Credit providers are facing a court challenge over illegal debt collections. The Stellenbosch Law Clinic has filed an application at the Cape High Court for judicial intervention into the way debt is collected.

It says up to R1 billion has been illegally collected from debtors.

The clinic, together with Summit Financial Partners, represents 10 clients.

All the major banks, lending institutions, the ministers of Justice and Trade and Industry, and the National Credit Regulator are part of the 49 respondents in the matter.

Stephan Van Der Merve of the Stellenbosch Law Clinic says there are different interpretations attached to the specific piece of legislation.

“The problem is that there’s different interpretations that is attached to this specific piece of legislation being section 135 of the National Credit Act.  In our reading, and understanding of that legislation is that it is there to protect the debtor and specifically geared to put a limit, a cap on the amount of interest, collection cost, including legal costs that can be charged against the defaulting debtor”.