Does the NCA affect all agreements?

[Eugene]

Within the scope of debt collection practise I have received 14 applications for debt review during June. Considering that there are ony 55 (might be more to date) registered debt counsellors, the amount of applications received are quite high. All is fair, but a new tendency is starting to develop in the collection industry where non-registered entities, holding themself out as "para-legal advisors", "debt guidance officers" etc. are bombarding our offices with an informal proposal for debt re-structuring. My opinion is that these guys are treading on thin ground as the NCA prohibits these type of conducts.

What is troublesome furthermore is that registered debt counsellors are using their company letterheads, which are also prohibited by the NCA as the debt counsellor has to use his OWN letterhead reflecting the registration status and number. The problem with the use of company letterhead (usually an incorporated company or even a CC) is that they are juristic persons which are clearly prohibited as practising as debt counsellors.

At first I did not think much thereof, but when I received 2 different applications on different letterheads of the same debt counsellor, the red lights started flickering. What was seriously wrong with this particular scenario was that you had one registered debt counsellor who intends opening a couple of "franchises" offering debt counselling. The matter was referred to the NCR and they have replied that they will have to consider definte principals and guidelines regarding the "own letterhead" as contemplated in the Act, but the franchising of debt counsellors is a sure no-go, unless you have a registered debt counsellor at every office.

[jazz]

How does blacklisting customers affect incidental credit agreements

We work in an organisation that does not levy interest on arrears account , we are however classified a an incidental credit, what impact would blackisting a client have on our organisation

[Eugene]

Jazz, I think your question was answered in another thread youposted.

Turning to the NCA and section 70 which deals with credit bureaus it is noted that only registered credit providers (section 70(2)) may submit details to the credit bureau upon payment of a submission fee. One must bear in mind that default judgments issued by the Courts are automatically lodged at the relevant credit bureaus. The “bad paying consumer” (payment history) could only be listed if you are a credit provider and a subscriber at the bureau.

With regards to “incidental credit agreements” it would indicate that the company is not registered as a credit provider (yet) and therefore the bureau is under no obligation to accept the report (section 70(2)). Should you however reach a stage where you have more than 100 incidental credit agreements, registration as a credit provider will be imminent as required by the NCA and you would then be in a position to lodge your payment profiles of defaulting consumers to the bureau if you are a subscribed member or paid the submission fee.

[Brett Bentley]

Hi All,

Eugene if what you are saying is that only registered credit providers can list default payments with a credit bureau, then I disagree, Section 70(2) refers to a credit provider being entitled to list, not a registered credit provider. The defintion of a credit provider in terms of Section 1 does not limit credit provider to those that are registered.

So in my opinion all credit provider, registered or not, incidental or otherwise, are entitled to list on credit bureaux - provided they comply with Section 70 and related section of the NCA.

[Eugene]

Brett, when I spoke to Experian, I was told that only registered credit providers and subscribers could supply them with payment (and defaulting) details. The normal court judgments are not affected as they get listed automatically. I am still of the opinion that it is unfair and also interpreted section 70 as you do. I will clarify the issue with the NCR when we have our seminar on 31 July 2007.

[duncan drennan]

4. (1) Subject to sections 5 and 6 (deals with incidental credit agreements and juristic persons), this Act applies to every credit agreement between parties dealing at arm's length and made within, or having an effect within, the Republic, except-

(a) a credit agreement in terms of which the consumer is-

(i) a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold value determined by the Minister in terms of section 7(1) (currently set at R1 000 000.00);

"juristic person" includes a partnership, association or other body of persons, corporate or unincorporated, or a trust if-

(a) there are three or more individual trustees; or

(b) the trustee is itself a juristic person, but does not include a stokvel;

I was just looking at this again. Couple of questions...

1. Does the NCA apply to ALL natural persons, regardless of their net worth?
2. If a trust has only 2 trustees, but one of them is a juristic person, is it a "juristic person" under the NCA?

[Dave A]

Does the NCA apply to ALL natural persons, regardless of their net worth?

It would seem so, yes.

If a trust has only 2 trustees, but one of them is a juristic person, is it a "juristic person" under the NCA?

It would seem not.

The fact that there has been some effort to define a juristic person in a manner that is inconsistent with the juristic person definition of pretty much any other piece of legislation I've come across so far is, to me, something quite interesting. It flies in the face of a directive in an ongoing legal revue process that is striving for consistency on definitions across all legislation.

[duncan drennan]

One that I find quite interesting is that a partnership, which is in essence two natural persons AND requires no formal legal registration, has the benefit of the R1mil exemption, while a natural person does not. Quite strange to me.

[Dave A]

And following that line of thought, if a husband and wife own property jointly, that would be a partnership (?)

[duncan drennan]

And following that line of thought, if a husband and wife own property jointly, that would be a partnership (?)

Exactly what I was thinking! Are we going to see lots of little Duncan & Donné Lifestyle Management Partnership's popping up?

[Dave A]

There was a time when folk were getting divorced to get around joint taxation of married couples. Do you think that little twist in the NCA could help reduce our horrific divorce rate?

[duncan drennan]

Hmmm...except that partners don't need to me married?

[Dave A]

Agreed. I don't think it'll lead to more marriages. But consider for a moment:

Traditionally, the property ends up in one or the other spouse's name (normally the one with the better housing subsidy).
Owning jointly now helps facilitate access to finance.
If the relationship hits rough waters, the partners are materially bound together just that little bit closer. And small shifts like that can produce fairly big changes.

Without going too far off-topic, I suspect a fair number of divorces nowadays are as a result of people giving up too soon. And adding a little more complexity to the act of disengaging could just be enough to disuade a few more folk from taking the "easy" option.

[Eugene]

Duncan / Dave you posted very interesting questions regarding spouses contracting with each other.

The NCA applies to every (1) credit agreement entered into between (2) parties dealing at arm’s length (3) made within or having an effect within the RSA. Remember the exceptions contained in section 4(1)(a)-(d), eg. where the consumer is a juristic person with an annual turnover or asset value that > R1 million.

‘Dealing at arm’s length’ not specifically defined in the Act, but see sec 4(2)(b) as to what does NOT constitute dealing at arm’s length:

• When a juristic person borrows money from a person who has a controlling interest in the juristic person.

• When a juristic person as consumer, enters into a credit agreement with a person who has a controlling interest in the juristic person

• A loan to a shareholder

• When a juristic person lends money to a person who has a controlling interest in the juristic person.

• When a juristic person, as credit provider, enters into a credit agreement with a person who has a controlling interest in the juristic person.

• A credit agreement service, such as between persons in a familial relationship when one or both are dependent on the other.

• Any other arrangement where the parties are not independent of each other and they do not strive for their best possible advantage.

• Any other arrangement deemed by the law not to be "at arms length"

[Dave A]

OK. Let's test this a little further. Do the arm's length provisions apply to the creditor/consumer relationship, or to any aspect of the relationships regardless of exactly where those connections may lie?

There is ordinarily an arm's length relationship between the bank (credit provider) and the partnership forming the consumer (in this instance our happy couple alluded to above). Whilst it might seem we're kidding around a bit here, the same principle surely applies to pretty much any "mom & pop" business partnership out there.