Written by: Marco Basson
 01 of June 2024
Who is protected by the National Credit Act?
A key piece of legislation intended to control the nation’s credit industry and encourage cautious lending practices is the National Credit Act 34 of 2005. In order to safeguard consumers against deceptive lending practices and excessive debt, the National Credit Act establishes rules for credit providers that guarantee affordability and transparency in credit agreements.
This article explores how the National Credit Act aims to empower consumers, promote financial inclusion, and add to the general stability of South Africa’s economy by requiring transparent disclosures, affordability assessments, and dispute resolution procedures.
What is a Credit Agreement?
Section 8 of the National Credit Act of South Africa defines what qualifies as a credit agreement. The types of agreements considered under this law are as follows:
- Credit Facility: Any agreement in which a credit provider provides the consumer with goods, services, or money and permits instalment payments or recurring invoicing with relevant costs or fees.
- Credit Transaction: This includes pawn transactions, instalment agreements, leases, mortgage agreements, and any other deferred payment agreement where charges or fees are payable.
- Credit Guarantee: An agreement where one person promises to fulfil another consumer’s obligations under a credit facility or credit transaction upon demand.
The Act excludes certain agreements like insurance premium payments, leases of immovable property, and transactions within stokvels governed by their rules from being considered credit agreements under this section.
When is a Credit Agreement Unlawful?
A credit agreement is considered unlawful if:
- The consumer was an unemancipated minor without a guardian’s assistance or under a court order declaring them mentally unfit, and the administrator didn’t consent.
- It resulted from offers prohibited by law.
- It involved supplementary agreements or documents prohibited by law.
- The credit provider was not registered as required by the law.
- The credit provider was under a regulatory notice to stop offering credit, regardless of registration requirements, with no further appeal available.
What Happens if a Credit Agreement is Unlawful?
If a credit agreement is unlawful:
- The court can declare the agreement void from the start and can provide redress by ordering the credit provider to forfeit any gains.
- The credit provider must refund all payments made by the consumer with interest.
- The credit provider’s rights to recover money or goods can be cancelled or forfeited to the state, depending on the circumstances.
What Rights does a Consumer have under the National Credit Act?
The National Credit Act collectively ensures that consumers are informed, protected from exploitation, and empowered to responsibly manage their credit obligations under the National Credit Act, which offers the following rights:
- Right to Apply for Credit: Consumers have the right to apply for credit. Approval, however, is at the discretion of the credit provider based on reasonable grounds.
- Right to Reasons for Declined Applications: If credit is declined, consumers have the right to receive reasons for the decision within a reasonable timeframe upon request.
- Protection Against Discrimination: Consumers are protected against discrimination during the credit application process, ensuring that decisions are not based on factors such as gender, race, or marital status.
- Protection from Reckless Lending: Consumers must be protected from entering into reckless credit agreements. This includes an assessment of their understanding of the costs, risks, rights, and responsibilities under the credit agreement, as well as their repayment history and current financial situation.
- Quotation Requirement: Before entering into a credit agreement, consumers must receive a quotation detailing the loan amount, interest rate, additional charges, and total costs involved and sign that they have received and accepted the quotation.
- Clear and Understandable Information: Information and documents related to the credit agreement must be provided in clear, plain, and understandable language to enable informed decision-making.
- Language Preference: Consumers have the right to receive information and documents in an official language they can understand, considering practicality and regional usage.
- Choice of Communication Method: Consumers can choose how they receive information and documents related to their credit agreement, whether by post, email, fax, or in person.
- Access to Free Copies of Documents: Consumers have the right to receive a free replacement copy of documents related to their credit agreement, although frequent requests may be subject to a fee.
- Liability After Reporting Loss or Theft: Consumers are not held liable for using their credit facility after reporting the loss or theft of their card, PIN, or similar item.
- Debt Review Application: Consumers have the right to apply for debt review (debt counselling) if they cannot afford their credit obligations, allowing for a restructuring of their debt repayments.
- Goods Surrender: Under certain circumstances, consumers may surrender goods under a credit agreement to settle outstanding amounts.
- Access to Credit Bureau Information: Consumers have the right to access and challenge information held by credit bureaus, with the ability to request this information free of charge once every 12 months.
- Regular Statements: Consumers are entitled to receive regular statements of account outlining the current balance, payments made, charges, and next instalment due date.
- Confidentiality of Personal Information: Consumers’ personal information must be treated as confidential and used only for purposes for which consent was given, ensuring the protection of their privacy
What Duties does a Consumer have in Terms of the National Credit Act?
- Ensure timely payments according to the terms of their credit agreement.
- Notify the credit provider of any changes in their address, location where goods under the credit agreement are stored, or if another individual is responsible for the goods.
- Provide accurate and truthful information to the credit provider.
- Adhere to the obligations specified in the credit agreement, such as maintaining the condition of goods or obtaining insurance for them.
Need Expert Help In Representation under the National Credit Act? Contact Our Experienced Attorneys Today For A Consultation
The National Credit Act provides a robust framework to ensure fairness, transparency, and accountability in South Africa’s credit industry. It empowers consumers to make informed financial decisions while holding credit providers accountable for their practices. Whether you’re a consumer facing overwhelming debt or a credit provider aiming to comply with the National Credit Act, it is crucial to understand your rights and obligations. To avoid reckless financial behaviour or disputes, contact and consult with a legal expert at Burger Huyser Attorneys for tailored guidance and representation under the National Credit Act.
Randburg call 061 516 6878; Roodepoort call 061 516 0091; Sandton call 064 555 3358;  Pretoria call 064 548 4838;
Centurion call 061 516 7117; Alberton callÂ
DISCLAIMER: Information provided in this article does not, and is not intended to constitute legal advice. READ MORE