Study Theme 12: The rescission of credit agreements (the cooling-off right)

Question 1

General rule on cooling off

Answer 1

❖ In terms of the NCA:
❖ Consumers have the right to rescind/cancel a credit
agreement without a reason.

Question 2

❖ Cooling-off right:

Answer 2

s121(1)-(3)

Question 3

❖ S121 of NCA

Answer 3

❖ Cooling-off does not constitute breach of contract
because it is a statutory right afforded to the consumer.

Question 4

❖ S121(1) of NCA

Answer 4

❖ This section applies only in respect of a lease or an
instalment agreement
❖ Entered into at any location other than the registered business
premises of the credit provider.

Question 5

❖ S121(2) of NCA:

Answer 5

❖ The consumer may terminate a credit agreement:
➢ Within 5 business days after the date on which the
agreement was signed by the consumer
➢ By means of a notice to the credit provider
➢ Delivered as prescribed (regulation 37)
❖ If there is a problem with “signed”:
❖ Solution: 5 business days after entering into the
agreement.

Question 6

❖ Business days

Answer 6

❖ S2(5) of NCA:
❖ Excluding Saturdays, Sundays and public holidays.
❖ If a number of business days must be calculated between
two events (e.g. the date of conclusion of the credit
agreement and the last day to cool-off):
❖ LIFO principle applies:
➢ Last day IN first day OUT

Question 7

❖ The delivery of the notice of rescission

Answer 7

❖ Regulation 37:
❖ Notice by the consumer to the credit provider to
terminate a credit agreement in terms of S121(2) must be
in writing;
➢ And delivered by hand, fax, e-mail or registered mail;
➢ To an address specified in the credit agreement or the
credit provider’s registered address

Question 8

❖ Consequences of exercising the right:

Answer 8

➢ 1) The particular credit agreement is cancelled by the
consumer.
➢ 2) Reciprocal restitution.

Question 9

❖ Reciprocal restituition:

Answer 9

** S121(2) of NCA:**
❖ The consumer must tender the return of (money) or
goods received by the consumer in relation to the
agreement

S121(3) of NCA:
❖ The credit provider must refund any money the consumer
has paid under the agreement
❖ Within 7 business days after the notice of termination
was delivered to them.

Question 10

❖ Strict compliance required:

Answer 10

❖ If the consumer does not comply with the provisions of
the Act and regulations,
❖ The consumer does not cancel the credit agreement and
is thus bound to the agreement.
❖ Standard Bank v Dlamini
❖ Legal question was whether the consumer must be
informed?
❖ The court held that yes, a consumer must be informed

Question 11

Advantages

Answer 11

❖ Get rid of an interest and cost bearing debt
❖ The consumer gets his/her money back (if any was paid
to the credit provider)