2. 1. THE RELEVANCE OF CREDIT
AGREEMENTS
• Part of the law of contract
• National Credit Act has an impact on when a contract is
a consumer credit agreement, to which the Act applies.
• But remember, there are credit agreements to which the
NCA does not apply.
3. Categories of law
National law
Substantive
law
Private
law
Law of
persons
Law of
property
Law of
obligations
Etc.
Public
law
Procedural
law
4. Which legal principles apply to consumer credit
agreements?
Law of
contract
Unless
regulated
by the NCA
Not all
credit
agreements
regulated
by NCA
5. 2. & 3. WHY THE NCA?
THE OBJECTIVES OF THE NCA
IN THE PAST NOW
• Usury Act, Credit Agreements Act
and Exemption Notices.
• National Credit Act
• Outdated and fragmented
legislation.
• Single system of consumer credit
regulation.
• Ineffective consumer protection. • Focus on consumer protection.
• Created a dysfunctional credit
market.
• Promotes a fair, transparent and
efficient credit market.
6. 4. APPLICATION OF THE ACT
4.1. General application 4.2. Exclusions 4.3. Limited application
The NCA applies to:
• All credit agreements…
• Between parties, dealing
at arm’s length…
• Concluded in the RSA or
having an effect in the
RSA.
The NCA does not
apply if:
• The borrower is the
state.
• The credit provider is the
Reserve Bank.
• The xredit provider
located outside RSA and
exempted.
The NCA has limited
application if:
• The consumer is a
company, closed
corporation, partnership or
trust.
• The consumer’s annual
turnover does not exceed
R1 million.
7. Ask 4 questions to determine if the National
Credit Act applies:
1.Is it a credit agreement defined in the Act?
2.Was the credit agreement concluded between parties
dealing at arm’s length?
3.Was the credit agreement concluded in SA or does it have
an effect in SA?
4.Is the agreement exempted?
10. Small credit
agreement
• All pawn transactions
• Credit facility, credit
guarantee or credit
transaction (principal
debt is below
R15000)
• Mortgage agreement
excluded
Medium credit
agreement
• Credit facilities where
credit limit is above
R15000
• Credit guarantee or
credit transaction
where principal debt
is R15000-R250000
• Pawn transaction
and mortgage
agreement excluded
Large credit
agreement
• Credit guarantee or
credit transaction
where principal debt
is above R250000
• All mortgage
agreements
Categories of credit agreements
11. ‘Altruistic’ agreements
• Education loan
• Loan for development of small
business or low cost housing
• Loan to promote socio-economic
development
Developmental
credit
agreement
• Credit in case of natural disaster or
grave public interest
• In circumstances the Minister
considers public interest
Public interest
credit
agreement
12. 5. CONSUMER CREDIT INDUSTRY
REGULATION
National Credit Act
National Credit Regulator
• Compliance monitoring
• Complaints investigation
• Monitoring credit market
• Reporting to the Minister and
Parliament
• Registration procedures
National Consumer Tribunal
• Operate independently
• Direct access by credit
providers and consumers
• Prosecution
• Decisions can be appealed or
taken to High Court
Provincial Credit Regulators
14. 8. CONSUMER CREDIT POLICY AND
CONSUMER RIGHTS
Consumers have the right to:
1. Apply for credit.
2. Not to be unfairly discriminated against.
3. Know the reasons why a credit application was refused
4. Information in an official language.
5. Information in plain and understandable language.
6. Receive documents.
7. The protection of all the consumer’s rights in the Act
15. Specific consumer rights
The Act also provides for various other rights, including:
1. Consumer’s credit
and personal
information
• Confidentiality
• Maximum retention period by credit bureaux
• Consumer may access and challenge this
information
2. Limits imposed on
costs of credit
• Recover principal debt, initiation fee, service fee,
interest, credit insurance, default administration
charges and collection costs
• Maximum prescribed interest rates
3. Rescission • Cooling-off period
16. 4. Statements of
account
• Consumer entitled to statements and to dispute
entries
• Time periods within which to provide such statements
5. Surrender of goods • Terminate agreement and surrender movable goods
• Credit provider must sell goods and adjust
consumer’s account
• Consumer liable for outstanding amount after sale
6. Credit marketing
and advertising
practices
• Misleading advertising and coercive sales techniques
prohibited
• Negative option marketing
• Prescriptions in respect of small print
7. Early payment • Allowed without notice or penalty
17. Unlawful agreements Unlawful provisions
Description Situations where entire
agreement is unlawful
Where one/some of the
provisions are unlawful
Examples • Consumer mentally unfit or
an unassisted,
unemancipated minor
• Credit provider not
registered
• A term that defeats the
objectives of the Act
• Aterm that subjects the
consumer to fraudulent
conduct
Effect • Court must declare it to be
void and make any further
orders it deems just and
equitable
• Court must declare provision
unlawful and sever it from
the agreement or declare
entire agreement unlawful
9. CREDIT AGREEMENTS
18. 10. RECKLESS LENDING AND OVER-
INDEBTEDNESS
• A credit provider must first do an affordability
assessment
• Provisions only applies in respect of a natural person
• Provisions do not apply to school loans, student loans
and emergency loans
19. Credit is granted recklessly if…
Creditor took no steps to
assess consumer’s:
• Understanding of risks,
costs, rights etc.
• Debt repayment history
• Existing financial means
and prospects
• Possibility that commercial
purpose might be
successful
Creditor took the
necessary steps and still
entered into agreement
despite:
• The fact that the consumer
did not understand the
risks, costs, rights etc.
• The fact that entering into
the agreement would make
the consumer over-
indebted
20. If credit was granted recklessly…
A court or Tribunal may make an order:
• Setting aside all/part of the consumer’s obligations
• Suspending force and effect of the credit agreement...
– until a certain date
– by making an order restructuring the consumer’s
obligations
21. A consumer is over-indebted if…
Available information indicated
that consumer unable to satisfy
obligations:
- Financial means, prospects and
obligations
- Probable tendency to satisfy
obligations timeously as indicated
by debt repayment history
Debt
counselling
Debt
restructuring
22. 11. DEBT ENFORCEMENT
Creditor may not institute legal proceedings unless:
• Delivery of a section 129(1)(a) notice;
• The consumer is in default for at least 20 business
days;
• At least 10 business days have elapsed since
delivery of the notice and the consumer has not
responded
23. Alternative dispute resolution
Other options available to the consumer:
• Institute court proceedings to suspend agreement on
ground of reckless credit or over-indebtedness
• Application for debt review lodged with debt counsellor
24. 14. OTHER RELEVANT LEGISLATION
• Alienation of Land Act
• Consumer Protection Act
