MBD dealt court blow in R462m debt review fight - IOL

Munnik Basson Dagama Incorporated (MBD Inc.) is a South African legal debt collection and credit management firm established in 1997.

Debt collector MBD Legal Collections has been ordered to comply with an earlier court ruling preventing it from rerouting payments in a dispute involving more than 44,000 debt-review accounts worth about R462 million.

The Western Cape High Court ruled that its March order against MBD must take effect immediately, despite the debt collector appealing the ruling, after finding that keeping the order suspended would cause irreparable harm to Consumer Friend and that the disruption extended to consumers under debt review.

MBD has also received thousands of reviews from consumers on the review platform HelloPeter, where it has a rating of 1.1 out of five, based on 438 reviews over the past 12 months, and more than 7,000 reviews overall.

Recent complaints include allegations of payments not being correctly allocated, consumers continuing to receive demands after making payments, difficulty obtaining paid-up letters and unresolved account queries. The complaints are allegations made by consumers and have not necessarily been independently verified.

The legal dispute stems from MBD's acquisition of a portfolio of debt-review accounts from RCS Cards in September 2025.

Consumer Friend had administered the accounts for RCS under an agreement that entitled it to continue administering so-called "Paying Matters" until the debts were settled.

The procurement documents for the sale stated that the portfolio would come with Consumer Friend as managing agent and that it would retain the right to collect on those accounts.

After buying the portfolio, MBD continued using Consumer Friend for several months and paid it commission.

However, in January, MBD said it did not accept that it was bound by the Consumer Friend agreement, regarded the relationship as a month-to-month arrangement and sought to terminate it from the end of February. It also sought to redirect payments to itself.

Consumer Friend went to court and in March obtained an order declaring MBD bound by its agreement with RCS as a permitted assign or legal successor.

The order required MBD to recognise Consumer Friend's right to continue administering the affected accounts and restore the existing payment arrangements. It also prohibited MBD from rerouting payments or interfering with Consumer Friend's administration of the portfolio.

MBD was granted leave to appeal, which ordinarily suspended the order. Consumer Friend then returned to court seeking permission to enforce the ruling while the appeal proceeds.

The court heard that MBD continued efforts to reroute payments while the earlier order was suspended.

In April, its attorneys demanded that Debt Busters redirect payments to MBD and threatened urgent proceedings, punitive costs, damages and a complaint to the National Credit Regulator if it failed to comply.

MBD also contacted Zero Debt, Pioneer Debt Solutions and PayPlan as part of its efforts to complete the rerouting process. The dispute affects a substantial debt book.

Consumer Friend's DReX platform has more than 2,000 registered debt counsellors and about 70,000 registered consumers, while the portfolio bought by MBD comprises about 44,216 accounts with a reported book value of about R461.7 million at acquisition.

Complaints against MDB on HelloPeter.

Consumer Friend argued that rerouting payments meant it no longer received transaction information directly and instead depended on information supplied by MBD or related company Capital Data.

It told the court that delays or problems with the information could result in incorrect account balances and statements, incorrect terminations, delayed paid-up letters, incorrect settlement figures or an inability to respond accurately to consumers or debt counsellors.

MBD disputed that the changes harmed consumers and argued that relevant information remained available from payment distribution agencies, debt counsellors and creditors.

It said it was entitled as creditor to reroute payments to itself and maintained that the changes did not prejudice affected consumers. MBD also argued that Consumer Friend's possible harm related to commission payments and was therefore financial and capable of being remedied.

Judge Ndita found there had been delays in transactional information flowing from MBD and Capital Data to Consumer Friend, hampering Consumer Friend's operations. Given the portfolio's 44,216 accounts, the judge said the impact of the failures was magnified.

The court found Consumer Friend would suffer irreparable harm if the March order remained suspended while MBD appealed. By contrast, Judge Ndita said MBD had not identified any operational, reputational or other consequences it would suffer if the order took effect.

The judge said MBD's main complaint was that it wanted payments routed directly to itself or Capital Data and did not want to incur liability for Consumer Friend's commission.

Any financial prejudice to MBD could be calculated if it ultimately succeeded on appeal, the court found. The court consequently ordered that the March ruling take effect while MBD's appeal is determined.

MBD was also ordered to pay the legal costs of the application, including the costs of two counsel at the higher Scale C rate.