Incidental credit agreement

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Incidental credit agreements basically arise when an amount due has not been paid timeously and additional charges become payable, or when two prices are quoted based on date of payment.

Definition: Incidental credit agreement

An incidental credit agreement 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:

(a) a fee, charge or interest became payable when payment of an amount charged in terms of that account was not made on or before a determined period or date; or
(b) two prices were quoted for settlement of the account, the lower price being applicable if the account is paid on or before a determined date, and the higher price being applicable due to the account not having been paid by that date.

Formation date

In terms of section 5.(2) The parties to an incidental credit agreement are deemed to have made that agreement on the date that is 20 business days after-

(a) the supplier of the goods or services that are the subject of that account, first charges a late payment fee or interest in respect of that account; or
(b) a pre-determined higher price for full settlement of the account first becomes applicable,

unless the consumer has fully paid the settlement value before that date.

Limit of additional charges

In terms of section 5.(3) A person may only charge or recover a fee, charge or interest-

(a) in respect of a deferred amount under an incidental credit agreement as provided for in section 101(d), (f) and (g) subject to any maximum rates of interest or fees imposed in terms of section 105 (currently set at 2% per month per Notice No. R. 489 of 2006); or
(b) in respect of an unpaid amount contemplated in paragraph (a) of the definition of "incidental credit agreement" only if the credit provider has disclosed, and the consumer has accepted, the amount of such a fee, charge or interest, or the basis on which it may become payable, on or before the date on which the relevant goods or services were supplied.

Relevant parts of section 101:

(d) interest, which-
(i) must be expressed in percentage terms as an annual rate calculated in the prescribed manner; and
(ii) must not exceed the applicable maximum prescribed rate determined in terms of section 105;
(f) default administration charges, which-
(i) may not exceed the prescribed maximum for the category of credit agreement concerned; and
(ii) may be imposed only if the consumer has defaulted on a payment obligation under the credit agreement, and only to the extent permitted by Part C of Chapter 6; and
(g) collection costs, which may not exceed the prescribed maximum for the category of credit agreement concerned and may be imposed only to the extent permitted by Part C of Chapter 6.