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An incidental credit agreement (ICA) is any agreement in terms of which a charge is levied for payment of an invoice after a specific date OR where 2 prices are quoted to the consumer and the lesser applies to payment on or before a specific date and the higher applies for payment after such date – therefore an extra charge or levy for late payment.
The NCA contains certain exemptions in respect of such incidental credit agreements:
- Credit provider under an ICA does not have to register with the NCR;
- 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
- An ICA does not have to adhere to the Act’s requirements as to the form and contents of a credit agreement.
BUT:
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 (significantly also e.g. municipalities in the case of overdue amounts on periodic statements – see sec. 4(6)(b) above).
Some comments on an ICA:
- 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;
- Credit provider may only recover certain costs and fees, and the maximum interest is limited in terms of the Act;
- 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;
- A supplier seeking to enforce an arrangement which has become an ICA will initially have to send the consumer a default letter proposing a referral of the matter to a debt counsellor, alternative dispute resolution agent, or a consumer court, with the intention of resolving a dispute or agreeing on a debt payment plan. The supplier may only approach the Court for enforcement if:
The consumer is in default for 20 business days;
10 days have elapsed since a default letter;
Consumer has failed to respond to the letter or rejected the proposals in the letter;
The matter is not pending before any tribunal, consumer court or debt counselor; and
The agreement is not the subject of a debt re-arrangement. (See sec. 130)
The NCA contains certain exemptions in respect of such incidental credit agreements:
- Credit provider under an ICA does not have to register with the NCR;
- 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
- An ICA does not have to adhere to the Act’s requirements as to the form and contents of a credit agreement.
BUT:
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 (significantly also e.g. municipalities in the case of overdue amounts on periodic statements – see sec. 4(6)(b) above).
Some comments on an ICA:
- 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;
- Credit provider may only recover certain costs and fees, and the maximum interest is limited in terms of the Act;
- 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;
- A supplier seeking to enforce an arrangement which has become an ICA will initially have to send the consumer a default letter proposing a referral of the matter to a debt counsellor, alternative dispute resolution agent, or a consumer court, with the intention of resolving a dispute or agreeing on a debt payment plan. The supplier may only approach the Court for enforcement if:
The consumer is in default for 20 business days;
10 days have elapsed since a default letter;
Consumer has failed to respond to the letter or rejected the proposals in the letter;
The matter is not pending before any tribunal, consumer court or debt counselor; and
The agreement is not the subject of a debt re-arrangement. (See sec. 130)
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