Business Law National Credit Act 34 of 2005

National Credit Act Advance social & economic welfare Protect the poor & uneducated

The National Credit Act: Objectives Aims to promote fair, competitive & accessible credit and to protect consumers by: Prohibits unfair marketing Provides information to consumers System to resolve disputes Debt reorganisation Credit bureaux etc

Who does it apply to? Every credit agreement except: Juristic persons with asset value or T/O in excess of R1 million The State Credit provider located outside RSA Large Credit Agreements

Types of Credit Agreements Small Credit Agreements Intermediate Credit Agreements Large Credit Agreements

Small Credit Agreement A pawn transaction, credit facility or credit transaction of less than R15 000

Intermediate Credit Agreement A credit facility or credit transaction of between R15 000 and R250 000

Large Credit Agreement A mortgage agreement, credit facility or credit transaction of more than R250 000

Regulation National Credit Regulator National Consumer Tribunal Regulations All credit providers must register Credit bureaux to register Debt counsellors to register

Consumer Rights Right to apply for credit Right to reasons for refusal Right to information in official language Right to plain & understandable language Right to receive documents Right to confidentiality

Credit Marketing No automatic agreements unless refused No automatic credit limit increases If comparing alternatives show costs of each

Prevention of Reckless Credit No reckless credit granting Assess consumers understanding of risks & costs, rights & obligations, financial history & financial means Recklessly granted credit may be set aside

Debt Review Consumer may apply to debt counsellor to be declared over indebted Debt counsellor investigates & if over indebted makes recommendation to Magistrates Court If not over indebted may suggest parties voluntarily agree on debt rearrangement

Debt Review If over indebted – Mag Court to receive debt counsellor recommendation and decide if to reject or to declare any agreement reckless or rearrangement of consumer obligations If not over indebted & creditor rejects DC recommendations, DC may refer to Mag Court

Unlawful Provisions Any clause in a credit agreement that does any of the following is unlawful: Deprives consumer of any statutory rights Exempts CP from liability Excludes any implied warranty States that no warranties were made before agreement States that goods have been received (if not) Forfeits any money paid if default Requires deposit of ID book, ATM card etc etc..

Other protections Consumer must advise CP of address where goods kept & of change of address Pawn brokers must specify date on which agreement ends & must deliver goods if paid by this date Limits on costs of credit CP must provides statements to consumer

Termination On payment in full By rescission within 5 days (unless at CP premises) Early settlement Surrender of goods Debt enforcement by court order

Who is a credit provider? The party who supplies goods or services under a discount transaction, incidental credit agreement or instalment agreement The party who advances money or credit under a pawn transaction The party who extends credit under a credit facility The mortgage under a mortgage agreement The lender under a secured loan The lessor under a lease The party to whom an insurance or promise is made under a credit guarantee The party who advances money or credit to another under any good credit agreement Any other person who acquires the rights of a credit provider under a credit agreement after it has been entered into

Who is a consumer? The party to whom goods or services are sold under a discount transaction, incidental credit agreement or instalment agreement The party to whom money is paid, or credit granted, under a pawn transaction The party to whom credit is granted under a credit facility The mortgagor under a mortgage agreement The borrower under a secured loan The lessee under a lease The guarantor under a credit guarantee The party to whom or under whose direction money is advanced or credit granted under any other credit The lessor under a lease The party to whom an insurance or promise is made under a credit guarantee

When will an agreement be a Credit Agreement under the Credit Act? If it is a credit facility (eg: credit card), a credit transaction (eg: instalment agreement), a credit guarantee (eg: suretyship) Will not be a credit agreement if it is an insurance policy, a lease of immovable property or a transaction between a stokvel and its members

Explain the 3 different classifications of credit agreements Small agreement – pawn transaction, credit facility or credit transaction with credit limit or principal debt under R15 000 Intermediate agreement – credit facility with credit limit over R15 000 or credit transaction (except credit guarantee, pawn transaction or mortgage) with principal debt between R15 000 and R250 000 Large agreement – credit transaction with principal debt over R250 000

Discuss the general rights of consumers under the NCA Everyone has the right o apply for credit No one may be discriminated against in granting credit based on their gender, race, religion, culture, etc Credit providers may not disclose confidential information of consumers Consumers refused credit have the right to be told of the reasons why credit is being refused

Consumers have the right to receive copies of all documents and in the official language of their choice Consumers must be provided with all relevant information including all costs and charges relating to the credit Credit providers may not recklessly grant credit – they have a duty to check the consumer can afford it The credit provider must not engage in prohibited marketing practices and must give the consumer the option to be excluded from marketing campaigns.

Further reading www.ncr.org.za