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Thread: National Credit Act

  1. #11
    Administrator I Robot's Avatar
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    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    She explained that whilst the Credit Agreements Act, Usury Act and Usury Exemption Notice had been repealed by the National Credit Act (NCA), the provisions of the repealed Acts remained enforceable until the relevant provisions in the NCA are implemented.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.
    Last edited by I Robot; 28-Jul-06 at 02:05 PM.

  2. #12
    Site Caretaker Dave A's Avatar
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    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.

  3. #13
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    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?

  4. #14
    Bronze Member Sieg's Avatar
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    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"

  5. #15
    Site Caretaker Dave A's Avatar
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    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:
    Quote Originally Posted by Yvonne Symons View Post
    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?

  6. #16
    Site Caretaker Dave A's Avatar
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    It seems Tito is aware that other measures might be required.
    The SA Reserve Bank might "adjust" the reserve requirements of commercial banks to discourage the offering of credit to customers who do not need it, Reserve Bank Governor Tito Mboweni warned on
    Thursday.

    Citing consumer demand and credit extension as two of the factors which led the banks to increase the repo rate by 50 basis point to nine percent, Mboweni said the way credit cards were offered to consumers was "madness".

    "Some of our colleagues received phone calls offering them all kinds of credit cards. Someone was offered two credit cards and told he could use the one to pay off the other. Clearly there is some madness out there that needs to be stopped," Mboweni said.

    He had already met with chief executives of some of the big commercial banks, but they did not think it to be a problem.

    "If this trend does not stop I may be forced to resort to adjust the reserve requirement," Mboweni warned.
    from Business Report here

  7. #17
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    I'm currently working within the furniture industry..and as most of you know that the business practically thrives on credit sales.
    I would like to be enlightend about the consequences and their impact of non-compliance with NCA after it has come into effect on the 1 June 2007.

  8. #18
    Site Caretaker Dave A's Avatar
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    Hi sitho and welcome.

    I think we've still got a way to go to get a full handle on the consequences of the NCA - except that in the worst case scenario - the granting of "reckless credit" - non-compliance could mean that the debt might not be collectable through legal process.

    There are other pitfalls. Options to collect interest and collection costs may be harmed if we don't educate/notify the debtor in advance of the transaction. It seems there are still a number of practice notes/guidelines that still have to be published. Hopefully it will aid clarity on these issues.

    My hope is that we will be able to develop a step-by-step guide here that will ensure that we as business owners don't fall foul of the NCA. Perhaps if you read through the existing work that has been done and then post some comments/questions from your point of view it will help.

    The idea is to develop the solutions as a team, thus making it easier for anyone to find the right answers. Maybe it's time we did another push to understand this legislation better.

  9. #19
    Site Caretaker Dave A's Avatar
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    I've started working on the National Credit Act using our Wiki here.

    The goal is to structure an understanding of the Act in a useful format. Anyone else feel like joining me in this project?

  10. #20
    Site Caretaker Dave A's Avatar
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    Whilst working on our Wiki project for the NCA, I've found that this statement may not always be true:
    Quote Originally Posted by Dave A View Post
    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.
    A surety is dealt with in the NCA by what is called a Credit Guarantee, which only applies if the credit itself falls within the ambit of the NCA. If the company is a juristic person to which the NCA does not apply, then the surety does not seem to be subject to the NCA either.

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