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Thread: debtors application forms

  1. #1
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    debtors application forms

    Our company falls under ICA - having debtors varing from large bus to the guy working out of his garage.
    The bank has agreed we don't need to register, but the question the bank asked ' what about your debtors?' they don't all fall within section 7 (1)?
    1) do I need to adapt my credit application forms to accommodate these guys?
    2) do I need to register to cover these debtors?
    I believe Jazz's questions sort of covered this and Yvonne 4/4/07 questioned along these lines.
    p.s the extent of my knowledge on this subject is - a morning workshop, which covered consumers, I learnt we fall into ICA. Any info will be most appreciated.

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    Silver Member Eugene's Avatar
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    I have made an extract from some of my notes:

    The application of the Act is regulated in terms of Sections 4, 5, 6 and 7 and is two pronged. It applies to certain persons and to certain credit agreements. A wide variety of credit agreements are covered by the Act. The Act applies with certain exemptions to inter alia an overdraft, credit card, personal loan, mortgage bond secured loans, rendering of service, purchase and sale, lease involving movables and credit guarantees.

    The Act applies to all consumers who are natural persons irrespective of value & small juristic persons i.e. those with a turnover or asset value of less than R1 million.

    Juristic Persons above or equal to the Section 7(1) threshold (R1 million): Should the asset value or annual turnover of a consumer who is a juristic person equal or exceed the Section 7 (1) threshold then the Act will not apply. Should the consumer consist of more than one related juristic person regard is had to the combined value.

    Juristic persons are deemed to be related if:
    • One of them has direct 'or indirect control over the whole or part of the
    business of the other; or
    • Another person has direct or indirect control over both of them.

    "Juristic person" includes a partnership, association or other body of persons, corporate or unincorporated, or a trust if- .
    • there are three or more individual trustees; or
    • the trustee is a juristic person


    Who must be registered as a credit provider in terms of the Act?
    A credit provider in respect of a credit agreement to which the Act applies is an entity whether natural or juristic who supplies goods or services under a discount transaction, incidental credit agreement or instalment agreement; who advances money or credit under a pawn transaction; who extends credit under a credit facility; a mortgagee under a mortgage agreement; is a lender under a secured loan; a lessor under a lease; a party to whom an assurance or promise is made under a credit guarantee; a party who advances money or credit to another under any other credit agreement; or any other person who acquires the rights of a credit provider under a credit agreement after it has been entered into. (Sec 1)

    Credit providers who provide credit other than incidental credit under at least 100 credit agreements to consumers; are obliged to register with the National Credit Regulator. Note this is not 100 credit agreements per year but 100 or more credit agreements at any given time. (Sec 40(1)(a))

    A credit provider who provides incidental credit as a result of outstanding transactions are not obliged to register (Sec 40(1)(a))

    A credit provider to whom a total principal debt is owed under all outstanding credit agreements of more than R 500 000 is also obliged to register with the National Credit Regulator. In calculating the total principal debt, the credit limit of a credit facility is a primary factor. (Sec 40(1)(b))

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Eugene View Post
    Juristic persons are deemed to be related if:
    • One of them has direct 'or indirect control over the whole or part of the
    business of the other; or
    • Another person has direct or indirect control over both of them.
    Does this mean that if I'm a director or shareholder of multiple companies, their combined turnover or asset value is applied to calculate application of the Act?
    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, I think the Acts suggests majority control or shareholding. The companies would only be related if it has majority control over another company of which you also have the majority shares - something like affiliated companies. If you however have 2 companies not affliated (two different companies) of which you are the director, but the one has nothing to do with the other ("direct or indirect control over the whole or part of the other business") then the combined turnover or asset value would not be applicable.

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    Eugene, does that mean - if a shareholder has majority in all our companies, and although the companies are registered in various provinces, but are in the same market/field - the companies would all be ICA, falling under section 7 (1)?

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    Thank you for the info - with the banks question in mind 'what about the other debtors?' as we fall into ICA and don't register, I believe the 'banks' concern is risk on 'other debtors' i.e. on judgement would we be able to collect, or would we be deemed to have been reckless?
    Another thought, how does this affect us in regards to our over the border customers?

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    Silver Member Eugene's Avatar
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    The NCA has certain exemptions in respect of incidental credit agreements:

    1. Credit provider under an ICA does not have to register with the NCR;

    2. Provisions relating to reckless credit (specifically the assessment to be done by the credit provider as to whether consumer can afford the credit or is over-indebted) do not apply to the credit provider under an ICA; and

    3. An ICA does not have to adhere to the Act’s requirements as to the form and contents of a credit agreement.

    Having said that it should be noted that the definition of an ICA is clearly very wide; the NCA may thus apply to most businesses who are in the practice of charging a fee for late payment of accounts to their clients. The following should be considered:

    - An ICA is deemed to have been concluded 20 business days after (i) the fee for late payment was levied or (ii) the date a pre-determined higher price for full settlement of the account first becomes applicable, unless the account is fully paid by the consumer before that date;

    - If a consumer defaults under an ICA, and before he/she receives a default letter, the consumer may apply to a debt counselor to be declared over-indebted – if confirmed by a magistrate / magistrate conducts own investigation the consumer’s obligations under the ICA may be rearranged;

    - Credit provider may only recover certain costs and fees, and the maximum interest is limited in terms of the Act;

    Bushbaby, as it seems that you are only conducting business which might be construed as ICA, there can be no talk on being “reckless” as the NCA makes it clear that sections 81 to 84 and any other provisions of chapter 4 Part D relating to reckless credit does not apply to an incidental credit agreement.

    With regards to your question regarding your over the border customers, it must be borne in mind that other countries have laws of their own and usually are not affected by laws that are enforced in South Africa, but I note that section 4 (4) states that: if the NCA applies to a credit agreement it continues to apply to that agreement even if a party to that agreement ceases to reside or have its principal office within the Republic; and it applies in relation to every transaction, act or omission under that agreement, whether that transaction, act or omission occurs within or outside

    the Republic. This matter has been sent to the National Credit Regulator for comment and clarification and we still await their response, but I would assume that both parties entered into the agreement within the borders of South Africa.

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