NCA - Chapter 1

[duncan drennan]

After a question came up on another forum regarding how a creditor responded to a letter of demand I've decided to try to get to grips with the new NCA act. I'm just going to be slowly working through it and putting down my thoughts and comments.

Please add your thoughts about the chapters to the relevant threads.

Thanks,

[duncan drennan]

What the Act does not apply to

There are agreements that the Act does not apply to, namely,

• When the consumer is the state or organ of state
• When credit provider is the Reserve Bank
• When parties are not operating at arms length (see 4-2-b)

Any thoughts on why the state has a blanket exclusion from this?

There are also a couple of other places that it does not apply, such as,

• Payments subsequently refused (e.g. immediate and full payment by cheque or credit card that is subsequently refused)
• Payments made by credit cards (i.e. 3rd party payments)

There is an intersting one here about utilities or continuous services which says that this is not a credit agreement. It only constitutes a credit agreement if interest is charged within 30 days of the account being overdue (see section 6-b). After the 30 days it then falls under an incidental agreement.

Incidental credit agreements are ones that occur due to an account being overdue. This type of agreement is deemed to have been made 20 days after the dat that,

• an account is first charged a late payment fee or interest
• a pre-determined higher price first becomes applicable

On this second point - does that mean that a discount is not a credit agreement until 20 days after the higher price is applicable? (discount was mentioned here)

[Dave A]

Thanks for getting this started, Duncan.

Any thoughts on why the state has a blanket exclusion from this?

One of the goals of the legislation is to protect consumers (who might not be able to manage their own credit affairs). Government obviously feels it does not fall in this category, along with juristic persons with a turnover exceeding R1 million per annum or asset base exceeding R1 million.

I'm still not sure about the discount note situation. Given some of the "accidental effects" that have been found so far, the issue of cash on delivery discounts might not have been fully considered in the drafting.

[Dave A]

I've spent some time going over the official website of the National Credit Regulator - which is supposed to help.

The site plainly reflects the original thinking that this Act is intended for finance companies, micro-lenders, pawn brokers and retail type operations that give consumer credit. Furniture companies are specifically mentioned, which is not surprising given the problems consumers have had with this sector.

However, when we look at the definitions of a credit provider, it appears that the reach of the Act is much further. Perhaps the key here is that the "principal debt" is payable by instalment? (As opposed to the full amount falling due at some point which would be an incidental credit agreement?)

The website also says that statements will be issued from time to time to clarify issues. My impression is that whilst the original intentions of the Act are considered known, the actual effects of what has been promulgated are not nearly as well understood.

[duncan drennan]

Can we maybe make this the focus of the next month or so? I'll try to spend some time each week on this and give my interpretation and pose questions. I think having a guide to the NCA to will a big draw point for this site. Maybe we can even submit some questions to the NCR once we're done?