In short
The in duplum rule limits how much a debt can grow once the borrower is in default. Under section 103(5) of the National Credit Act the interest, fees and charges accruing during the default may not in total exceed the unpaid principal as it stood on the day the default began — not the original loan, and not the current balance. It caps more than interest: the initiation fee, service fee, credit insurance, default administration charges and collection costs all count towards the same total. The statutory rule applies only where the Act governs the agreement, but an older common-law rule of the same name still applies to loans outside it, and neither can be contracted out of.
The in duplum rule is usually explained as interest stops when it reaches double the loan. That is memorable, roughly the right shape, and wrong in the three respects that decide any actual case: what is capped, when it is measured, and whether it applies to you at all.
01 — The ruleWhat the National Credit Act actually says
Where the Act governs the loan, the rule works like this. Once the borrower is in default, the charges that build up during that default may not add up to more than the unpaid principal as it stood on the day the default began.
Three things follow from that wording, and each is commonly got wrong.
| Commonly said | What the Act says |
|---|---|
| Interest stops at double the loan | Charges accruing during default stop when they equal the principal still unpaid when the default started. Not the original loan. Not the current balance. |
| It caps interest | It caps interest and the initiation fee, service fee, credit insurance, default administration charges and collection costs, in aggregate. Interest is one item on that list. |
| It applies to any loan | It applies where the National Credit Act governs the loan. A great deal of business lending sits outside the Act, and this provision goes with it. |
A worked example
You lend R500 000. The borrower repays down to R400 000 and then defaults. From the day of default, the charges that accrue — interest, fees, collection costs, the lot — are capped at R400 000 in total.
Not R1 000 000. Not double the original advance. The measure is what was still owing in principal when things went wrong, which is why the day of default matters so much.
The cap is on what accrues during the default. It does not wipe out interest that had already properly accrued before the borrower fell into default.
02 — The other ruleThere is also a common-law in duplum rule
The Act opens section 103(5) with the words despite any provision of the common law. That phrasing tells you something important: there is a common-law rule of the same name, and it existed long before the Act.
The two rules are not identical in scope or in measurement, and the differences have been worked out in case law rather than in a statute. This page does not attempt to summarise that case law, because a summary accurate enough to rely on would be longer than the judgments.
03 — In practiceWhat a lender should actually take from this
- Know which rule governs your loan. That means knowing whether the Act applies, which turns on who is borrowing — set out at do you need to register as a credit provider.
- Record the principal outstanding on the day of default. Under the statutory rule that figure is the cap. If you cannot evidence it, you cannot prove your own entitlement.
- Count everything, not just interest. Collection costs and default administration charges come out of the same allowance. A lender who tracks only interest will overshoot without noticing.
- Do not try to draft around it. A clause purporting to waive the rule is unlawful under the Act and contrary to public policy at common law.
04 — The boundaryWhat this page does not decide
Whether your loan is capped, by which rule, and at what figure depends on facts a web page cannot know: whether the Act reaches the agreement, when default began, what was outstanding then, and what has accrued since.
The common-law rule in particular has been shaped by decisions of the courts on questions this page does not address — including what happens to the cap once summons is served. If the difference matters to a live matter, it is a question for an attorney.