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Thread: Then NCA nightmare!

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    Then NCA nightmare!

    A company lent money to one of its employees to buy a house. The loan was for about half a million rand and the mortgage loan agreement was concluded on 2 June 2006. A mortgage bond was registered by the employee over the property in favour of the company in 2006. The employee, recently dismissed, failed to comply with his obligations in terms of the loan agreement by failing to pay the monthly installments. The company is not a registered credit provider, despite having provided similar credit to a couple of other employees over the last few years.

    The following questions now arise:
    (1) How is the NCA going to impact on this transaction come 1 June 2007? I have issued summons against the debtor and my priority is to obtain judgement before 1 June 2007 when section 89 of the NCA comes into operation.
    (2) Am I misguided when advising my client that the transaction will be invalid and unenforceable after 1 June 2007?
    (3) Is the act in other words retrospective?

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    Silver Member Eugene's Avatar
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    While s89 is retrospective, it is only partly retrospective. One can argue that the particular instance which makes a credit agreement void (i.e. not being registered as a credit provider) was not a sanction present before 01 June 2007 and thus is not retrospective.

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    Silver Member Eugene's Avatar
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    (2) Am I misguided when advising my client that the transaction will be invalid and unenforceable after 1 June 2007?

    I would say that you would still be able to recover the debt after the 01 June 2007 as the credit agreement was entered into before 01 June 2007 - thus before the new Act came into opertaion.

    If your client enters into any further credit agreements after 01 June 2007 and is still not registered then of course he/she/it would run a very real risk of not being able to recover their loan from the debtor as s89(5) indicates as he/she/it is not registered as a credit provider as required. (But see s89(4)(a) which gives you a 30 days grace period if your client does enter into a credit agreement after 01 June 2007 without being registered).

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    Silver Member Eugene's Avatar
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    If the Credit Provider is required to be registered in terms of s40 of the NCA when the loan is entered into and is not registered as a Credit Provider with the National Credit Regulator then the loan is unlawful and void (not voidable!).

    The consequences of this agreement being void are that a court MUST order that:

    a) the credit agreement (loan) is void;
    b) all instalments (with interest) must be repaid to the consumer (mortgagor); and
    c) all the rights that the credit provider had to recover the loan are either cancelled, not cancelled or forfeited to the State.

    However there is an exception to this rule as contained in s89(4)(a), which allows that the agreement will not be unlawful if the Credit Provider applies to be a registered Credit Provider within 30 (presumably calendar) days after entering into the loan agreement.

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    Email problem RKS Computer Solutions's Avatar
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    Nice to have the law in the forum Can already see Eugene making a difference!

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    Thanks for the info , but I am still unclear as to the position after 1 June 2007.

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    just me duncan drennan's Avatar
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    Is this not a case of immovable property, and therefore the NCA does not apply?

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    Silver Member Eugene's Avatar
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    Duncan,

    The NCA excludes all leases of immovable property. The bond still falls under the ambit of the NCA.

    Any attempt to collect any arrear rental connected to a lease of immovable property would be outside of the ambit of the NCA.

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    Silver Member Eugene's Avatar
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    Xander, the situation after June 2007: I do not consider that the credit agreement that your client entered into is likely to be affected by section 89. In my opinion the credit agreement would need to be entered into after 01 June 2007 for section 89 to be an obstacle to you.

    With regards to further collection on this matter consider section 129, which provides that a letter of demand must be sent and must contain a reference to the rights of the consumer or else you can't send out a summons. Since you have already issued the summons before 01 June 2007, I do not consider that this would be pertinent to you, but I would caution you that if you haven't issued a summons before 01 June 2007 then you will be required to comply with section 129 irrespective of whether the credit agreement was entered into before 01 June 2007 (i.e. section 129 applies retrospectively to debt collection for credit agreements entered into before 01 June 2007 where you attempt to recover the debt after 01 June 2007).

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    just me duncan drennan's Avatar
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    Quote Originally Posted by Eugene View Post
    The NCA excludes all leases of immovable property. The bond still falls under the ambit of the NCA.
    Ahh, thanks

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