Q & A's on the National Credit Act

[Eugene]

Q: What type of unsolicited sales communication is allowed under the NCA?

My understanding is that cold calling is prohibited, what about unsolicited offers via postal mail, or email for that matter?

Duncan, the required content for advertising practices is found under section 21 of the Rules under the NCA:

If an advertisement refers only to the availability of credit, and no reference is made to costs, interest rate or monthly instalment, no further disclosure of cost of credit, interest rate or monthly repayment is required.
If an advertisement discloses only the interest rate or the maximum and minimum rates where a range is applicable and no reference is made to other costs of credit, no further information has to be disclosed, but the advertisement must indicate that an initiation fee and service fee will be charged, if applicable;

Any of the following statements or phrases, or any wording that has substantially the same meaning, may not form part of any advertisement or direct solicitation for credit-
(a) "no credit checks required",
(b) "blacklisted consumers welcome";
(c) "free credit"

A direct solicitation may not contain the expressions "loan guaranteed", "pre-approved" or similar statements except when the credit granted is not subject to any credit assessment after acceptance by the consumer.

[Rebel]

When you daft the memo remember to address the issue of in duplum - would repo costs fall in under the in duplum together with costs that belong to a debt collector in term of the debt collectors costs - what about attorney and own client fees ?

[Dave A]

in duplum?

[daveob]

in duplum?

http://www.creditmanagement.co.za/?p=165

[Dave A]

So a client "neglects" to pay you R500.00 COD as arranged which now falls under incidental credit; it doesn't take much to incur over R500.00 in collection costs!

Is this for real? Because believe me, the end effect once the pain has kicked in enough is the death of any kind of small account credit. The only solution in the service industry would be "pay me first before I even start the job" - even payment on completion wouldn't cut it.

[Rebel]

In duplum = sec 103 (5) of the NCA

[Sieg]

National Credit Act

In Duplum

the "in duplum" rule in law refers to interest on the debt and means that a creditor may not recover an amount in interest which exceeds the original capital amount [the maximum amount of interest recoverable is therefor limited to the same amount of the capital debt]

For example, if the debtor original owes R100, the interest amount that can be recovered, cannot exceed R100.

The "in duplum" rule has merely been confirmed in section 103(5) of the NCA.

It has nothing to do with the legal costs and other recoverable amounts.

Sieg

[Dave A]

Hmm. Let's run through this step by step:

Section 103 (5) reads:

(5) Despite any provision of the common law or a credit agreement to the contrary, the amounts contemplated in section 101(1)(b) to (g) that accrue during the time that a consumer is in default under the credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under that credit agreement as at the time that the default occurs.

And then we look at 101(1)(b) to (g) and find:

101. (1)A credit agreement must not require payment by the consumer of any money or other consideration, except-

(b) an initiation fee, which-

(i) may not exceed the prescribed amount relative to the principal debt; and

(ii) must not be applied unless the application results in the establishment of a credit agreement with that consumer;

(c) a service fee, which-

(i) in the case of a credit facility, may be payable monthly, annually, on a per transaction basis or on a combination of periodic and transaction basis; or

(ii) in any other case, may be payable monthly or annually; and

(iii) must not exceed the prescribed amount relative to the principal debt;

(d) interest, which-

(i) must be expressed in percentage terms as an annual rate calculated in the prescribed manner; and

(ii) must not exceed the applicable maximum prescribed rate determined in terms of section 105;

(e) cost of any credit insurance provided in accordance with section 106;

(f) default administration charges, which-

(i) may not exceed the prescribed maximum for the category of credit agreement concerned; and

(ii) may be imposed only if the consumer has defaulted on a payment obligation under the credit agreement, and only to the extent permitted by Part C of Chapter 6; and

(g) collection costs, which may not exceed the prescribed maximum for the category of credit agreement concerned and may be imposed only to the extent permitted by Part C of Chapter 6.

At this point, I'm nervous. But then we look at the Limited application of Act to incidental credit agreements:

5. (1) Only the following provisions of this Act apply with respect to an incidental credit agreement:

(e) Chapter 5, Part C, subject to subsection (3)(a);

Sections 101 and 103 are both in Chapter 5, Part C, so moving onto section 5(3)(a)...

(3) A person may only charge or recover a fee, charge or interest-

(a) in respect of a deferred amount under an incidental credit agreement as provided for in section 101(d), (f) and (g) subject to any maximum rates of interest or fees imposed in terms of section 105;

OK. I'm still nervous
Am I limited to recovering only R500 of my collection costs from a client who owes me R500.00 under an incidental credit agreement?

[Rebel]

I am afriad that the codification of the in duplum rule in the NCA has everything to do with the amounts that may be recoverred from a debtor.

The amount that is owing by the debtor when he defaults - say R 100 - may never be increased by more than double - another R 100 - with any and all additions to the default amount. SO interest, costs, admin, etc - all inclusive - may never be more than another R 100 in my example.

[Rebel]

watch out that you don't try and clasify an agreement as NCA or not by its name - rather look at the causa - a cellphone contract can be in or outside the NCA - if no interest is charged then its outside - if they charge interest then its inside - mora interst on arrears does not bring it into the NCA

[Dave A]

OK. So let's get this cleared up then.

I provide a once-off service for a client. I am supposed to get paid once I have completed the service - (either immediately or within 30 days - does this affect anything?). The client fails to make the payment as arranged.

Now what?
Does this fall under the NCA?
If the fee for providing the service was R500.00, am I limited to being able to recover a maximum of R500.00 of my collection costs incurred?

[duncan drennan]

I provide a once-off service for a client. I am supposed to get paid once I have completed the service - (either immediately or within 30 days - does this affect anything?). The client fails to make the payment as arranged.

My understanding is that it becomes an incidental agreement when interest is charged, but maybe other charges (such as recovery fees) also push this into the realm of an incidental credit agreement.

My reading of those sections is the same as yours - any additional charges are limited to R500.

[Rebel]

Yes the NCA can be applicable should the receiving company be below the thresholds set - R 1 mil yearly turnover or R 1 mil asset value

[Dave A]

"Can" is kinda like "may."

Let's assume the client falls under the R1 million turnover or assets line. Here's the problem as I see it.
You don't do a credit check on a COD customer.
You provide the service and the client fails to pay.
You are now limited to R500.00 for collection costs?

[Rebel]

"Can" is kinda like "may."

Let's assume the client falls under the R1 million turnover or assets line. Here's the problem as I see it.
You don't do a credit check on a COD customer.
You provide the service and the client fails to pay.
You are now limited to R500.00 for collection costs?

Dave,

Yes "can" is like "may" - The NCA may be applicable if the end user is a "small" business ie below thresholds. Now you drag COD orders in - they fall outside the NCA definitions of credit agreements to start with. Should you not pay the COD and then interest is added it will come back under the NCA as incidental credit. The moment it is back under the NCA the sec 103 (5) in duplum is activated. As you know "reckless" does not apply to incidental.