1 UN Guidelines for Consumer Protection “… to address imbalances in economic terms, educational levels, and bargaining power “… create market conditions to provide consumers with greater choice at lower prices. “… adequate information to make informed choices … individual wishes and needs “… protected from contractual abuses as one-sided standard contracts, exclusion of essential rights in contracts, and unconscionable conditions of credit by sellers. National Credit Act  To promote a fair and non-discriminatory marketplace for access to consumer credit  To promote responsible credit granting and use and for that purpose to prohibit reckless credit granting;  To provide for debt re-organisation in cases of over-indebtedness

National Credit Act Maryke Steynberg June 2011

3 National Credit Act Agreements & quotes Unlawful agreements, provisions Credit Bureaus National Credit Register Debt counselling Enforcement & debt collection Reckless lending rules Marketing & sales practices Interest & fees National Credit Act Scope & objectives  Improved disclosure, enforcement & redress  Prohibit unfair contractual practices  Regulate interest and fees  Reckless lending rules & debt counselling;  Regulate credit bureaux & credit information  Marketing & Sales practices

44 Consumer Credit Market in South Africa Credit Providers 18,35 million Credit Consumers 1,922 Debt Counsellors R1.19 trillion consumer credit Credit Providers = 4,381 Branches = 34,332 Credit Bureaus

55 Credit Provider Statistics Overview of consumer credit market Consumer book: R1.19 trillion, provided to million consumers & consisting of 35m accounts Registrations: credit providers ( branches) 10 credit bureaus, managed 22 audits; 16,8 m data removals Provincial distribution of credit: Gauteng = 44% WC = 15%KZN = 14% EC = 6% FS = 4.0% LP = 4% MP = 6% NC = 2% NW = 4 % Other = 1%

66 Credit Provider Statistics Overview of consumer credit market Approximately R1.19 trillion consumer credit, provided to million consumers & consisting of 35m accounts (exclude micro-lenders & other small providers) Book value distribution:  Mortgages 64%;  Secured motors and furniture= 18%;  Credit Facilities = 11%;  Unsecured = 6%.  Approximately R1.19 trillion consumer credit;  provided to million consumers &;  consisting of 35m accounts.

7 Credit Provider Statistic Overview of consumer credit market 7 Gross Loans Outstanding Accounts Banks90%18.5m Motor Dealers3.3%0.273m Retailers3.1%15.1m  Decline in total credit granted noticeable until 2 nd quarter of 2009;  Decline in Gross debtors book only noticeable in 2 nd quarter 2009;  Steady increase in total credit granted from Q1 to Q4 of  Increase in 3 rd and 4 th quarter 2011.

88 Credit Bureau Statistics & impaired records  million credit active consumers.  For December 2010 a moderate increase in number of consumers with an impaired record.  Number of consumers with impaired records increasing: Dec 2008 = 7.30m, Dec 2009 = 8.18m, September 2010 = 8.49m and December 2010 = 8.61m  This is an increase of when compared to September 2010 and when compared to a year ago.

9 Developmental credit agreement  What is a Developmental credit agreement?  In terms of Section 10 of the National Credit Act (NCA) gives the following definition; “Credit agreement irrespective of its form, type or category is a developmental credit agreement if it is an educational loan. “  What is an educational loan? “Student loan or school loan or any other agreement entered into related to adult education, training or skills development”

10 Registration Developmental Credit provider Section 40 More than 100 credit agreements or loan book more than R Register for Supplementary Registration

11 Consumer rights  Right to apply for credit  Right not to be discriminated against a consumers specifically with regards to Section 9 of the Constitution  Right to receive a reason for credit being refused  Right to receive information in official language  Right to information in a plain and understandable language  Right to receive documents  Right to confidential treatment

12 Provisions exclude Developmental c/a  Reckless credit provisions does not apply  However may apply for debt counselling  Documentation in plain and understandable language does not apply only if the NCR has approved documentation to be used.  Right to receive documents – consumer may receive one free copy thereafter have to pay for it – does not apply to Developmental c/a if NCR approved manner in which documentation will be send

13 Exclusions continue  Credit provider must submit detail to a credit bureau or the National Loans Register however developmental credit provider can by requested by the Minister to provide additional information.  Section 75 – may not enter into a loan at private dwelling and employer or trade union who enter into an agreement may not receive a commission or fee to enter into such an agreement does not apply to developmental c/a.  Section 76 – Advertising practices does not apply to developmental c/p unless approved by the NCR  Section 92 – pre agreement disclosure – Minister may prescribe a different form for developmental c/a.

14 Exclusions continue  Section 93 – Form of credit agreement – The Minister may prescribe a different form to be used other than already prescribed  Section 103 – provide that if variable interest are used there must be reference made to a interest rate in the agreement – does not apply to developmental credit agreement subject to approval from the NCR.  Section 107 – provide that Section 108 to 114 does not apply to developmental credit agreements (this sections deals with statement of account)

15 Unlawful credit agreements  Section 89 an agreement will be unlawful if  at the time of the agreement the consumer was an unemancipated minor unassisted by a guardian  Order by competent court holding that person to be mentally unfit  Under administration as contemplated in Section 74(1) of the Magistrates Court Act  If agreement was indeed entered into following can happen: Credit provider is unregistered Court can declare such an agreement void Credit provider must refund consumer all monies paid

16 FORM AND CONTENTS Credit agreements Small R – Form 20.2 R30 Intermediate R R (Q) Form 20.1 R31 Large R prescribes a compulsory standard pre-agreement statement

17 Pre agreement statement & Quotation

18 Intermediate agreements – Regulation 31  Information disclosed must be comprehensive, clear concise and in plain language  Copy of all documents including ones referred to in original agreement should be attached and signed for  Lettering of the agreement should be eligible  Agreement must disclose: Type of agreement, credit providers name contact details and registration number with NCR  Cost of credit – Interest rate & principal debt  Indicate if interest is variable or fixed  Manner and frequency of which statements will be provided  Process that will be followed on default

19 Regulation 31  A provision that the consumer has a right to contact the credit bureau  Have their credit record disclosed  Correct inaccurate information  Consumer have a right to settle the agreement  Credit provider has a right to terminate the agreement  Consumer has a right to lodge a complaint with the NCR

20 Unlawful provisions of a credit agreement  The following common law rights or remedies that are available may not be waived in a credit agreement: Exceptio errore calculi  Provision in an agreement is unlawful if it defeats the purpose of the NCA or deceive the consumer  Waive or deprive consumer of a right set out in the Act  Authorise the credit provider to do anything unlawful  To authorise any person in processing payment to give priority payment  Agreement will be void.

21 Section 103 (5)  Common law in duplum rule codified  Section 103(5) provides that: Despite any provision of the common law or a credit agreement to the contrary the amounts contemplated in section 101(1) (b) to (g) that accrue during the time that a consumer in IN DEFAULT under the credit agreement may not, in aggregate, exceed the UNPAID BALANCE of the PRINCIPAL DEBT under that credit agreement as at the time that the DEFAULT OCCURS  The above supported by the Supreme Court of Appeal.

22 Enforcement under NCA  Section 129  If consumer is in default under credit agreement the credit provider may draw the default to the consumers notice and refer them to;  Debt counsellor  Alternative dispute resolution agent  Consumer court or Ombud with jurisdiction  Consumer must be at least 20 business days in default and at least 10 business days expired since the credit provider delivered a notice to the consumer  Section 72  Consumer must be informed if any adverse listing will be listed at the credit bureau’s

THANK YOU