Credit applications

[Mike C]

Hi All,

I have just received an email saying that due to the Credit Act we may not have Credit Applications older than 5 years.

I have looked at the Credit Act and can't find this specified anywhere - unless I am looking right past it!

Is it true that all Credit Applications need to be renewed after 5 years?

[Dave A]

I love emails like that.

I can see an argument that a current credit assessment should be based on a current credit application. But once past that hurdle, I'm not aware of anything that requires regular revaluation of a standing credit facility.

Seeing as they're making the claim, just ask them to substantiate it by pointing you to the relevant section or regulation.

[Mike C]

You should see the "legalese" language in the suretyship that they provided. Words like "excussion" and "Exceptio errore calculi, Exceptio non numerate pecuniae and Exceptio non causa debiti" ...

When I pointed out that the Credit Act specifically says that "All the information that is disclosed in a credit agreement must be comprehensive, clear, concise and in plain language", and that the rights of those three legal terms may not be signed away I received this response:

"JHB has said our legal department approved this information form plus surety.
They are more than happy for you to go ahead and get legal advice, should there still be a query let us know & we can go back to our Legal department."

[Dave A]

I take it the real reason is they're seeking to change the terms of the credit facility then...

[Blurock]

I love emails like that.

I can see an argument that a current credit assessment should be based on a current credit application. But once past that hurdle, I'm not aware of anything that requires regular revaluation of a standing credit facility.

Seeing as they're making the claim, just ask them to substantiate it by pointing you to the relevant section or regulation.

In my experience a supplier has the right to, but will only require updated information when there has been a change in circumstances e.g. a change in shareholding or a default. In other words, something that may materially influence the risk that the lender/supplier is exposed to. Most of this information can be obtained by requesting a new bank report and credit checks. A new credit application may serve only to slip in a surety clause as part of the document. The buyer may still delete the surety clause if not happy with the conditions.

It would be rather silly of a supplier to risk losing a customer just because some financial wizkid wants updated information to tick the blocks! Although it now happens more frequently where big corporations have become arrogant and have little disregard for the small business operator. Fortunately there are still those that value their name and ethics.

[Mike C]

Came across another one today that I need to check out with the forum. It reads:

The Customer warrants that the Customer is a juristic person as defined in the National Credit Act.
The customer warrants that its assets and/or annual turnover exceeds one million Rand and that this agreement therefore falls outside the ambit of the National Credit Act
The Customer acknowledges and accepts that by virtue of the above, this agreement will come into acceptace of this Credit Application by the Company.
The customer acknowledges and accepts that this agreement shall not be subject to the provisions of the National Credit Act.


I found this reference on "gottaquirk.com/2011/04/04/" which has bearing, but raises the bar to 3 million.

It is widely expected, however, that once the Minister of Trade and Industry has passed the long-overdue Regulations which are required to give practical meaning and effect to much of the CPA, the definition of “consumers” will be limited to exclude juristic persons (i.e. CCs, companies, trusts) whose asset value or annual turnover is equal to or exceeds R3 million.

Can any light be shed on this by those who know?

[BusFact]

I can't give you a reference, but I've seen the R1mil amount thrown about a few times. The R3mil one looks like someone's estimate at the time of what may happen.

[Dave A]

As far as I can tell, no notice has been published amending the thresholds set out in Notice No. 713 of 2006, so those thresholds remain of force and effect.

i.e R1 million appears to still be the correct threshold.