Then NCA nightmare!

[Dave A]

I think these are what is described in the Act as discount transactions.

[Eugene]

Further to the above post: if an agreement is an instalment sale agreement and discount is offered for early payment, it would be considered a discount transaction as defined:

“discount transaction” means an agreement, irrespective of its form, in terms of
(a) goods or services are to be provided to a consumer over a period of time; and
(b) more than one price is quoted for the goods or service, the lower price being applicable if the account is paid on or before a determined date, and a higher price or prices being applicable if the price is paid after that date, or is paid periodically during the period;

In the above instance the credit provider would be registered as such and the full NCA would be applicable. Again, I think the first thing would be to establish if you are really extending credit as contemplated in the Act, if the agreement is considered a credit transaction and if the NCA is applicable.

[Eugene]

Dave, correct. But is will only be regarded as a discount transaction if it falls under the NCA. If I have a little cooka-shop and someone buys from me and offer to pay at a later stage (I am not registered as a credit provider nor charge a fee or levy or charge on overdue accounts) then it can not be regarded as a credit transaction under the NCA.

[Dave A]

Eugene - that's where I'm actually a little troubled.

The inclusion of discount transactions was probably intended to cover financing as facilitated under Islamic law, but the definition of a discount transaction seems to extend beyond this to (possibly) COD discounts.

Once you are in this territory, it then becomes a threshold issue - and there are lots of businesses who don't consider themselves as financial institutions or money lenders, but are going to be classified as such by those thresholds.

[Eugene]

Let's look at some Q & A's I got (can't remember where) which might be useful - it mainly deals with money lending transactions:

Q. Is a person who lends more than R500 000 required to register as a Credit Provider?

A. Yes. Section 40(1)(a) of the NCA requires a person/entity to register as a credit provider if the person/entity has 100 or more credit agreements (loans) or (section 40(1)(b)) the total value of all the loans exceeds R500 000.


Q. What happens if a person lends more than R500 000 in a loan but isn't registered as a credit provider?

A. Section 89 of the NCA and section 40(4) of the NCA make it completely clear that a credit agreement (loan) entered into by a credit provider who should have been registered with the National Credit Regulator is void.


Q. How can the Credit Provider rectify the problem if he is not registered when granting a loan?

A. 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 There is an exception which allows that the agreement will not be unlawful if the Credit Provider applies to be a registered Credit Provider within 30 days after entering into the loan agreement. (s89(4)(a))


Q. If the loan is granted two years ago and the duration is a ten-year term, must the Credit provider still register?

A. Yes, provided the total amount of the loan exceeds R500 000. The duty to register as a Credit Provider in terms of this example would have arisen 40 working days after the implementation date of s40 which was 01 June 2006 (in terms of s2 of Schedule 3 of the NCA). Thus in this example the Credit Provider needed to apply to be a registered Credit Provider by 27th July 2006.


Q. Are Micro lenders exempt if they have 99 agreements which in total amount to less than R500 000?

A. Yes and no. Yes they are exempt from registering as Credit Providers. No they aren't exempt from complying with the many provisions of the NCA as they are still Credit Providers in terms of the NCA - they simply don't need to register as Credit Providers.

[Eugene]

The inclusion of discount transactions was probably intended to cover financing as facilitated under Islamic law, but the definition of a discount transaction seems to extend beyond this to (possibly) COD discounts.

Once you are in this territory, it then becomes a threshold issue - and there are lots of businesses who don't consider themselves as financial institutions or money lenders, but are going to be classified as such by those thresholds.

Very true Dave - this point also came up at one of the workshops I attended. There are no clearcut guidelines and I believe that this might be one of the first issues to be considered in a Court and a declatory order issued as it affects many small business owners.

[duncan drennan]

Question: If there is this threshold of 100 agreements, and R500000....does that mean that a business who is providing credit (with no interest, etc.) and has more than 100 clients (or total amounts due over R500k) would still need to register as a credit provider?

Is this affected by who their clients are, e.g. if the client asset value is greater than R1mil? Or is it a flat issue, regardless of the make up of the clients?

[Dave A]

There's nothing to indicate that the threshold count is affected by the profile of the debtors as far as I can tell.

[Eugene]

Quite correct.