The National Credit Act

What is the purpose of the NCA?

  • The purpose of the NCA is to promote and advance the social and economic welfare of South Africans; promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry; and to protect consumers while balancing the rights of suppliers.

Who does the NCA apply to?

  • It applies to all credit agreements between parties dealing at arm's length that are made in South Africa or have an effect in South Africa. The NCA applies to all natural persons and some juristic persons (in particular small juristic persons).

What is a credit agreement?

  • The NCA defines credit agreements which include credit cards, cheque accounts, loans by financial institutions, clothing accounts on credit, cell phone accounts on credit, and suretyship agreements.

What are the key features of the NCA?

  • The language in credit agreements must be plain and understandable.
  • Quotes must be given before credit agreements are entered into and which are binding for 5 days.
  • Advertising and marketing must contain information on the cost of credit.
  • Credit sales at a person's home or work are not allowed unless the consumer says otherwise.
  • Reasons must be provided if a credit application is declined.
  • Automatic increases in credit limits are allowed unless the consumer says otherwise.
  • Reckless lending is prohibited.
  • Interest and fees are charged as according to the NCA (including micro-loans).
  • Credit bureaus are regulated and consumers have the right to see their credit bureau record.
  • Debt counselling was introduced to enable restructuring of debts for over-indebted consumers.

What are my rights as a consumer?

  • A consumer has the following rights, to:
    • apply for credit (but a credit provider can decline a credit application);
    • be protected against discrimination in respect of the granting of credit;
    • be given reasons for credit being refused;
    • information in plain and understandable language;
    • receive documents; and
    • protection of consumer rights.

How does the NCA protect a consumer against over-indebtedness?

  • The NCA requires that credit providers must perform a full credit assessment before entering into a credit agreement with the customer.  Such an assessment includes taking reasonable steps to ensure that the customer understands the rights, obligations, risks and costs associated with the credit agreement; and it must assess the consumer's financial position.

How will a consumer know that he/she may be over-indebted?

  • A consumer may be over indebted if, after deducting reasonable living expenses from the total income, the consumer will not be able to repay his/her debts. Legal Eagle can assist by referring a consumer to the debt counselling department for an assessment (for further information on debt review, refer to the debt counselling QuickLaw

What is the National Credit Regulator (NCR)?

  • The NCR is an independent juristic person that regulates the South African credit industry.

What are the functions of the NCR?

  • The NCR must:
    • Register credit providers, credit bureaus and debt counsellors; and monitor the conduct of these parties.
    • Educate and create awareness of the protection the NCA offers.
    • Research the credit market to monitor access to credit  and the cost of credit.
    • Identify factors that may undermine access to credit, competitiveness and consumer protection.
    • Advise government on policy and legislation changes.
    • Receive and investigate complaints.
    • Ensure that a consumer's rights are protected.
    • Enforce the NCA and take action against contravening institutions.

What is the National Consumer Tribunal (NCT)?

  • The NCT is independent of the NCR and conducts informal hearings on cases of non-compliance with the NCA. Consumers and credit providers may appeal to the NCT against a decision of the NCR. The NCT issues fines and provides redress to consumers. The NCT consists of a chairperson and at least 10 other members.

Key.

  • ARM'S LENGTH: there is no personal relationship between the consumer and credit provider. An arm's length transaction involves two independent parties and each is attempting to get the best deal possible.
  • NATURAL PERSONS: means individual customers or sole proprietors.
  • JURISTIC PERSONS: means partnerships, close corporations and companies with an asset value or turnover of less than R1 million and the credit transaction is less than R250 000.
  • CREDIT AGREEMENT: credit agreements are written contracts that involve credit (which means there is a promise to pay later on but the consumer must pay interest, a fee or higher amount).

How can Legal Eagle help you?

A Legal Eagle Legal Counsellor can advise you on credit agreement related queries.