Does the NCA affect all agreements?

[Eugene]

Duncan, I'm not sure if I fully agree. The part (section (b)) that you are referring to states that "...or goods or services that are to be provided to a consumer over a period of time and either or both of the following conditions apply" and the one being acceptance of the lesser amount when making early payment(s). As I understand, the second part of the definition suggests a continuation of payments happening "over a period of time". Thus, if you engage in an agreement with monhtly payments (with an incentive of a lesser amount when paid by the due date) it would fall under teh ambit of the NCA. If however I buy something (once-off) and get discount when paying before the due date, it cannot be regarded as a credit agreement or incidental credit agreement: that would mean chaos!

[duncan drennan]

that would mean chaos!

That's exactly what I'm worried about!

means an agreement, irrespective of its form, in terms of which an account was tendered for goods or services that have been provided to the consumer, or goods or services that are to be provided to a consumer over a period of time and either or both of the following conditions apply

There are two items in that definition which are separated by an or

1. Account tendered for goods or services, OR
2. Goods or services provided over a period of time

So if either of those are true, and either (a) or (b) are true....

Again, the scary bit is that we are going to have to wait and see what happens.

PS. Eugene, thanks for your amazing input on these topics — it really adds an immense amount of value for everyone accessing this forum (and hopefully it will add value to your business ). We (all) appreciate your time and effort. Thanks so much

[Brett Bentley]

I agree with what Eugene has said and to answer your question dsd, I believe a COD account would fall under subsection (b) of the defintion of incidental credit agreements that you referred to.

In addition there were concerns by some creditor providers that giving trade discounts for early payment would push a credit provider under the "general credit agreement" provisions, as opposed to being an incidental credit provider. However the subsection (b) referred to ensures, in my opinion, that such a transaction remains under the definition of an incidental credit transaction.

[Eugene]

I just has a legitimate enquiry from one of my clients regarding the normal "acceleration clauses" that we normally find in a contract. My enquiry was based on an interpretation of section 129 when a letter of demand has to be sent out only for the arrears of the account and not the full contract amount i.r.o. the acceleration clause. So I called up the toll free number of the NCR and spoke to 8 people explaining my enquiry. After forming new four lettered works starting with the letter "F", I decided to draft an e-mail to the NCR (Gabriel Davel himself and a couple of his sidekicks).

This is how it went:

My e-mail to them:

Good day Sirs!

I am an attorney from the Western Cape specializing in debt collection within the retail industry. I have been asked the following question by my clients and was unable to give them a clear answer in terms of the NCA. Could you please assist as a matter of urgency.

Question: What is commonly referred to in credit management, as an acceleration clause is a clause in which a creditor granting a debtor the right to repay a debt in instalments agrees the right to proceed for the full debt in the event of the debtor defaulting in the payment of any instalment. Could a credit provider still make use of such a provision in their agreement with a consumer?

Your reply is awaited.

Regards

Eugene Opperman


Their reply:

Dear Sir,

We have noted your e-mail enquiry which was sent to various people within this organisation and surprisingly, also to the CEO, on the basis that you require an urgent reply! Kindly note that this office, and in particular the CEO, is not in a position to respond to every attorney, or other member of the public for that matter, as a matter of urgency every time someone has a question about the Act or some related topic.

We will try to assist persons who approach us, but within reason. I am of the view that a credit provider would be entitled to demand repayment of the full amount outstanding under a credit agreement, if the client is in default and the credit provider seeks to enforce his rights in terms of the agreement in a court. The requirements of the Act and specifically sections 129 and 130 must be complied with – or any other section if applicable to the specific type of agreement. I suggest you consider all the sections dealing with termination and enforcement etc.

Please note that this is only my understanding of the legal position and should not be regarded as a formal legal interpretation of the Act by the NCR.

Yours faithfully,
National Credit regulator
Legal Advisor

My final reply to them:

Thank you very much for your reply. I fully understand your predicament with the number of enquiries received by your offices regarding the practical implications of the Act. The main reason for sending the e-mail to various people within the NCR is that we really needed some guidance from the NCR as after a couple of phone calls to your offices no-one was in a position to understand our enquiry, not to mention offering some advice. While attending one of the courses on the NCA, I was brought under the direct impression that the NCR would welcome input and questions as to clarify any issues arising – my apologies if I was brought under a misconception of the willingness, or lack thereof on the side of the NCR. I appreciate your answer though and getting back to me.

[Dave A]

Given the snail's pace at which these things get through court, Section 129 (3) looks rather troublesome.

The response from the national credit regulator is pretty much my point in establishing this forum. Imagine how much easier it would be if we had an easily accessible library of Q&A's with the regulator's input.

My thanks to all who are contributing to this knowledge base.

[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]

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.