National Credit Act

[Dave A]

I'm trying to make head or tail of the National Credit Act - which looks like it should be the subject of this month's project. I've quoted from this page of the Cliffe Dekker website to indicate why:

All grantors of credit need to determine whether or not they are regarded as "Credit Providers" for purposes of the Act as Credit Providers must submit their registration documentation by 27 July 2006, otherwise all agreements they have entered into will be unlawful and unenforceable.

And folks, from what I have read so far, if you grant credit to your customers, you might well be a "Credit Provider".

But tracing the logic to work out who is and who isn't is like deciphering a bowl of spaghetti. And I haven't found any clear guidance anywhere on the internet yet either.

[I Robot]

I'm busy reformatting the act to make it more understandable. I just love this section:

64. (1) The producer of a document that is required to be delivered to a consumer in terms of this Act must provide that document—

(a) in the prescribed form, if any, for that document; or
(b)in plain language, if no form has been prescribed for that document.

(2) For the purposes of this Act, a document is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the document is intended, with average literacy skills and minimal credit experience, could be expected to understand the content, significance, and import of the document without undue effort, having regard to—

(a)the context, comprehensiveness and consistency of the document;
(b)the organisation, form and style of the document;
(c)the vocabulary, usage and sentence structure of the text; and
(d)the use of any illustrations, examples, headings, or other aids to reading and understanding.

Now if only we could get the lawmakers to practice this.

[duncan drennan]

64. (1) The producer of a document that is required to be delivered to a consumer in terms of this Act must provide that document�


(a) in the prescribed form, if any, for that document; or
(b)in plain language, if no form has been prescribed for that document.



(2) For the purposes of this Act, a document is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the document is intended, with average literacy skills and minimal credit experience, could be expected to understand the content, significance, and import of the document without undue effort, having regard to�

(a)the context, comprehensiveness and consistency of the document;
(b)the organisation, form and style of the document;
(c)the vocabulary, usage and sentence structure of the text; and
(d)the use of any illustrations, examples, headings, or other aids to reading and understanding.

So here is an interesting one...let's use the good ol' domicilium et exucandi.

If I've signed a document that for example says all summons etc will be served at my domicilium, and I've not updated my details (by registered post as always) and things follow the usual path of default judgements etc. etc. THEN...

Surely I can say well, I don't feel that the use of latin and the terminology was,

..plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the document is intended, with average literacy skills and minimal credit experience, could be expected to understand the content, significance, and import of the document without undue effort..

Could this give people a way out of surety documents and so forth? Is a contract still enforcable if these terms are not adhered to?

[Dave A]

I'm organising for a reformatted version of the whole Act to be published on this site. The purpose is to aid understanding (but not re-define interpretation of the Act).

From my scan so far, there are two issues to consider:

• The consequences from the point of view of a credit provider, and
• The consequences from the point of view of a consumer.

From there we can try to work out possible answers to questions such as Duncan's.

I have asked for interpretative assistance from some contacts at the DTI and been given some people to talk to - let's see how we go.

From what I've seen, the legal fraternity has already sensed there is money to be made interpreting the Act in relation to business owners. For example, there are many teasers that basically say any business owner needs to see if they might be deemed a credit provider, but there is no guidance as to roughly what the criteria are. And IMHO it's not easily spotted when reading the Act either.

Can I suggest everyone post their questions over the next few days and I'll try to get answers.

[I Robot]

Just set up the National Credit Act accessible from the home page - at this stage for members only.

Not everything is behaving exactly as it should be, but the content is there for the meanwhile. Some sort of clash with the BB code.

I'll work on tidying up the glitches and then getting the cross-referencing links going.

[Dave A]

I see the reformatting is done. Now to make sense of it all.

Or maybe the answer is just "business as usual" until some officious notification arrives telling us we are in contravention?

[Candy Bouwer]

National Credit Act - here are some of the benefits

As at 1 September 2006 Chapter 4, Part B of the National Credit Act 2006 which concerns \"Confidentiality, personal information and consumer credit records\" comes into effect. In addition, under Chapter 2, Part B the National Consumer Tribunal comes into effect on the same date and this tribunal will have the power to investigate disputes and make orders compelling creditors and credit bureaus to comply with the provisions of the NCA.

Regulation of credit bureaus
As at 1 September 2006, credit bureaus will, for the first time, have to comply with regulations, made under the NCA, which set out exactly when consumer credit information may be added to and deleted from credit records.

Temporary removal of challenged credit data
All challenged information must be removed for twenty days while the credit bureau investigates to see whether the credit data is incorrect. No credit record will be issued by the credit bureau while such an investigation is taking place.

Reduction of default listing period
Subjective credit information, such as \"handed over\", \"absconded\", \"written off\" will no longer be listed for three years. This Adverse Information may only be listed for a maximum period of one year.

Administration orders
Previously when an administration order was set aside a \"rehabilitation notice\" was added to the credit profile for five years. As at 1 September 2006 once an adminstration order has been set aside, all reference to it must be removed and the regulations do not allow for a \"rehabilitation notice\" to be added.

Listing commencement date
Creditors used to be able to list a consumer many months or even years after the date the account went into arrears. From 1 September 2006 the listing date will be the date the consumer defaulted on paying their account and not an arbitrary date chosen by the creditor.

Notification of addition of adverse information
A credit bureau must notify a consumer before adverse information may be added to their credit profile and a copy of such information must be made available to the affected consumer.

Annual Free Credit Report
As from 1 September 2006 consumers are entitled to get a copy of their credit record, held on each credit bureau, once a year at no charge. The National Credit Regulator will most probably phase this requirement in (based on dates of birth or surname) so as not to swamp credit bureaus with millions of applications.

These are not the only changes which the National Credit Act will bring about. The law deals with many other abuses and will benefit all consumers.

This information is written user friendly and make a lot more sense.

[Dave A]

Thanks Candy. A great contribution - just what the doctor ordered.

I think that really helps from a consumer point of view.

My struggle at the moment is whether my companies have to register. We have debtors, but I don't consider ourselves a "finance company".

[Candy Bouwer]

On the lighter side of getting credit.....or paying your debts!!!

I love this one!

LETTER TO TRUWORTHS FROM SIPHO
Next time you get a letter to pay your debts from your creditor's, be sure to remember Sipho's letter.

LETTER TO TRUWORTHS

Dear Sir/Madam
I acknowledge receipt of your letter dated 1 May in which for the third time you request that I pay the monies owed to you. I first want you to know that by no means do I dispute my debt and I intend to reimburse you as soon as possible.
However, I bring to your attention that I have many more creditors, quite as honourable as you, and whom I wish to reimburse too. That is why, each month I throw all the names of my creditors into a hat and draw one randomly whom I hasten to refund immediately. I hope that yours will come out shortly.


Sincerely Yours,
Sipho

PS: I have great regret in informing you that given the unceremonious tone of your last letter, you will not be taking part in the next three draws.

[Dave A]

Great report here dealing with how sureties will be covered by the act.

People who stand surety for others' debt will be protected against over-indebtedness and reckless credit by the new National Credit Act, the ombudsman for banking services (OBS) said on Monday.

The Act, which came into force on June 1, would give credit guarantors the same status and protection as it does credit consumers.

These were the people who stood surety for the debt or obligations of others, often through "emotionally-transmitted debt" or "sexually-transmitted debt".

The former referred to parents assisting their children with student loans while sexually-transmitted debt to one spouse acting as surety for the other.

Company directors who, sometimes unwittingly, accepted liability for debts run up on the company credit card, and small business owners who made themselves personally liable for the credit facilities of the business, would also be protected under the new Act.

The Act enables a court to set aside a consumer's obligation under a reckless credit agreement and to reconstruct the consumer's obligations.

"Suretyship-related complaints, which encompass credit guarantees, may only account for one percent of the workload of the OBS, but they give rise to a number of concerns," read a statement from his office.

Chief of these was the use by banks of universal (unlimited) suretyship agreements. Often signed by a consumer as a matter of routine, these agreements entitled the bank to hold the surety liable for any of the debts of the person for whom they stand as surety in the event of that person's default, no matter how or when the debts were incurred.

"Many a home has been repossessed and livelihood ruined because of universal suretyships."

The OBS said it was strongly against this practice and had decided against the banks in several matters involving universal suretyship agreements over the years.

Ombudsman Advocate Neville Melville said he was glad that the "inherently unfair practice" of requiring that universal suretyship agreements be entered into was drawing to a close.

"This is an unexpected and perhaps even unintended windfall from the National Credit Act. It is a pity, however, that it took legislation to bring about the change."

Another problem area of suretyships the Act would address was requiring customers to waive their common law defences and remedies. The Act would prohibit this practice.

These and certain other provisions that give consumers new rights are scheduled to come into effect in June 2007.

Melville has suggested that banks voluntarily implement the impending provisions of the Act before this date. - Sapa

Whilst this is mostly good news, I find this comment somewhat disturbing:

This is an unexpected and perhaps even unintended windfall from the National Credit Act.

[I Robot]

Another article on M&G here on the need to register by tomorrow. Whilst the main thrust is about getting registered, it also sheds more light on the criteria that determine whether you need to register or not.

"The implications of not registering when you should have registered are severe," charged Motshegare. She also cautioned that credit agreements signed by unregistered credit providers will be declared "unlawful and unenforceable" as from June 1 2007.

According to Motshegare, the main criteria for the registration of credit providers are: a credit provider must have signed at least 100 credit agreements or have a loan book of at least R500 000.

She explained that whilst the Credit Agreements Act, Usury Act and Usury Exemption Notice had been repealed by the National Credit Act (NCA), the provisions of the repealed Acts remained enforceable until the relevant provisions in the NCA are implemented.

Motshegare also expounded that entities that provide incidental credit do not have to register with the NCR.

"This means entities such as doctors, dentists or anyone who provides goods or services on account, with the possibility for the client to pay at the end of the month 'without charging interest'," she explained.

Significantly, Motshegare points out that it should be noted that financial products such as student loans, staff loans and a facility for the consumer to pay on account over time, with interest, and other credit providers need to register. -- I-Net Bridge

All articles I have read so far seems to miss one aspect - if you offer a COD discount, this could be interpreted as a credit agreement.

So in order to avoid having to report every credit transaction with a private individual or business with an annual turnover (or assets) less than one million Rand, you may not charge interest (or any other charge) on overdue accounts or offer a COD discount!

And yes - you have to report every credit transaction that falls under the Act whether you are required to register as a credit provider or not.

[Dave A]

Strong stand on enforcement.

This article from Personal Finance reports that The Regulator is making sure it can enforce compliance.

In a hard-hitting message to the credit industry this week, Gabriel Davel, the chief executive of the National Credit Regulator (NCR), said his office will pull out all the stops to enforce the Act.

The office of the NCR will brook no arguments from the industry in ensuring that it complies with the Act, Davel said at the official inauguration of his office.

The office of the NCR is responsible for regulating the South African consumer credit industry, and its tasks include educating consumers, conducting research, developing policy and investigating complaints.

-----

He warned that the prosecutions division of the NCR has been beefed up more than any other division.

The message Davel wants to make clear is that in a R400-billion credit market where there are strong competitive interests, there is no way that the NCR will allow non-compliance to become a competitive issue.

The NCR has recruited Obed Tongoane from the South African Revenue Service to be the regulator's senior legal adviser, and Advocate Rendani Munzhele from the Scor-pions to be its senior prosecutor.

[Yvonne]

Yesterday I was asked by our housekeeper (A fairly well educated person), if it is true that becuase of a new act which she called the credit bill, if she owed money on an account and could not pay it, that she was no longer forced to pay the account!!!
With Christmas just around the corner, a fair number of "clothing" type account holders are possibly going to overspend - hoping that the rumour is correct. I know for a fact that she is constantly receiving mail offering credit and loans, she has a Woolworths, Edgars and a credit card. She owes me approx. R10,000 which she has never yet honored the agreed monthly payment on, and just run up a R2,000 cell phone bill - and was unbelieving that it could be so high.
If this is how an educated person handles her finance, it is going to be "open season" on any gullible person!. Could this act at the end of the day, cause more harm than good?

[Sieg]

National Credit Act

Hi Yvonne

One thing to remember at this stage about the National Credit Act is that, although the Act is now Law, it will only come into operation on 1 June 2007. I think that's all that needs to be told to your housekeeper at this stage to make her understand that this Christmas is not yet "free", maybe at the end of 2007 it all will be!

That reminds me of a speech made by our then Prime Minister, Adv B J Vorster, many years ago, when he said "Ladies and Gentlemen, this year, my government and I are hoping for a white Christmas!"

Sieg


"Victorious Peace"

[Dave A]

Sometimes you just have to join the dots. In today's M&G we have the question:

Why are consumers still buying?

South African real retail sales growth in September rose considerably to 13,6% year-on-year (y/y) from August's 8,8%, with consumers possibly buying strongly in anticipation of tighter conditions which beckoned.

Total retail trade sales amounted to R35,8-billion, while real growth for the year to date -- recorded by Stats SA -- came in at 9,9%.

"Just when it looked as though retail sales were beginning to moderate on the back of the cumulative 100 basis point rate hikes in June and August, sales surged in September. Year-on-year sales growth was the highest in the past six years, while month-on-month (m/m) sales growth was nearly 6%, an extremely strong m/m growth rate," say independent economic analysts RLJP.

The analysts say it may well be that consumers have been engaging in pre-emptive buying ahead of the final quarter in anticipation of higher interest rates.
full story from M&G here

And right on queue out comes the rate increase because, amongst other things, credit extension is running amok:

Mboweni's not-so-merry Christmas

South African Reserve Bank Governor Tito Mboweni's words in mid-November that South Africans need to tighten their belts came home to roost on Thursday when he put a dampener on the Christmas spirit by raising the repo rate by 50 basis points to 9%.

The recent spate of poor economic data, including unexpectedly strong credit growth at 27,5% and a leap in producer-price inflation to 10%, had raised particular concerns last week that the tightening cycle could last past February next year.
full story from M&G here

And with the scoop on the real problem we have Yvonne Symons at The Forum SA:

Yesterday I was asked by our housekeeper (A fairly well educated person), if it is true that becuase of a new act which she called the credit bill, if she owed money on an account and could not pay it, that she was no longer forced to pay the account!!!
With Christmas just around the corner, a fair number of "clothing" type account holders are possibly going to overspend - hoping that the rumour is correct. I know for a fact that she is constantly receiving mail offering credit and loans, she has a Woolworths, Edgars and a credit card. She owes me approx. R10,000 which she has never yet honored the agreed monthly payment on, and just run up a R2,000 cell phone bill - and was unbelieving that it could be so high.
If this is how an educated person handles her finance, it is going to be "open season" on any gullible person!. Could this act at the end of the day, cause more harm than good?

I wonder what the chances are of Tito taking Sieg's advice as to how to solve the problem?