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n Tydskrif vir die Suid-Afrikaanse Reg - Limitering van renteheffing en die ultra duplum-reël : 'n evaluering van die historiese ontwikkeling van die reël en die vermeende oogmerk daaragter (deel 2)
Limiting of accumulating debt from interest due and the ultra duplum rule : an evaluation of the historical development and the purported purpose of the rule
It is an accepted principle in any state governed by the rule of law that no one may use an asset of another without his permission and if it is to be for a period of time, they would normally regulate the situation by agreement. The only exception would be when someone uses someone else's property and is complying with the principles of acquisitive prescription. Doing otherwise may encourage squatting and anarchy. Unless the person with full legal title feels inclined to be benevolent towards his neighbour, the agreement between them would normally make provision for the payment of a sum of money to the owner for the use of his property. Nobody would disallow the owner his right to a reasonable benefit as quid pro quo, but if we are dealing with the use of money (a money-lending transaction) where interest is to be paid, the law will limit the money-lender's claim to profit from interest in terms of the rules against usury if it becomes excessive.
Since early Roman times, Roman law objectively limited the possible content of a clause governing interest on an outstanding debt due in terms of a money-lending agreement. Not only was the maximum interest rate determined and the claim to compound interest excluded, but under the duplum rule the interest could not accumulate beyond the equivalent of the original debt.
In this contribution the author reflects on the evolution of this rule and the content it carried as contained in both known and lesser-known texts on the Roman law. In the light of the interplay between the known and lesser-known texts from Justinian the author concludes that contrary to the popular assumption or belief, the underlying purpose of the duplum rule was not an early version of consumer protection for the benefit of the poor, over-indebted credit-seeker. Instead, it served to safeguard the general public interest by eliminating as early as possible any high-risk debtor as possible credit-seeker who would never be able to rid himself of his indebtedness and would - if allowed to continue to form part of the economic society with an unsequestrated status - endanger that very society. For this purpose Justinian ruled that no interest may accumulate at any stage beyond the magic duplum amount. This applied irrespective of whether the interest due was paid in instalments or not. It consequently made it unattractive for a credit provider to extend the due date for the full repayment of any debt beyond the date of reaching this maximum margin. This is a very effective disciplinary measure to curtail over-indebtedness and to compel the creditor to attend to the timeous service of his claim.
An oversimplification of allowing the immature (rather unsophisticated) credit-seeker to enjoy unlimited credit irrespective of whether he would be in a position to service and repay all his debt does not conform to the economic reality recognised by the old authorities.
The article concludes by noting with astonishment that an African country like Kenya, with no legal historical ties to Roman law, decided to introduce legislation along the lines of the duplum rule to govern the further accumulation of debt from interest-bearing financial vehicles, because the rule makes logical and economic sense. The advisors to the European Union whom one would have expected to be acquainted with Roman law and its fundamental principles, however, have not advised the European Union along these lines, since it is still providing bankrupt states with loans under circumstances where it may be assumed that it might be impossible for the recipient countries ever to repay their debts. Greece might not have been in half of its current financial difficulties if a credit provider knew that no profit was to be made by extending additional credit if the outstanding debt had passed the duplum margin (had the possibility existed to apply this rule). If there is no profit to be made from extending the due date for the debtor, the flow of credit will automatically dwindle, unless credit providers publicly don the cloak of the Good Samaritan and could justifiably show their shareholders or taxpayers why their investments or hard-earned money should be donated to the credit receiver in question.
The same principle applies to the private debtor seeking unlimited credit as consumer. An outright moratorium or re-arrangement order on the repayment of debt is contrary to the provisions of the original agreement by which the debtor undertook to abide; this implies that it is done at the expense of the creditor, even if governed by sections 78-88 read with section 103(5) of the National Credit Act 34 of 2005.
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