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Thread: Does the NCA affect all agreements?

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    Does the NCA affect all agreements?

    Does the NCA affect all agreements after 1 June 2007?

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    Silver Member Eugene's Avatar
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    Thumbs up Not all agreement are regulated by the NCA

    Xander, the answer is no. The NCA specifically excludes agreements that are not credit agreements. Section 8 defines credit agreements as being those agreements where goods and/or services are provided and the consumer's obligation to pay is deferred or is repaid in instalments AND there is a fee that is levied (typically, interest) for the ability to repay later or in instalments.

    The NCA also excludes all leases of immovable property (note that movable property is included), credit agreements between people who are not contracting at arm's length (such as a loan by a son to his mother), credit agreements where consumer is a company or CC whose asset value or turnover is over a million rand and credit agreements where the consumer is the South African Reserve Bank, the state or an organ of the state (note that when the state/Reserve Bank is the lender, the NCA is not excluded).

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    Site Caretaker Dave A's Avatar
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    One thing I'm trying to figure out is trade debtors and "casual" debtors.

    How does the NCA affect the way we treat:
    • Regular debtors with an ongoing account
    • Once off debtors (provide service - send bill and they tend to pay within 7 - 30 days)

    The other aspect is where a COD discount is offered - as opposed to paying at, for example, 30 days.
    The trouble with opportunity is it normally comes dressed up as work.

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    Silver Member Eugene's Avatar
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    Dave, good question. These could be considered as incidental credit agreements. Say for instance you have a number of incidental credit agreements where the debtor has agreed to pay these accounts off over time (for instance if I am a doctor and have bad debtors), would you have to register as a Credit Provider? I think the answer is no: The debt still arises from an incidental credit agreement and thus you are exempt from having to register as a Credit Provider (see section 40(1)(b) of the NCA). This does not, however, mean that you do not have to comply with all the sections of the NCA that relate to incidental credit agreements - it simply means you don't have to register as a Credit Provider.

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    Silver Member Eugene's Avatar
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    I believe that the crux of the matter is the charging (and regulating fees or interest charged). As a general rule of thumb, if the intention of the person was not to levy interest or an additional charge, it will not be seen as a incidental credit agreement. An incidental credit agreement comes into being 20 business days after the consumer was due to pay provided that there is interest being charged if the consumer doesn't pay. For this reason many of my collegue attorneys have indicated that they would prefer not to charge interest as not charging interest would remove these agreements from the ambit of the NCA.

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Eugene View Post
    For this reason many of my collegue attorneys have indicated that they would prefer not to charge interest as not charging interest would remove these agreements from the ambit of the NCA.
    I think that is one of the more critical points for business to consider when developing a debtors control strategy around the NCA.

    Thanks Eugene.
    The trouble with opportunity is it normally comes dressed up as work.

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    just me duncan drennan's Avatar
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    Do you think that there is a possibility that COD discounts will fall away as a result of this? In the same way that it might be better to avoid interest charges, it could be better to avoid COD discounts? Obviously this is not necessarily good for the consumer....
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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by dsd View Post
    Obviously this is not necessarily good for the consumer....
    Not that hot for cashflow of the business either.
    The trouble with opportunity is it normally comes dressed up as work.

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    Silver Member Eugene's Avatar
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    Duncan / Dave

    I believe that the working of the COD (Cash on delivery) type of account will not be impacted by the NCA as it does not constitute a credit agreement, nor was it the intention of the parties to form a credit agreement. The fact that you offer a discount on early payment, I believe will not have an affect at all. (But the question still arises: if the consumer cannot pay the full settlement amount upon delivery and makes arrangements to pay it off in say, 2 instalments: this would then create and incidental credit agreement and the transaction would fall under the workings of the NCA).

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    just me duncan drennan's Avatar
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    From the NCA definitions,

    "incidental credit agreement" means an agreement, irrespective of its form, in terms of which an account was tendered for goods or services that have been provided to the consumer, or goods or services that are to be provided to a consumer over a period of time and either or both of the following conditions apply:

    (a) a fee, charge or interest became payable when payment of an amount charged in terms of that account was not made on or before a determined period or date; or

    (b) two prices were quoted for settlement of the account, the lower price being applicable if the account is paid on or before a determined date, and the higher price being applicable due to the account not having been paid by that date.
    Surely a COD discount is an example of (b)?
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