Chapter 1 - National Credit Act

Question 1

• Outline/Describe/Explain/Discuss the purpose of the NCA

Answer 1

• Promote a fair but competitive credit market
• Ensure that consumers know exactly what is included in their credit contracts
• Prevent discrimination and ensure credit is available to all consumers
• Protect consumers from unfair business practice where credit is involved
• To prohibit unfair credit-marketing practices
• To regulate credit information

Question 2

Discuss/Explain/Evaluate the impact of NCA (advantages and/or disadvantages/negatives) on credit providers

Answer 2

Advantages

Disadvantages

• Credit providers benefit through the debt restructuring plan as they n ow receive part of the outstanding debt, instead of consumers being forced to sell property below market value or being declared insolvent
• Credit providers are switching to short-term credit facilities such as store cards
• Increased credit control reduces bad debt
• Credit providers have greater certainty as to what constitutes unfair credit practices
• Profitability improves because of less bad debt
• Promotes transparency, because the credit application process is more transparent
• The approval of mortgage loans has decreased due to stringent credit application requirements required by the NCA
• Credit providers cannot over-extend credit to consumers who are unable to afford the repayment premiums
• Consumers can apply for store cards without providing any debt security
• Administration burden – there are more admin involved in the process of edit provision
• Smaller consumer market – goods may only be sold to credit-worthy customers
• Debt collection procedures are more complex

Question 3

Impact on customers

Answer 3

Advantages

Disadvantages

• Provisions in the Act can secure debt relief for those badly in debt
• Consumers can approach a debt counsellor to restructure their debt
• Consumers can benefit from lower repayment due to lower interest rates and longer payment periods with creditors
• Creditors are not allowed to take legal action against debtors during the 60 days period between debt reviewing and a court hearing
• The National Debt Mediation Association (NDMA) may intervene on behalf of consumer to make their debt active again
• It discourages consumers from purchasing goods they cannot afford
• Difficult to gain access to credit
• Consumers must budget more carefully
• Consumers who previously qualified for credit but who do not qualify for credit any longer may experience a decline in their standard of living
• No further credit is allowed when a consumer is placed under debt review.

Question 4

Suggest/Recommend ways in which businesses can comply with the NCA.

Answer 4

• Credit providers must be registered, and registration van be cancelled for specific contraventions
• Records and information by credit bureaus can be challenged and corrected

Question 5

Outline/Discuss penalties/consequences for non-compliance with the NCA

Answer 5

• The National Consumer Tribunal (NCT) can impose administrative fines
• The NCT may declare certain conduct to be unlawful
• The NCT may interdict unlawful conduct
• The NCT may require repayment of certain monies to consumers
• Certain contraventions of the NCT are criminal offences
• A credit provider or debt counsellor who doesn’t adhere to the regulations as set out in the NCA could be criminally prosecuted

Question 6

Outline/Explain actions regarded as discriminatory by the NCA

Answer 6

• The act allows for anyone to apply for credit
• The credit provider must give reasons to applicants if they refuse to give them credit
• Credit may not be refused purely on grounds of gender, language, disability or any other factor contained in the Employment Equity Act
• A business may not refuse credit or change different interest rates to a customer based on gender, race religion or gage unless they are a minor
• A business must also make sure that all attempts have been made to recover the debt before blacklisting the customer

Question 7

Rights and responsibilities of Businesses

Answer 7

Rights

Responsibilities

• Receive payment for goods and services sold to customers
• Receive compensation e.g. interest when payments are late
• May issue a summons and apply for judgment against the consumer
• Do a thorough check on the ability of the consumer to repay the debt before concluding the agreement
• Ensure the language used in agreements is simple and easy to understand
• Stipulate the costs of the crest being offered
• Ensure the interest and fees charged are whiting the limits set byte he NCA
• Give the consumer a quotation and pre-agreement that is valid for five working days
• Must register as a credit provider

Question 8

Rights and responsibilities of consumers in terms of NCA

Answer 8

Rights

Responsibilities

• Apply for credit without unfair discrimination
• Told reasons why credit is being refused
• Receive a written quotation valid for five working days, a credit agreement and other information in an official language (preferably the consumers fist language)
• Receive this information in plain and understandable language
• Challenge the information recorded at the credit bureau
• Have all risks and costs involved in a credit agreement clearly explained
• Supply correct, honest and complete information regarding income and debt
• Pay the debt on time and without deductions
• Inform the credit provider of any change concerning:
  
  • Residential or business address
  • Address where the goods are kept
  • Name and address of any other person to who possession of the goods has been transferred