The City of Johannesburg’s New Credit Control and Debt Collection Policy (August 2022)

Article by Chantelle Gladwin-Wood, Partner and Maike Gohl, Partner

20 September 2022

Introduction

The City of Johannesburg (“COJ”) approved a new Credit Control and Debt Collection Policy in August 2022. A copy can be accessed at https://www.joburg.org.za/services_/Documents/Credit%20Control%20and%20Debt%20Collection%20Policy-Final%20%28Council%20Approved%2031%20August%202022%29.pdf. This article reviews some of the key changes from the prior iterations of this key document.

Because this is such a dry and boring topic, but such a crucial one, we decided to spice things up a bit and try our hand at some light-hearted fun with the policy.

Boy Corporates

In paragraph 2.27 the City defines rates with reference to boy corporates. I’m not sure if they are different to girl corporates, but maybe COJ can tell us.

Amount of Time Before Appealing to the Municipal Manager

This actually isn’t funny at all. The old policies provided that a customer who was not satisfied

with the COJ’s response to a query/dispute lodged could lodge an appeal to the municipal manager 30 days after the query/dispute  was lodged. The new policy provides that a customer must wait a whopping 90 days before being able to appeal to the municipal manager now. This is quite disturbing because it means that customers who previously waited months (or years) for resolution (if it ever came) in terms of the older policies which had shorter time frames for resolution, might be expected to wait even longer in terms of this extended resolution time frame.

Definition of “rates”

The COJ has a most unfortunate definition of “rates” in clause 2.27.

It is not correct that rates are fees—in fact, all the case law says precisely the opposite—that rates are NOT fees. It is also not correct that rates are payable for the servicing of the property—again, all the case law says the opposite, that rates are owed without any concomitant obligation on the City to deliver any services for those rates. In addition, the definition makes no sense by referring to body corporates. I’d like to see the COJ try to collect amounts paid to a body corporate under its new policy.

Distinction between ‘rates’ and ‘fees’

This is really interesting. The City’s policy refers to charges for electricity, water, refuse and sanitation as all being ‘fees’, which are consumption based charges for services supplied to a customer. Fees are different to rates because rates are taxes and are compulsory and are due without any services being delivered in return. The COJ’s policy most certainly refers to its charges for refuse and sewer as ‘fees’, meaning that it regards them as being services that it delivers to customers within the meaning of the various laws. This would mean that these charges prescribe after 3, and not after 30 years, as the older case law originally provided. Note that the older case law set the prescription period for 30 years only because the municipalities back in the day in the cases concerned framed their charges for refuse and sewer as rates and not service charges. COJ has chosen to eschew this – which means (in theory at least) that refuse and sewer charges could now also prescribe after 3 years.

Then again, however, the definition of ‘rates’ indicates that the drafters of the policy weren’t really clear on the difference between ‘rates’ and ‘fees’ in law – so who knows? Perhaps that was a patent error that will be corrected, rather than an intentional decision by the City. I suppose we will know shortly when someone reading this article attempts to sue the City for the write off of prescribed sewer and refuse charges!

Holding Prior Owners of the Property Liable for Debts

Clause 5.3.9 says that the City can hold the prior owner of a property (which is owned by a company, trust, cc or body corporate) liable for “any debt incurred at the property” as set out in section 118(3) of the Systems Act. The City certainly cannot hold a new owner of a property liable for the debts of an old owner and this has been confirmed by the Constitutional Court. I’m not sure what the City plans to do here – and how it can hold a prior owner liable for a current owner’s debts? I would be thrilled if the City decided to sue the person I bought my property from, and not me, for my electricity charges (which are through the roof – thanks loadshedding)!

Expropriation and on-sale

Clause 5.3.12 indicates that the City is of the view that it can expropriate owners who do not comply with the policy. Well, it can’t do that. There is another set of laws that apply to expropriation – the Expropriation Act, Bill, and the Constitution. Reference is made further on in the same clause to the “proceeds of the sale of the debtor’s” property, which indicates that the drafters of the policy are actually thinking about a sale in execution based on outstanding debt, and not expropriation. These are two vastly different procedures. It’s quite worrying that no one proof reading this picked this issue up – but I would pay to see the face of the judge who is asked by the City to “expropriate” a customer’s property as a result of the customer’s arrears, so that the property can be sold and the “proceeds” paid to the City.

Code of Conduct and Treating Debtors with Dignity and Respect

Clause 6 requires that all the City’s officials will treat all debtors with dignity and respect at all times and will exercise honesty, transparency and diligence. OK cool. Going to cite that in my next set of court papers.

Disconnection during deposit review?

Clause 8.5 provides that the City will disconnect customers when doing a deposit review (which is when the City checks if it holds a large enough deposit). Whilst I might understand cutting off a customer who has not paid a ‘top up’ deposit requested by the municipality after a deposit review, I cannot understand how the City obtains the right in law to disconnect before this request for a top up has taken place.

Um What? Say Again?

Don’t know what this means. ??

9.10. The credit control measures should be taken through the Business Partner (BP) maintenance, which is the primary residence not owing to collect on subsidiary properties owing.

Only payments made on time will be taken into account

Clause 10.5 says that only payments made on time (i.e. before the due date) will be “duly received”. Is the City planning to ignore all late payments made by of its all customers? I hope not.

Collections mandate

Clause 10.8 provides

Who must collect this money? The City, fraudsters or rouge disconnection “agents”?

National Credit Act application

The City admits that the National Credit Act applies in clause 14.2.16. It’s now going to have to apply the provisions of the National Credit Act in relation to the notice periods required for disconnection/restriction and other credit control measures. This is going to be interesting.

Reversing benefits?

Clause 14.8 provides that the City can reverse any benefit granted to any consumer who later falls into arrears. So the City is planning to reverse the rebates/discounts given to pensioners and indigent persons who are awarded a benefit and then later fall into arrears? Seem a bit harsh when one assumes that the point of the ‘benefit’ having been granted in the first place was to assist the customer financially. Perhaps the City ought to clarify what kind of benefits it is talking about here. Is it like a “friend with benefits” where after supper and a good night out, no one calls you the day afterwards?

No interest on amounts pre-paid or for security deposits

In terms of clause 15.2 the City doesn’t pay interest on deposits. This is not new and has been the case for the last ten years at least. But it remains controversial and potentially challengeable legally. There’s nothing funny or interesting about this (excuse the terrible pun).

Charges on “closed accounts”

Clause 15.3 provides that the City can charge interest on closed accounts. Not sure how it is going to do this, because the account is closed, unless it plans to invoice the customer separately for the interest charges on another new account, solely for interest charges on the account that was previously closed? Seems like a lot of admit. Perhaps it could just keep the account open whilst the interest charges accrue?

Part of a month deemed to be a month

Clause 15.4 provides

I’m not sure how part of a month can be deemed to be a full month – does this mean that if interest is outstanding for one day in a month, the City can instead charge you interest for a full month instead of for that one day?

Clearance applications

Clause 26 explains that the City can request 4 months’ worth of projections (estimated charges) before issuing a rates clearance certificate, but it also says (later in the same clause) that the certificate is only valid for 60 days. Why for then must customers pay clearance for 60 days over and above the validity period of the certificate? That’s madness and there is no legal justification for that whatsoever. If, however, the City was trying to say that its certificates remain valid for 120 days even though the Deeds Office (wrongly in law) regards them as only being valid for 60 days, that would make more sense (but that’s not what the City is saying here….?)

Reduction in Pre-termination Period

Letters of demand now only need to give a customer 7 day’s notice of a pending disconnection in terms of clause 29.1.13.

Clause 34, no wait 32, no wait 31…..?

Kudos to the City for Recognising that Debt Ought to be Written off Sometimes

On a very serious note, the City’s new policy provides that debt can be written off in certain circumstances, and the City recognises the following (which is great, well done COJ and thank you)!

Well done to COJ on recognising its obligation to provide 6 free kl of water per household even on disconnection

Good on you COJ!! Keep up the good work in promoting human rights on this front.

Conclusion

What is said above is intended as light humour and nothing more. There are no serious changes (from prior years’ policies) that will bring about the apocalypse for Joburg City dweller in the new policy. There may be a few spelling and numbering mishaps, perhaps a couple of drafting errors and omissions, and a few instances in which some more thought needs to go into the processes intended. Maybe a better proof reader would save us some trouble for next year. But all in all, very much business as usual. This is not to say that there are no issues at all with the policy – this article does not address the very serious issues that we have raised before in relation to COJ’s debt collection policies and methods (they are addressed in other articles) and these can be obtained on our website. But we will reserve those more serious (and boring) conversations for another time.