Asked by Desiree Nash on 12-08-2022 15:33:31
Question posted in the General Law category relating to Western Cape

Good day,   I just need some legal advice please.

I had someone loan me money for a business transaction ( R 2 000 000.00) with an interest portion of R 300 000.00.   The payback date was to be end May 2022.   I subsequently had some cash flow issues,  and I could not pay end of May.   6th July I paid R 250 000.00 and then I paid them another R 1 000 000.00 today.

When I queried the balance owning,  as they had not taken off the R 250 000 payment,  they said that it was being used as interest since I was so late with my payments,  and that the full amount of R 2 300 000 was still outstanding (before I paid the R 1 000 000)

The original letter/agreement that I signed,  said it was only R 300 000 interest,  and there was no further talk about any additional interest portion or rate.

I want to know what my rights are in regards to the interest,  and if I can go back and tell them that I am not paying any additional interest as I did not agree to it.   What is their recourse in this matter?

The person who loaned me the money is also not a registered credit provider nor are they an authorised financial service.

Posted by Att. Patrick on 12-08-2022 16:03:03

Hi there and thank you for your question,

I am a practicing attorney based in South Africa and I will assist you with your question. Please feel free to ask as many follow up questions in order to clarify your question. If you have a new question, you must please open a new thread.

Please keep in mind that our discussions is for general information purposes only. Our engagement on this website does not create an attorney-client relationship. 

Do you mind if I take a moment to review your question? I will come back to you shortly!

Att. Patrick

Posted by Att. Patrick on 12-08-2022 16:05:09

If the person who loaned you the money is not a registered credit provider then they are not allowed charging you interest on the amount loaned. So technically, they have a problem there.

If I can ask, what date did you borrow the money?

And for how long did the agreement say that you could borrow the money for? 1 month? 1 year? 

Or, did the agreement say that interest was to be charged at xx% per month?

Hi there. Payment was received from them on the 9th and 10th of February in two payments.

We agreed that the loan would be for a period of 120 days - payment due to them at the end of May, and that we would pay them an additional 15% as "interest" for this period.

On the surety document that was signed, it does state that if payment is late the ruling interest rate would apply, so I suppose they could argue that we did agree to the interest, but if they are not a registered credit provider then surely they are not allowed to charge interest?

I have no intention of not paying them the amount of the loan, plus the interest we agreed on, but am just unsure how to broach the subject of the additional interest they want to charge.

Posted by Att. Patrick on 15-08-2022 09:17:49

If they are not a registered credit provider, then they are not legally allowed to charge you interest. 

At best, what you should be doing is to calculate interest on the loaned amounts starting from the day that you received the money up until the day that you repay them, but calculate interest at the prime lending rate (currently 9%). 

If you take R2m and work out the annual interest rate, you are looking at R180k for the whole year, or R15k per month. So this is really what you need to base your calculations on. 

It is NOT legal for them to demand R300k of interest from you for 120 days. That would work out to 20 months' worth of interest for a 120 day loan. NEVER!

I would tell them that you have taken legal advice and that the advice which you have received is that they can't charge you interest like they want to, and all that you will agree is to repay the capital amount plus interest calculated at prime, and that you won't pay penalty interest either because there was never any agreement that you would do so. 

Posted by Att. Patrick on 15-08-2022 09:22:30

If you received R2m in mid-February, and then paid back R250k in mid-July, then this is what the calculations should look like:

Capital [R2m] + Five months interest on the R2m [R75k] - Repayment made to them [R250k] = R1.825m owing

Then, after your payment in mid-August, then this is what the calculations should look like:

Capital [R1.825m] + One months interest thereon [R13,687] - Repayment made to them [R1m] = R838k owing

Would they be able to proceed with legal measures if I do not pay them any additional interest based on the surety and letter that I signed?

Posted by Att. Patrick on 15-08-2022 12:33:05

Yes, because you can't stop them from suing you in court. Anyone can sue you in court. Whether or not they have a good claim is another story. To me, you have a really good defence. But you might need to prove that defence in court to win. Otherwise, you might need to negotiate a middle ground settlement with them.

Good Evening

So this person who I owe this money to came to my house, and refused to leave without a payment or he said he was going to take my car or something in lieu of the money. I managed to come to some arrangement with him to make weekly payments, and I have paid 60% of the money owing.

He is getting quite threatening and aggressive and is saying he will arrive at my place of business and remove stock to the value of what I owe him, and sell it on auction, and that I will also be liable for additional interest as the payments are much later than the agreed term.

As far as I am aware - he should be following a legal process ie lawyer's letter, final demand etc and he is not able to just take stock in lieu of the monies owed.

I feel quite threatened by this and especially as he came to my house, and would not leave, I feel like I need to be better prepared for this situation and know exactly what constitues illegal behavious on his part.

Posted by Att. Patrick on 09-09-2022 13:31:51

Hi there, please can you copy/paste this further question into a new question and post it.