The National Credit Act, 2005

Question 1

The National Credit Act was introduced to (5)

Answer 1

• Promote the economic and social welfare of all South Africans
• Promote a fair and transparent credit market
• Protect consumers and their rights in the credit market
• Limit the cost of credit
• Level the playing fields between credit providers by standardizing the way in which credit is granted by credit providers, so that consumers can compare what is being offered.

To regulate all:

• – credit providers
• – debt counsellors
• – credit bureaux

Question 2

The purpose of the National Credit Act (6)

Answer 2

• Simplify and standardize information in credit agreements
• Regulate credit bureaux and the information they keep on record about consumers.
• Ensure all credit products are handled in the same way by different credit providers
• Assist over-indebted consumers to restructure their debt
• Have on regulator to regulate the entire credit market (the National Credit Regulator)
• Establishing the National Consumer Tribunal to adjudicate matters relating to The Act

Question 3

5 Types of providers regulated by the NCA

Answer 3

• Banks
• Micro lenders
• Retailers
• All businesses who do business on credit, provide loans or charge interest on overdue accounts.

In addition, it regulates:

• credit bureaux
• Debt Counsellors

Question 4

5 Credit agreements regulated by The Act

Answer 4

• Mortgage bonds
• Developmental credit
• Incidental credit
• Credit guarantees
• Credit facilities:
• – store cards
• – bank overdrafts
• – credit cards
• – garage cards
• – personal loans
• – instalment sales
• – leases
• – pawn and discount transactions

Question 5

3 Types of Developmental credit

Answer 5

• loans for educational purposes
• loans to build / expand / improve low-cost housing
• loans to set up small- and medium-sized businesses

Question 6

Incidental credit

Answer 6

Cases where, originally, the intention is not to extend credit to the consumer.

But due to the consumer’s failure to pay for the goods or services on or before a determined date, a fee, charge or interest is added to the amount due.

Question 7

9 Consumer rights guaranteed under the NCA

Answer 7

The right

• to apply for credit
• to not be discriminated against when applying for credit
• to be given reasons for credit being declines
• to be given documents in an official language that the consumer understands
• to be given documents in a clearly understandable language
• to be given written documentation relating to the credit transaction
• to confidentiality of personal information
• to access and challenge information held by a credit bureau
• to receive periodic statements

Question 8

Credit insurance

Answer 8

Insurance which can be required by a credit provider, and would cover the debt due to the credit provider in certain cases (e.g. death).

Question 9

NCA stipulations regarding credit insurance

Answer 9

• “Compulsory” insurance cover taken by the consumer may not exceed the outstanding obligation to the credit provider, and the cover must reduce as the outstanding balance due to the credit provider reduces.
• In certain instances a consumer may be offered “optional” insurance of benefit to the consumer.
• The consumer may not be forced to take the insurance offered by the credit provider, and can in fact select to replace the insurance offered by the credit provider with a policy of the consumer’s choice.
• All insurance premiums payable to the credit provider must be by way of monthly premiums except in the case of a large agreement where an annual premium may be recovered.

Question 10

10 Objectives of the National Credit Act

Answer 10

• to promote black economic empowerment and ownership within the consumer credit industry;
• to prohibit certain unfair credit and credit-marketing practices;
• to promote responsible credit granting and use and for that purpose to prohibit reckless credit granting;
• to provide for debt re-organisation in cases of over-indebtedness;
• to regulate credit information;
• to provide for registration of credit bureaux, credit providers and debt counselling services;
• to establish national norms and standards relating to consumer credit;
• to promote a consistent enforcement framework relating to consumer credit;
• to establish the National Credit Regulator and the National Consumer Tribunal;
• to repeal the Usury Act, 1968, and the Credit Agreements Act, 1980; and to provide for related incidental matters.

Question 11

10 Key features of the NCA

Answer 11

• Language in credit agreements must be in simple and understandable;
• Quotes must be given on all credit agreements, and are binding for 5 days;
• Advertising and marketing must contain prescribed information on the cost of credit;
• Credit sales at a person’s home or work are strictly limited;
• Reasons must be provided if a credit application is declined;
• Automatic increases in credit limits are regulated;
• Reckless lending is prohibited;
• Interest and fees are regulated on all agreements, including micro-loans;
• Credit Bureaux are regulated and consumers have the right to a free credit bureaux record;
• Debt counselling is introduced, to enable restructuring of debts for over-indebted consumers.

Question 12

Role of the National Credit Regulator

Answer 12

• Register credit providers, credit bureaux and debt counsellors, and monitor the conduct of these parties;
• Educate and create awareness of the protection which the Act offers;
• Research the credit market and monitor access to credit and the cost of credit to identify factors that may undermine access to credit, competitiveness and consumer protection;
• Advise government on policy and legislation;
• Receive and investigate complaints and ensure that consumer rights are protected
• Enforce the Act and take action against contravening institutions