NOTE ON CLAIM VERIFICATION PROCESS BY IRP UNDER IBC
Ad hoc loan agreements in terms of the NCA
1. September 2015
BROTHER CAN YOU SPARE A
DOLLAR? – AD HOC LOANS AND THE
NATIONAL CREDIT ACT
Samantha Horsfield and Nikhil Bhogal
2. Hogan Lovells
Structure -
• Purpose of the National Credit Act
• Scope of the NCA
• When is one required to register as a credit
provider under the NCA?
– Threshold requirements.
• The consequences for failure to register
under the NCA.
- Consideration of legislation and case law
• Conclusion
• Q & A
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3. Hogan Lovells
Purpose of the National Credit Act.
• Carl Sagan - ‘You have to understand the past to
understand the present.’
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4. Hogan Lovells
Purpose of the National Credit Act
• Credit market in South Africa prior to the NCA
• Promulgation of the NCA
• Purpose
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5. Hogan Lovells
Scope of the NCA
• Applies to all credit agreements made between
parties acting at arm's length in South Africa in
terms of which payment is deferred and interest is
levied.
• Hence we see four elements
• Only credit agreements to which the NCA applies
are considered when determining whether a credit
provider needs to register.
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6. Hogan Lovells
When is one required to register as a credit
provider in terms of the NCA?
• Not every person who grants credit is required to
register as a credit provider.
• Section 40 of the NCA (prior to the amendment Act)
required registration if:
– that person was a credit provider under at least 100 credit
agreements; or
– the total principal debt owed to that person under all
outstanding credit agreements was equal to or greater
than R500 000.
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8. Hogan Lovells
Register – Yes or No?
Opperman v Boonzaaier 2012 JDR 0619
(WCC)
V
Friend v Sendal 2015 (1) SA 395 (GP)
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9. Hogan Lovells
Section 40 in terms of the Amendment Act
• ‘‘(1) A person must apply to be registered as a
credit provider if the total principal debt owed to that
credit provider under all outstanding credit
agreements, other than incidental credit
agreements, exceeds the R500 000."
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10. Hogan Lovells
Consequences of Failure to Register under the
NCA
• Section 40(3) of the NCA:
– "A person who is required in terms of subsection (1)
to be registered as a credit provider, but who is not so
registered, must not offer, make available or extend
credit, enter into a credit agreement or agree to do
any of those things."
• Section 40(4) of the NCA:
– "a credit agreement entered into by a credit provider
who is required to be registered in terms of
subsection (1) but who is not so registered is an
unlawful agreement and void to the extent provided
for in section 89“
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11. Hogan Lovells
Section 89(5) of the NCA
"If a credit agreement is unlawful in terms of this section, despite any
provision of common law, any other legislation or any provision of an
agreement to the contrary, a court must order that-
• (a) the credit agreement is void as from the date the agreement
was entered into;
• (b) the credit provider must refund to the consumer any money
paid by the consumer under that agreement to the credit provider,
with interest…
• (c) all the purported rights of the credit provider under that credit
agreement to recover any money paid or goods delivered to, or on
behalf of, the consumer in terms of that agreement are either-
• (i) cancelled, unless the court concludes that doing so in the
circumstances would unjustly enrich the consumer; or
• (ii) forfeit to the State, if the court concludes that cancelling those
rights in the circumstances would unjustly enrich the consumer."
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12. Hogan Lovells
S89 in application - Cherangani Trade and Investment 107
(Pty) Ltd v Mason NO and Others 2011 JDR 0344 (CC)
– Facts
• Free State High Court
– Courts finding
– Strict and literal interpretation of the law
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13. Hogan Lovells
S89 in application - Opperman v Boonzaaier
2012 JDR 0619 (WCC)
• Facts
• Court’s findings
• Constitutional Court
– National Credit Regulator vs Opperman 2013 (2) SA 1
(CC)
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14. Hogan Lovells
Chevron (Pty) Ltd vs Dennis Edwin Wilson t/a
Wilson's Transport 2015 JDR 1055 (CC)
• Facts
• Courts findings
• Reasoning
– Arbitrary deprivation of property
– S25 of the Constitution vs the limitation of rights.
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15. Hogan Lovells
National Credit Amendment Act
• Changes to s89 of the NCA.
– "If a credit agreement is unlawful in terms of this section,
despite any other legislation or any provision of an
agreement to the contrary, a court must make a just and
equitable order including but not limited to an order that:
(a) The credit agreement is void as from the date the
agreement was entered into
(b) ……………………………………………..
(c) ……………………………………………..
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17. Hogan Lovells
Practical Obligations of a Registered Credit
Provider
"52(5) A registrant must
(a) post the certificate or duplicate registration certificate
in any premises at or from which it conducts its
registered activities;
(b) reflect its registered status and registration number,
in a legible typeface, on all its credit agreements and
communications with a consumer;
(c) comply with its conditions of registration and the
provisions of this Act;
(d) pay the prescribed annual renewal fees within the
prescribed time;
(e) keep any prescribed records relating to its registered
activities, in the prescribed manner and form; and
(f) file any prescribed reports with the National Credit
Regulator in the prescribed manner and form."
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18. Hogan Lovells
Proposed Registration Requirement
S40: A person must apply to be registered as a credit
provider if that person, alone or in conjunction with
any associated person, grants credit in their line of
business in credit agreement(s), excluding incidental
credit agreement(s).
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