National Credit Act

Posted on: September 12th, 2014 by STBBSiteOwner

The objectives of the Act are to:

  • Prohibit and curb unfair contracts and policies;
  • Curb reckless credit extension;
  • Provide mechanisms to assist over-indebted consumers;
  • Regulate information required, held and reported by credit bureaux

The Act applies to:

  • All consumers who are natural persons
  • All consumers who are juristic persons unless they have an asset
  • value in excess of R1-million
  • It is NOT applicable to mortgage loans to juristic persons.

All credit providers must be registered:

  • If they are a credit provider in terms of at least 100 credit agreements
  • The total debt owing in respect of all of their credit agreements exceeds R500 000

The Regulator will take into account:

  • •BEE compliance
  • Any effort to combat over-indebtedness, eg. by subscribing to the industry code

Consumer Rights

  • Every consumer has the right to apply for credit.
  • A credit provider may not unfairly discriminate against a person on grounds that are contrary to the Constitution.
  • A credit provider must advise a consumer in writing of the dominant reason for refusing credit or offering a lower credit limit and such
  • notification must be in an official language which the consumer understands
  • A credit provider may not discriminate against a consumer who has sought to assert his/her rights in terms of the Act.

Unlawful Agreements:

  • Unlawful Agreements are those entered into with minors, people who are mentally unfit, people who are under administration, credit providers who are not registered or in situations of negative option credit.
  • Unlawful agreements are void.

Interest & Fees

  • Income on loans will be limited to interest, the application fee and certain service fees and are subjected to maximum charges and/or rates prescribed by the minister from time to time. “In duplum” rule is extended accordingly: Interest initiation fees, service fees, cost of credit and collection costs incurred while a consumer is In default may not in aggregate exceed the unpaid balance of the principal debt at the time the default occurred”.

Credit Life Insurance

  • A credit provider may require sufficient life cover and short-term insurance on the property pledged as security but the demand must not be unreasonable.
  • The consumer must be given and informed of the right to waive the proposed policy and to substitute a policy of his/her own choice.

Reckless Credit

Reckless credit is prohibited under the National Credit Act (NCA) and is defined as lending money to consumers without:

  • Ensuring that they have enough income to repay the loan
  • Assessing a consumer’s debt repayment history
  • Ensuring a consumer understands the costs, rules, risks and all obligations of the credit agreement.

If the Court finds that the credit agreement is reckless, it may order that:

  • it be set aside, or:
  • it be suspended, or;
  • if the consumer is over-indebted, that the consumer’s obligations under any other credit agreement be restructured

Magistrate’s Courts may also conduct hearings on ““over-indebtedness”
ie, where a consumer is unable to satisfy his/her obligations under credit
agreements having regard to his/her financial means, prospects and
obligations and his/her history of debt repayment. The Magistrate’s
Court may issue an order re-arranging the consumer’s affairs, either by
extending the period of the debt and reducing the amount of each
payment by postponing the dates on which payments are due.

Credit Bureaux

The National Credit Regulator has a discretion regarding registration
and may take into account, inter alia, competence, knowledge,
experience, human resources and procedures to deal with queries in an
equitable and courteous manner.

A credit bureau must keep its information confidential and may only use
it for purposes permitted in terms of the Act or on the instructions of the
consumer.

A registered credit bureau must accept information from credit
providers and the consumer and take reasonable steps to verify the accuracy of
the information. The information must be kept for the prescribed period
and in the prescribed form.

Where a consumer’s debts have been re-arranged and a debt counselor
has issued a clearance certificate, the credit bureau must expunge all
records of the default.

Every person has the right to:

  • Be advised by a credit provider within the prescribed time before any adverse information is reported to a credit bureau and to receive a copy of that information;
  • Inspect any credit bureau free of charge once within any twelve month period and at any other time upon payment of the inspection fee.

Challenge any information and accuracy thereof at no charge.
Be compensated for the cost of correcting any incorrect information by
the person who reported it.

Upon receipt of a challenge by a consumer, the credit bureau must seek
evidence in support of the information. Once in receipt of the evidence,
the consumer may apply to the National Credit Regulator to investigate
the information.