High Court Grants Leave to Appeal in Key Section 103(5) Debt Review Judgment

New development on article written below on the 14th of May 2025

On 24 November 2025, the Gauteng Division of the High Court, Pretoria (Full Court), delivered an important ruling in the matter of Scott v National Credit Regulator and Others, granting the Banking Association of South Africa (BASA) leave to appeal to the Supreme Court of Appeal (SCA). The appeal concerns the Full Court’s earlier judgment of 12 May 2025, which held that entering debt review or obtaining a debt review order does not purge or cure a consumer’s default under the original credit agreement for purposes of section 103(5) of the National Credit Act (NCA).

This development places the interpretation of section 103(5) back under scrutiny and signals that a final determination will ultimately come from the SCA.

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Background

The May 2025 judgment concluded that a consumer remains in default for the purposes of section 103(5), even after entering debt review. This interpretation has significant consequences for both consumers and credit providers as it affects how interest and charges may accumulate once a consumer is in default.

BASA, representing several major banks, challenged the ruling and applied for leave to appeal. The application was opposed by the applicant, Chantelle Scott.

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Arguments Before the Court

1. BASA’s Position

BASA submitted that the judgment has far-reaching implications for the credit industry nationally. According to the banks, the ruling requires substantial changes to systems, software, and operational processes. They argued that there are compelling reasons why the SCA should reconsider the interpretation of section 103(5), both in the public interest and due to reasonable prospects that another court may reach a different conclusion.

       2. Scott’s Position

Scott argued that BASA failed to demonstrate reasonable prospects of success on appeal and that the Full Court’s interpretation should stand.

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The Court’s Reasoning

Acting Judge Mazibuko, with Judges Mali and Janse van Nieuwenhuizen concurring, held that:

• The issues raised are of public importance and impact stakeholders across the credit industry.
• The matter involves significant questions of law, particularly the interpretation of section 103 of the NCA.
• Another court, including the SCA, may reasonably reach a different conclusion from the Full Court.

Based on these considerations, the court granted leave to appeal.

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The Order

1. Leave to appeal to the Supreme Court of Appeal is granted.
2. The costs of the leave to appeal application will be costs in the appeal.

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Effect of the Appeal

The granting of leave to appeal has the following practical implications:

1. The May 2025 judgment remains in force for now

• Until the SCA gives its decision, the Full Court’s finding — that debt review does not purge default for purposes of section 103(5) — still stands.

2. The matter is not final

• Because an appeal is now pending, the legal position is not settled. The SCA will provide the final interpretation, which will apply nationally.

3. Credit providers may pause operational changes

• As the judgment noted that banks may need to adjust systems, many credit providers are likely to wait for the SCA outcome before implementing costly changes.

4. Debt Counsellors must apply the current judgment with caution

• Debt Counsellors may rely on the current ruling, but must remain aware that it could be overturned. Courts dealing with similar matters should also note that the issue is under appeal.

5. Potential future outcomes

• If the SCA overturns the Full Court’s decision, debt review may be interpreted as capable of purging default for section 103(5).
  If the SCA upholds the decision, the current interpretation becomes binding across South Africa.

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Conclusion

The High Court’s decision to grant leave to appeal confirms that the interpretation of section 103(5) remains an unsettled area of law with significant consequences for consumers, credit providers, and the debt review industry. All stakeholders now await the Supreme Court of Appeal’s final word, which will determine how default, interest, and statutory charges must be treated when a consumer enters debt review.

Full report here: https://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAGPPHC/2025/1218.html&query=debt%20near%20review 

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Breaking News: A debt review application does NOT erase a default on a credit agreement — court clarifies interpretation of Section 103(5) of the National Credit Act.

– -Written on 14 May 2025 (Vanessa Johst – Operations Manager of DCASA)

Summary:

The National Credit Act, Act 34 of 2005, to be interpreted by considering the history of the credit industry in South Africa and the purpose of the Act. An application for debt review and or a debt review order does not purge and or cure the default of the original credit agreement for the purposes contemplated in Section 103(5) of the National Credit Act. Held, Section 103(5) of the NCA, finds application in circumstances where the consumer’s obligations under the credit agreement are subject to a debt-rearrangement agreement, debt review, or debt review order.

 

Important Industry Update
Within our industry, we’ve unfortunately seen a trend where many consumers had already defaulted on their credit agreements before applying for debt review. In such cases, some credit providers have taken the position that Section 103(5) of the National Credit Act does not apply once a consumer enters debt review. As a result, many consumers have ended up repaying more than double the outstanding debt.

A groundbreaking judgment delivered by the High Court in Pretoria on 12 May 2025 has now clarified this matter: entering debt review does not purge a default.

This means that, as a debt counsellor, you must:

• Determine whether a consumer is in default,

• Establish the date of default, and

• Apply Section 103(5) accordingly.

To support our members, DCASA offers a Section 103(5) Calculator. If you would like access to the tool, please email admin@dcasa.co.za.

Please note: This provision applies only to consumers who are in default, not to all consumers. This clarification also aligns with the outcomes of our industry task team agreement.

For the Full Judgement download it here: 37. Chantall scott Section 103(5) – default

(please note that this article will be transferred to the DCASA Members only Law Library within two weeks)