge Thulmare had regard to the purpose of the enactment of the NCA, being to address and correct the imbalances that existed in the negotiating power between consumers and credit providers, and that the NCA provides for dispute resolution mechanisms to protect consumers from unfair conduct of credit providers and over indebtedness. 

The High Court considered the case of Nedbank v Fraser 2011 (4) SA 363 GSJ wherein it was found that “the existence of these reasonable alternatives will be determined with regard being had to attempts by the debtor to pay off the debt and the debtor’s resources.”

With reference to Ranamane v SB Guarantee Company (Rf) (Pty) Ltd (5285321) 2023 ZAGPJHC 592 (29 May 2023), the High Court underscored the importance of having regard to the debtor financial position ’s employment status, proof of income, reasons for non-payment, monthly expenses and debts, 3 months’ bank statements and if in arrears proof of payment arrangements and in the alternative the creditor’s programmes to assist financially distressed debtors in order to fairly assess the debtor’s proposal .  

Turning back to the facts before it, the Honourable Judge took a dim view of Ford Credit’s attitude to Van der Merwe which was coercive rather than collaborative. In only being willing to accept its own proposal without having consideration to what is fair and reasonable in respect of a financially distressed debtor who has made a bona fide attempt to reach resolution, Ford Credit’s conduct fell short of the spirit of the NCA.

The High Court stressed that a section 129 letter is not a mere tick-box exercise but rather, confers on a creditor responsibilities to engage meaningfully with the debtor. In its final words, the High Court held that a creditor will be required to provide a certificate of indebtedness and a compliance affidavit dealing with what transpired after the section 129 letter was served on the debtor who wished to make good on its debt.

This case also highlights the critical importance of seeking legal advice early when facing financial difficulty. Delayed or absent legal representation may lead to default judgments, even when potential alternative dispute resolution mechanisms exist.