Does the NCA affect all agreements?

[Dave A]

And following that line of thought, if a husband and wife own property jointly, that would be a partnership (?)

[duncan drennan]

And following that line of thought, if a husband and wife own property jointly, that would be a partnership (?)

Exactly what I was thinking! Are we going to see lots of little Duncan & Donné Lifestyle Management Partnership's popping up?

[Dave A]

There was a time when folk were getting divorced to get around joint taxation of married couples. Do you think that little twist in the NCA could help reduce our horrific divorce rate?

[duncan drennan]

Hmmm...except that partners don't need to me married?

[Dave A]

Agreed. I don't think it'll lead to more marriages. But consider for a moment:

Traditionally, the property ends up in one or the other spouse's name (normally the one with the better housing subsidy).
Owning jointly now helps facilitate access to finance.
If the relationship hits rough waters, the partners are materially bound together just that little bit closer. And small shifts like that can produce fairly big changes.

Without going too far off-topic, I suspect a fair number of divorces nowadays are as a result of people giving up too soon. And adding a little more complexity to the act of disengaging could just be enough to disuade a few more folk from taking the "easy" option.

[Eugene]

Duncan / Dave you posted very interesting questions regarding spouses contracting with each other.

The NCA applies to every (1) credit agreement entered into between (2) parties dealing at arm’s length (3) made within or having an effect within the RSA. Remember the exceptions contained in section 4(1)(a)-(d), eg. where the consumer is a juristic person with an annual turnover or asset value that > R1 million.

‘Dealing at arm’s length’ not specifically defined in the Act, but see sec 4(2)(b) as to what does NOT constitute dealing at arm’s length:

• When a juristic person borrows money from a person who has a controlling interest in the juristic person.

• When a juristic person as consumer, enters into a credit agreement with a person who has a controlling interest in the juristic person

• A loan to a shareholder

• When a juristic person lends money to a person who has a controlling interest in the juristic person.

• When a juristic person, as credit provider, enters into a credit agreement with a person who has a controlling interest in the juristic person.

• A credit agreement service, such as between persons in a familial relationship when one or both are dependent on the other.

• Any other arrangement where the parties are not independent of each other and they do not strive for their best possible advantage.

• Any other arrangement deemed by the law not to be "at arms length"

[Dave A]

OK. Let's test this a little further. Do the arm's length provisions apply to the creditor/consumer relationship, or to any aspect of the relationships regardless of exactly where those connections may lie?

There is ordinarily an arm's length relationship between the bank (credit provider) and the partnership forming the consumer (in this instance our happy couple alluded to above). Whilst it might seem we're kidding around a bit here, the same principle surely applies to pretty much any "mom & pop" business partnership out there.

[Eugene]

Dave when dealing with exemptions in respect of juristic persons one must distinguish between when the agreement is completely exempted from the Act versus when the Act applies, but the agreement is exempted from certain parts/provisions of the NCA.

In the following instances where juristic persons are consumers under credit agreements, such agreements are exempted completely from the application of the Act:

- Sec. 4(1)(a)(i): Where the consumer is a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold value
determined by the Minister (currently R1 million);
- Sec. 4(1)(b): The credit agreement is a large agreement (sec. 9(4) ) in terms of which the consumer is a juristic person with annual turnover / asset value below the threshold set by the Minister.

In all other cases where a juristic person is the consumer under a credit agreement, the agreement is exempt from the following parts of the Act (sec. 6):

- Chapter 4, Part C = credit marketing practices
- Chapter 4, Part D = reckless credit and over-indebtedness
- Chapter 5, Part A sec 89(2) = unlawfulness of negative option marketing
- Chapter 5, Part A sec 90(2)(o) = unlawful provisions relating to variable interest rates charged on the principal debt; and
- Chapter 5, Part C = consumer’s liability, interest, charges and fees.

[TishB]

What category does a non interest bearing staff loan with a 6 month repayment option fall under? is it an incidental credit agreement? do companies have the right to transfer monies into a staff members account and then ask them to sign a "staff loan form?

[Dave A]

do companies have the right to transfer monies into a staff members account and then ask them to sign a "staff loan form?

I would expect the staff loan form should be signed before the money is transfered. It's also a good idea to deal with staff "emergency" loans and advances in your employment contract to allow deductions of instalments from salary and to allow deduction of the full balance owed on loans against termination settlement pay.