1. The Turmoil: Cost of credit, charges & enforcement

2. The Cheese
In terms of sections 100 and 101 NCA there are only 3 possible ways to yield a profit on a credit agreement:
Initiation fee
maximum set in reg 42(2) AND reg 43(3)
Interest
maximum set in reg 42(1)
Service Fees
maximum set in reg 44

3. The Maze Matter: Relates to: “Bitline” RATES & FEES “Barko” EDO COSTS
“Impala Platinum”
COLLECTION PROCEDURES (EAO’s)
“Stellenbosch Legal Aid Clinic”

4. RATES & FEES
Bitline SA 510 CC t/a Loan Tech Financial Services & 6 others / The National Credit Regulator & 4 others, High Court, GD, Pretoria, 62367/2013
Bitline: H/C for declaratory order for:
Regulations to be declared invalid (ultra vires)
Service Fees (reg 44) to be reviewed
Interpretation on how “monthly” service fee may be charged
Parties reached a settlement: prosecutions were stayed
Court Order:
Service fees must be reviewed within 9 months’ from 4 June 2014: 4 March 2015
NCR & Minister ordered to pay the applicants’ legal costs
Bitline & applicants are micro lenders
NCR prosecuted Bitline in Tribunal on overcharging of service fees
Regulations to be declared invalid (ultra vires)
Service Fees (reg 44) to be reviewed
Interpretation on how “monthly” service fee may be charged
Parties reached a settlement: prosecutions were stayed
Court Order:
Service fees must be reviewed within 9 months’ from 4 June 2014: 4 March 2015
NCR & Minister ordered to pay the applicants’ legal costs

5. Cheese RATES & FEES Legal Opinion: RATES & FEES Legal Opinion:
BITLINE CASE
Legal Opinion:
“service fee” means a fee that may be charged periodically by a credit provider in connection with the routine administration cost of maintaining a credit agreement.” (s1 NCA)
No definition of “month” in NCA
Max Service Fee The maximum monthly service fee, prescribed in terms of section 105(1) of the Act, is R50.00… (reg 44)
Charge R50 for every calendar irrespective of the number of days.
Ex: Loan agreement on 17 February 2015, repayment date 3 March 2015 then service fees = R100.
RATES & FEES
Legal Opinion:
“service fee” means a fee that may be charged periodically by a credit provider in connection with the routine administration cost of maintaining a credit agreement.” (s1 NCA)
No definition of “month” in NCA
Max Service Fee The maximum monthly service fee, prescribed in terms of section 105(1) of the Act, is R50.00… (reg 44)
Charge R50 for every calendar irrespective of the number of days.
Ex: Loan agreement on 17 February 2015, repayment date 3 March 2015 then service fees = R100.
Cheese

6. RATES & FEES Impact on industry Cheese? BITLINE CASE 4 March 2015
How must it be reviewed? Ito Reg 45:
“…when making a recommendation to the Minister in terms of this regulation, consider: 
(a) ruling interest rates and fees;
(b) cost of providing such credit;
(c) the choice available to consumers in the particular category of credit agreements between different products and different credit providers; and (d) the impact upon access to finance for persons referred to in section 13(a) of the Act.”
What has been done so far? No one knows
MFSA: Econometrix Study: September 2014
What the report says
Proposes the all max fees be given a one-off boost to compensate for the 7 years’ inflation since 2007 – and then automatic adjusted in the future. This includes the “initiation fee”.
BITLINE CASE Impact on industry
4 March 2015
How must it be reviewed? Ito Reg 45:
“…when making a recommendation to the Minister in terms of this regulation, consider: 
(a) ruling interest rates and fees;
(b) cost of providing such credit;
the choice available to consumers in the particular category of credit agreements between different products and different credit providers; and
the impact upon access to finance for persons referred to in section 13(a) of the Act.”
What has been done so far? No one knows
MFSA: Econometrix Study: September 2014
What the report says
Proposes the all max fees be given a one-off boost to compensate for the 7 years’ inflation since 2007 – and then automatic adjusted in the future. This includes the “initiation fee”.

7. RATES & FEES… s105(2): must consider:
…. (b) cost of providing such credit;
S13(1)
Historically disadvantaged
Low income persons
Remote communities
s105(2): must consider:
The need to make credit available to persons in s13(1)
Prevailing conditions, including cost of credit & optimal functioning of market
Impact on low income consumers
s3: Purpose of NCA:
Promote credit market and protect consumers
Balancing of rights
Etc
…. (b) cost of providing such credit;
S105 – Must consider
The need to make credit available to persons in s13(1)
Prevailing conditions, including cost of credit & optimal functioning of market
Impact on low income consumers
S3 – Purpose of the Act
Promote credit market and protect consumers
Balancing of rights
Etc
S13(1)
Historically disadvantaged
Low income persons
Remote communities

8. EDO COSTS
Barko Financial Services (Pty) Ltd v National Credit Regulator (415/13) [2014] ZASCA 114, 18 September 2014
Barko contracted with NuPay: EDO for repayments
The Court found:
Barko was passing its liability towards NuPay onto the consumer in conflict with Section 101(1)(c) NCA
Barko induced the consumer to enter into a supplementary agreement
Barko Financial Services (Pty) Ltd v National Credit Regulator (415/13) [2014] ZASCA 114, 18 September 2014
Barko is a micro lender. Barko contracted with NuPay to render services as payment system operator on behalf of consumers who want to use EDO for repayments
NCR prosecuted Bitline in Tribunal on overcharging of service fees and/or inducing consumer to enter into supplementary agreement
The Court found:
Barko was passing its liability towards NuPay onto the consumer in conflict with Section 101(1)(c) NCA
Barko induced the consumer to enter into a supplementary agreement

9. EDO COSTS Impact on industry Mouse trap! Legal Opinion: BARKO CASE
Other attorneys: 2 separate & distinct agreements (credit agreement & agreement between SP and consumer for EDO costs) and consumer not induced – may still hold consumer liable for EDO transaction costs.
Mouse trap!
Legal Opinion:
Interpretation / construction of judgment in Barko
AD 16: “The simple expedient of two agreements could hardly have rendered lawful what would have been unlawful in terms of a single agreement.”
Substance over form (common law)
looks like duck, quacks like duck, walks like duck…
CAUTION !! - CP TO RATHER PAY EDO TRANSACTIONAL COSTS
- DO NOT CHARGE TO CONSUMER
Other attorneys: 2 separate & distinct agreements (credit agreement & agreement between SP and consumer for EDO costs) and consumer not induced – may still hold consumer liable for EDO transaction costs.
Legal Opinion:
Interpretation / construction of judgment in Barko
AD 16: “The simple expedient of two agreements could hardly have rendered lawful what would have been unlawful in terms of a single agreement.”
Substance over form (common law)
looks like duck, quacks like duck, walks like duck…
CAUTION !! - CP TO RATHER PAY EDO TRANSACTIONAL COSTS
- DO NOT CHARGE TO CONSUMER

10. COLLECTION PROCEDURES
- Stellenbosch Legal Aid Clinic & others / Minister of Justice & others - Impala Platinum / CG Steyn & 24 others
Impala: North West Division
SLAC: Western Cape Division
Applications to declare s65J (EAO’s) unconstitutional
Both opposed
Support from industry to respondents’ case important
Possible impact on industry: no way of recovering bad debt directly from salary of debtor
Impala hearing date: 26 March 2015
SLAC hearing date: this week
Stellenbosch Legal Aid Clinic & others / Minister of Justice & others - Impala Platinum / CG Steyn & 24 others
Impala: North West Division
SLAC: Western Cape Division
Applications to declare s65J (EAO’s) unconstitutional
Both opposed
Support from industry to respondents’ case important
Possible impact on industry: no way of recovering bad debt directly from salary of debtor
Impala hearing date: 26 March 2015
SLAC hearing date: this week

11. 2014 2015 Edo costs charged to consumer
Barko judgment created case law:
Depends on whether court finds Barko judgment binding on specific case.
My opinion: substance over form, will be binding in most instances. Don’t charge EDO to consumer.
Service Fees at R50 per month
Review ordered - BITLINE
Review period expires on 4 March 2015.
New fee unknown
EOA’s as standard practice for collection
2 pending matters might change position completely – SLAC & Impala Platinum
Constitutionality of EAO’s challenged
If found unconstitutional, CP’s can only execute ito attachment of property (writs), agreements to pay off, section 65 financial enquiries, garnishee orders against bank account, monies or debt

12. “They keep moving the cheese”
2014:
“They keep moving the cheese”
2015:
“Get ready for the cheese to move… again”
2014:
“They keep moving the cheese”
2015:
“Get ready for the cheese to move… again”

13. Ronél de Klerk - Director Lewies Prokureurs l Attorneys
Thank you
Ronél de Klerk - Director
Lewies Prokureurs l Attorneys
l SA (m)
l Nam (m)