The National Credit Act
Providing credit responsibly
The Act applies to all credit agreements entered into after 1 June 2007 with consumers. The National Credit Act (NCA) creates the framework for the regulation of consumer credit in South Africa. The NCA facilitates access to credit for all, while introducing measures to prevent over-indebtedness and the extension of reckless credit to vulnerable consumers.
The NCA requires credit providers to conduct an affordability assessment to determine whether or not a consumer can afford credit. Where such assessment is not done, or not done properly, the court may declare the said agreement to be reckless, in which case all rights and duties in terms of the agreement may be suspended.
The Act applies to credit agreements entered into after 1 June 2007 with natural persons and juristic persons (companies, closed corporations, etc) with an asset value or annual turnover of less than R1m). However, the act does not apply to large agreements entered into by such a juristic person.
A credit agreement is a large agreement if it is:
- a mortgage agreement; or
- any other credit transaction (except a pawn transaction) or a credit guarantee, and the principal debt under that transaction or guarantee falls at or above R250 000.
Please note that these provisions only have a bearing on the ‘size’ of the consumer, and does not apply to the ‘size’ of the credit provider. The Act will apply to ALL credit providers, irrespective of their size.
The Act applies to ALL credit providers – whether they are required to register or not. Thus, if a credit provider has less that 100 agreements on their books, or the total outstanding debt is less than R500 000, the credit provider will not be required to register as a credit provider with the National Credit Regulator – but the Act nevertheless applies to all agreements entered into by the credit provider.