NCA

NCA Institutions

Two new regulatory institutions have been established to administer the Act: The National Credit Regulator (NCR) is the administrative regulator dealing with issues such as research and policy development, registration of industry participants, investigation of serious complaints and will take responsibility for the enforcement of the Act. The National Credit Regulator will monitor credit providers and their compliance with the Act and regulations. The National Consumer Tribunal (NCT) will conduct hearings into complaints under the Act.

In terms of the NCA a Consumer is afforded certain rights and protections:

Protection from aggressive advertising

Negative option marketing is prohibited. (This occurs when goods or services are offered to you with the assertion that if you do not return the products or refuse the service within a certain time period you have 'purchased' them.)

Marketing of credit at the consumer's home or workplace is prohibited unless the visit is pre-arranged or the consumer invites the credit provider to visit for that purpose.

Protection from over-indebtedness

The credit provider must conduct a proper assessment of each consumer's ability to meet obligations, taking reasonable steps to investigate and evaluate the consumer's understanding and appreciation of the risks, costs and obligations of the proposed agreement; and ability to meet those obligations in a timely manner in terms of the consumer's existing financial means and debt repayment history.

A credit agreement will be deemed to have been entered into recklessly if the credit provider failed to conduct the required assessment, or having conducted it, enters into an agreement with a consumer despite the fact that the consumer did not appreciate the nature of the risks, costs and obligations, or could not afford them.

However, the onus is on the consumer to fully and truthfully answer any request by the credit provider for information as part of the assessment required. Failure to do so will be a defence against any allegation that the agreement is reckless.

The consumer may make a claim of reckless lending through a debt counsellor, who needs to investigate and seek an order from a court or the Tribunal.

Pricing (Interest rates and fees)

All existing advances taken before 1 June 2007 will continue to be priced as agreed under the Usury Act, but all new lendings with effect from 1 June 2007 will be subject to the pricing provided for under the NCA.

The Minister has established an interest cap and other cost controls, prohibiting any costs other than the principal sum borrowed, interest, an initiation fee, periodic or transaction based service fees, insurance premiums for credit insurance and collection costs. These fees, premiums and charges are subject to regulatory maximums or standards.

Surcharges for insurance and incidental costs are prohibited.

All costs must be advised in advance and the consumer has the right to arrange insurance directly, rather than pay the credit provider to do so, and to choose to arrange his or her own insurance policies.

Applying for credit under the NCA

Pre-agreement and quotation: The credit provider must provide the consumer with a pre-agreement, containing the main features of the proposed agreement and a quotation of the costs. This pre-agreement is valid for 5 days and gives consumers an opportunity to shop around for the best deal.

Credit assessment: The consumer will be required to provide detailed information to the credit provider. This may include a detailed statement of income and costs, a household budget and details of other credit commitments in order for the credit provider to assess affordability.

Consumer credit records and credit bureaux: The Act requires the credit provider upon entering or amending or terminating a credit agreement to report the transaction to a credit bureau.

Records of application: Credit providers will be required to keep records of all applications for credit and credit agreements for a prescribed time.

Payment of accounts: A consumer may pre-pay any amount owing at any time, and fully pay up the account at any time without penalty, except in the case of mortgage bonds or agreements in excess of R250 000, which are subject to a termination charge of not more than three months’ interest.

Over-indebtedness and reckless lending

The Act aims to promote responsible credit granting and use. To achieve this, when a customer applies for credit, a credit provider is obliged to check whether the consumer can afford the credit. If the consumer cannot afford to repay the credit agreement, it could be alleged that the credit provider has granted the credit recklessly, which could have severe consequences for that credit provider.

What should you do if you feel that you may be over-indebted?

You may be over-indebted if – after deducting reasonable living expenses from your total income – you are, or will in the future be unable to repay your debts. In the case where a consumer gets into too much debt, the consumer should approach a debt-counselling service.

As a registered credit provider, we fully support the National Credit Act (NCA), which came into effect on 1 June 2007, and have implemented the necessary policies and procedures to meet the requirements of the NCA. The NCA replaces the Usury Act and the Credit Agreements Act. Below are useful contact details should you require assistance.

Useful contact details:

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