National Credit Act

National Credit Act Update

National Credit Act - Removal of Adverse Consumer Credit Information and Information Relating to Paid Up Judgements:

Minister Rob Davies of the Department of Trade and Industries has signed has signed the regulations around Removal of Adverse Consumer Credit Information and Information in relation to Paid Up Judgements.

The regulations specify the requirements, processes and time frames for Credit Bureaus around the Removal of Adverse Consumer Credit Information and Paid Up Judgements from their records. A copy of the Regulations can be found below.

Removal of Consumer Credit Information and Information Relating to Paid up Judgements

National Credit Act Update

Notice of introduction of National Credit Amendment Bill into Parliament
The Department of Trade and Industry has gazetted a notice setting out its intention to introduce the National Credit Amendment Bill (Amendment Bill) to Parliament during October 2013.
The notice advises that the purpose of the Amendment Bill is to amend the National Credit Act 2005 (NCA), as follows:
amend certain definitions
empower the Chief Executive Officer to delegate certain functions to other officials of the National Credit Regulator
provide for the registration of Payment Distribution Agents
tighten measures relating to debt counsellors and the conduct of their practices
allow debt counsellors to voluntarily cancel their registration
provide for ministerial power to issue notices for the removal of adverse information
provide for automatic removal of adverse consumer information
empower the National Credit Tribunal to suspend reckless credit agreements
provide for the registration and accreditation of alternative dispute resolution agents and matters connected therewith
A copy of the Amendment Bill has not yet been made available to the public, and it appears that it will only be available once it has been formally
introduced into Parliament. However it appears that the Amendment Bill provides for amendments to the NCA which were not dealt with in the
draft National Credit Amendment Bill that was published for public commentary in May 2013. These additional amendments include the provision
for ministerial power to issue notices for the removal of adverse consumer information as well as to provide for the automatic removal of adverse
consumer information.

The timing of this notice coincides with the recently published invitation for public commentary on the "Proposed Removal of Adverse Information from Credit Bureaux" (which proposes the removal of adverse information listings held by credit bureaux, irrespective of the value of the listing and irrespective of non-payment, as well as the removal of all paid-up adverse information listings and judgment information on an on-going basis).

THE NATIONAL CREDIT ACT, 34 OF 2005

The National Credit Act was promulgated in December 2005 and signed by the President of the Republic of South Africa in March 2006.After signing the Act, the President passed a proclamation phasing in the Action three stages. The final stage became effective on 1 June 2007.This means that the full National Credit Act has been in force since 1 June 2007.

The main purpose of the Act is to control the granting and use of credit in South Africa, to put a stop to the abuse of power by credit grantors when granting credit and to protect the consumer against unscrupulous grantors.

Much has been said about this new Act and a lot of confusion and misunderstanding exists, particularly amongst consumers. This booklet has been compiled to in- form the people of South Africa of their rights and duties in terms of the Act.

WHAT IS CREDIT ?

If someone buys goods, obtains services or borrows money and undertakes to pay for the goods, services or loan at a later date, it is known as credit.

This means that:

·         If you buy clothing and undertake to pay the supplier over a six-month period, it is credit.
·         If you borrow money from a bank to pay for your house (known as a mortgage bond), it is credit.
·         If you have a car serviced or repaired and you undertake to pay the garage at the end of the month, it is credit.
·         If you buy medicine from the local pharmacy and you pay for it at the end of the month, it is credit.

The period for repayment is not important. If you don’t pay cash, it is credit!

WHO IS A CONSUMER  ?
Any  person , whether it is a natural person or a legal entity ( such as a company, close  corporation or partnership ) that purchases goods, obtains services or borrows money and pays for the goods, services or loan at a later date is a consumer.

WHO IS A CREDIT PROVIDER ?

Any person, whether it is a natural person or a legal entity (such as a company, close Corporation or partnership) that sells goods, provides services or lends money to consumer , and defers payment for the goods, services or loan to a later date, is a  credit  provider.
This means that:

·         The clothing store is a credit provider. The bank that lends you the money to buy your house (the mortgagee) is a credit provider.
·         The garage that repairs your car and then allows you to pay later is a credit provider.
·         The local pharmacy that allows you to pay later for your medicine is a credit provider.

WHAT IS A CREDIT BUREAU ?

A credit bureau is a business that accumulates information about consumers, keeps Records of the information and then supplies the information to credit providers to assist them in the process of evaluating the creditworthiness of a consumer.  The information that is on record at a credit bureau is usually obtained from credit providers, court records or newspapers.

The National Credit Act (Section 70(1) has stipulated the sort or type of information
That may be kept by a credit bureau:

·         Personal information, such as
-           Full names of consumer
-           Date of birth
-           Identity number
-           Marital status
-           Family relationships
-           Past and current physical and postal addresses

·         Credit history of the consumer, such as
-           application for credit
-           credit agreements to which the person is or has been a party
-           pattern of payment or default under any such credit arrangements
-           debts re-arrangement in terms of this Act
-           incidence of enforcement actions with respect to any such credit arrangement
-                the circumstances of termination of any such credit agreement.

·          Financial history of the consumer, such as
-           the person’s past and current income
-           assets and debts
-           other matters within the scope of that person’s financial means, prospects and obligations (as defined in section 78(3) of the Act)
·                              A consumer’s education, employment, career, professional or business history, including the circumstances of termination   of employment  career , professional or business relationship
With the exception of South Africa Police Service, who may access the information Held by the credit bureau for the purposes of investigating crime or fraud, no person may access the information held by the credit bureau without the written authority of the consumer.

A consumer may have free access to his or her information held by a credit bureau once a year. If the consumer finds that incorrect information is been retained by the credit bureau, the consumer may, without any charge, lodge a dispute. The disputes must be recorded on the records of the credit bureau until the information has been verified by the credit bureau, the consumer may, without any charge, lodge a  dispute. The dispute must be recorded on the records of the credit bureau until the information has been verified by the credit bureau – this must be done in 30days. If the consumer is correct and the information is incorrect, the record must be cleared and the credit bureau must inform all persons who have access to the incorrect information that the information has been removed from the record. The credit bureau must keep a record of this dispute and the outcome of the dispute for a period of 18 months.

Within three months after lodging a dispute regarding information held by the Credit bureau, the consumer may once again have free access to the records. There After, a consumer may access his or her own information by paying a fee of R15 to the credit bureau.

The Act prescribes the periods for which information may be held by credit bureau. Once this period is past, the record must be automatically removed.

RETENTION OF INFORMATION BY CREDIT BUREAUX

If a credit provider or any person other than the consumer him or herself accesses The information of the consumer, the record of that credit provider or person, together with the contact details of that person and the reason of the enquiry, must be kept for a period of two years.

All factual information pertaining to the payment profile of the consumer must be retained for a period of five years.

If a consumer defaults on payments, the credit provider is required by law to report this default to the credit bureau. This information will be retained for a period of one year. The credit provider may not report information to a credit bureau unless the consumer has been given 20 business days notice of such a report. If the credit provider has taken legal action against the consumer and has obtained a judgment against the consumer, a record of this judgment will be retained until the credit provider has abandoned the judgment, or for a period of five years.

An administration order or a record of sequestration will be kept for ten years, or until the court has rescinded the administration order or the consumer is rehabilitated. Once the consumer is rehabilitated, the court order will be retained for five years.

YOUR RIGHTS AS A CONSUMER

The National Credit Act entrenches or protects the following rights of the consumer

THE RIGHTS TO APPLY FOR CREDIT

Consumers have the right to enter any business of any nature and apply for credit. This does not necessarily mean that the consumer has the right to receive credit.
The credit provider is obliged to assess the consumer’s creditworthiness and then to refuse the credit if it is certain that the consumer cannot service the account. The credit provider also obviously has the right to refuse credit to an individual (a natural person) if its policy is not to supply an individual. A wholesaler, for in- stance, has a policy to only supply retailers or business who buy large quantities of goods.

The important point here is that the credit provider may not, under any circum- stances, discriminate against the consumer on the basis of race, gender, religion, sexual preference or any other grounds listed in the Constitution of the Republic of South Africa.

The right to be protected against any form of discrimination

The Constitution of the Republic of South Africa, Act 108 of 1996 (Section 9 (3)
State

The state may not unfairly discriminate directly or indirectly against anyone on one or more grounds , including race ,gender , sex ,pregnancy , marital status , ethnic or social origin , co lour , sexual orientation , age , disability ,religion, conscience , belief, culture , language and birth.

The credit provider is prohibited from discriminating against any party on the Grounds stated in this section in the granting of credit or enforcing of credit agreements.
The right to be given reason why credit is refused

If credit provider refuses an application for credit, then the consumer must be advised, in writing, of the dominant reason for:
.   refusing to enter into credit agreement with that consumer
.   offering that consumer a lower credit limit under a credit facility than applied for by the consumer , or reducing the credit limit under an existing credit facility.
.   refusing a request from the consumer to increase a credit limit under an existing credit facility
.   refusing to renew an expiring card or a similar renewable credit facility with that consumer.

When responding to a request for the reason of refusal, a credit provider who has based its decision on an adverse credit report received, from a credit bureau must advise the consumer in writing of the name, address and other contact particulars of that credit bureau?

The right to receive information

A consumer has the right to receive information regarding credit transactions in plain and understandable language.

The right to receive information in an official language

A consumer has a right to receive any credit contract in an official language that the Consumer reads or understands , to the extent that is reasonable having regard to usage, practicality ,expense , regional circumstances and the balance of the needs and preferences of the population ordinarily served by the person required to deliver that document.

The Act allows for a credit provider to apply for documentation to be made available in two official languages. The National Credit Regulator must approve this application and may reject it on the grounds that it impedes the right of the consumer to receive documentation in an understandable language. If the Regulator rejects the application, then the Regulator will nominate two official languages that must be used by the credit provider.

The right to receive information in plain and understandable language

Any document that that is required to be delivered to a consumer in terms of this
Act must be presented to the consumer in plain language.

A document is in plain language if it reasonable to conclude that an ordinary consumer of the class of persons for whom the documents is intended, with aver-age literacy skills and minimal credit experience, could be expected to understand the content , significance and importance of the document without undue effort ,having regard to:

.   the context, comprehensiveness and consistency of the document
.   the organization, form and style of the document
.   the vocabulary, usage and sentence structure of the text
.   the use of any illustrations, examples, headings, or other aids to reading and understanding

The right to receive documents

Every documents that is required to be delivered to a consumer in terms of this Act must be delivered in the prescribed manner, if any .If no method for the delivery of a particular document to a consumer has been prescribed , the person required to deliver that document must make document available to the consumer through one or more of the following mechanisms.

.   in person at the business premises of the credit provider, or at any other location designated by the consumer but at the consumer’s expense, or by ordinary mail.
.   By fax
.   By e-mail
.   By printable webpage

The document must be delivered to the consumer in the manner chosen by the consumer from the available options mentioned above.

A credit provider must not charge a fee for the original copy of any document required to be delivered to a consumer in terms of this Act

On written request from the consumer the credit provider must provide the consumer with a single replacement copy of a document required in terms of this Without charge to the to the consumer, at any time within a year after the date of original delivery of that document and any other replacement copy , subject to any search and production fees permitted by regulation.

The right to confidential treatment

A credit bureau must ensure that all credit records are kept up to date, and that the Following information is not reflected or contained in the records kept.

.   Race
.  political affiliation
.   medical status or history
.   religion or thought, belief or opinion
.   sexual orientation, except to the extent that such information is self-evident from
the record of the consumer‘s marital status and list of family members
.   membership of a trade union, except to the extent that such information is self evident from the record of the consumer’s employment information.

The prescribed purpose for which a report may be issued includes:

.   an investigation into fraud, corruption or theft, provided that the South African Police Service or any other statutory enforcement agency conducts such an investigation
.   fraud detection or fraud prevention services
.   considering a candidate for employment in a position that requires trust and honesty and entails the handling of cash or finances, provided that the specific consent of the candidate has been obtained in writing for an enquiry for such purpose to be made.
.   an assessment of the debtor’s book of a business for the purposes of
-                   the sale of the business or debtors book of that business
-                   any other transaction that is dependent upon determining the value of the debtor’s book.

.   setting a limit of service provision in respect of any continuous service provided that the specific consent of the consumer has been obtained in writing for an enquiry for such purpose to be made.
.  assessing an application for insurance provided that the specific consent of the consumer has been obtained in writing for an enquiry for such purpose to be made.
.   verifying educational qualifications and employment provided that the specific consent of the candidate has been obtained in writing for an enquiry for such purpose to be made.
.   obtaining consumer information to distribute unclaimed funds, and insurance
claims
.   tracing of a consumer by a credit provider in respect of a credit arrangement entered into between the consumer and the credit provider, provided the consumer consented to such tracing at the inception of the agreement.
.   developing of a credit scoring system by a credit provider or credit bureau.

The right to ensure that any information held by credit bureau meet national norms and the right to have these records removed.

A consumer who has applied to a counsellor to have a debt restructured, and who has met the restructuring requirements, may have the record of the
Restructuring removed from the record of the credit bureau.
Once a judgment has been rescinded or abandoned by the judgment creditor, the record must be removed.

The right to access information

The consumer is entitled to access information held by credit bureau and the National Credit Register.   This includes the right to

.   be notified when information is recorded
.   have disputed information investigated, and
.   have incorrect information changed or removed.

YOUR OBLIGATION AS A CONSUMER

You, as a consumer, have only a few obligations:

To provide as much information as possible

Don’t be vague .Whatever question is being asked of you on the application form provide as much information as you can , If  you are asked what your marital status is, don’t simply say married . If you are married in community of property, say so even if the application form does not ask for it.

To be truthful

When you apply for credit whether it is with a clothing store, a furniture store or a bank is truthful. Do not give false information about yourself (age, health) your finances (salary, your expected income) or your assets (your house, car or furniture). If you give false information two things can happed:
.   the application for credit will be rejected with the result that the account will not be granted- and of course your record at the credit bureau will show that your application with that credit provider has been rejected, or worse
. you are committing a crime by misrepresenting yourself to the credit provider.

Either way, the application is rejected.

To pay according to your agreed terms

Always pay your debts on time. It is not necessary to pay early just don’t pay late! If you find that you are not able to pay- for any reason whatsoever- don’t ignore the debt. The debt will not go away.

Rather than simply ignoring the debt, go and discuss the debt with the credit provider and make arrangement for the delay of your payment. If you fail to discuss It with the credit provider, action will be instituted against you for the recovery of the debt.

To keep the credit provider informed

Inform the credit provider of the following:

Your physical address

The law requires that you keep the credit provider informed of your physical address at all times. In Latin, the physical address at which legal notices can be delivered is referred to as the Dom cilium citandi et executandi. If you provide this address to the credit provider, then any notice (such as a registered letter or a summons to appear in court) will be accepted to be delivered to you at that address. If you move from the address given to a new address, you must inform the credit provider of the new address in writing, either by registered mail or by e-mail ( if you
have e - mail facilities)

The place where goods are kept

In the Law of Contracts, ownership of goods or services transfers on delivery of the goods or services. In other words, if you order goods from a credit provider (such as Fertilizer for your garden, or sand and cement to build a new wall) then the moment the goods are delivered to your premises and you sign for it, ownership has passed from the credit provider to you, the consumer – even though you still have to pay for it.

However, if you have purchased goods on instalment sale (such as your car which the bank is financing or furniture which you are paying off) then ownership only transfers to you, the consumer, once you have made the final payment on the instalment sales agreement. This means that, should you not pay your instalments agreed to, the credit provider has the right to repossess the goods. Note that the credit provider can’t simply arrive at your house and take back the goods! There is a specific process that must be followed, which we will discuss later under the heading” Debt enforcement”

The law requires that you keep the provider informed of the place at which the goods, of which the credit provider has the right to repossess, are kept. Failure to do so will be a breach of the contract between you and the credit provider.

Statement not received or errors on a statement

You must contact the credit provider if you do not receive a statement or an account on a monthly basis. Unless you agree to receive a statement of your account every three months (which is the longest period for accounts to be sent), the law prescribes that you receive a statement of account every month. You can’t have the excuse that you did not receive a statement and therefore you are paying your account! And if there is a mistake on your account, don’t keep quiet about it. Five business days before the due date of payment of your account, you must contact the credit provider and tell them that you have not received an account – or that you did not receive an account but that there was an error on it. If you don’t do this, legal steps will be taken to enforce the payment of the debt.

UNLAWFUL CREDIT AGREEMENTS

.    A credit provider may not induce a consumer into entering into credit agreement on the grounds that the agreement will automatically come into effect unless the consumer refuses the offer. Such a credit agreement would be unlawful.

.    A credit provider may not increase credit limit of a consumer without the consumer having specifically asked for the increase. The credit provider may not induce the consumer to accept an increase of a credit limit on the grounds that the limit will automatically be increased unless the consumer refuses the offer. Such an increase in credit limit will be unlawful.

.    A credit provider may not harass a consumer at home or at work to sell goods or render services on credit. If the consumer, however, has requested that the credit provider visits his or her place of residence to give a quote and then incidentally agrees to an offer to buy on credit, then that would not be unlawful.

.    It would also be unlawful for an unemancipated minor or a person who is under an administration order to enter into a credit agreement.

DEBT ENFORCEMENT

If you don’t pay tour accounts in accordance with the contract that you have signed with the credit provider (in other words, if you are in default of the contract), steps must be taken to force you to pay. The National Credit Act stipulates the following procedures that must be followed by the credit provider when enforcing a debt:

.   The credit provider must give the consumer 20 business day’s notice of its intention to suspend the account that is in default. This notice must be writing. If the consumer brings an account up to date before the notice period expires and then defaults again within a reasonable time, the second notice period can be five business days.

.    The credit provider will also, in the same letter, inform the consumer that unless the account is brought up to date, a negative report will be filed with the credit bureau and the National Credit Register.

.    According to the Act the credit provider must recommend to the consumer that he or she (the consumer) consult with a debt counsellor for assistance with the making of arrangements for payment of the outstanding debt.

.    If the consumer pays the outstanding amount before the 20 business days have expired, the account will be reinstated.

The debt counsellor will investigate the overall indebtedness of the consumer. If it is found that the credit provider did not do a complete creditworthiness assessment when the account was opened or if a complete assessment was done but indications were that the opening of the account would have caused the consumer to be over indebted, the counsellor will recommend that the court declare that the credit provider was reckless.

If a court finds that the credit provider was reckless in allowing the consumer to become over indebted, or if  the credit provider did not ensure that the consumer understood what his obligations were in terms of the credit arrangement, the court will declare part of the debt or the total debt as reckless.

RECKLESS CREDIT

If a court declares a debt reckless, then
.   the contract is cancelled immediately
.   all the rights of the credit provider are ceded to the state
.   all monies paid by the consumer must be refunded to the consumer, together with interest.

This does not mean that the consumer walks away scot-free. The account must still be paid- only it is paid to the state and not to the credit provider who is being penalized for being reckless.

On the other hand, the debt counsellor may find that the credit provider was not reckless and that the consumer was not over indebted at the time of entering into the contract, but that the consumer has become over indebted since the contract was entered into. In this case the debt counsellor may request that all credit providers co-operate to restructure the debts of the consumer.

Remember one important thing: while the consumer is consulting the debt counsellor, or while the consumer’s debts are being restructured, no action can be taken against the consumer. But, the consumer may not enter into other credit agreement- except a consolidation agreement- until such time that the debt counsellor has given the consumer a clearance certificate indicating that all debts owing by the consumer have been settled in terms of the restructuring agreement with the credit providers.

Nothing stops a credit provider from taking action to recover outstanding debts in the Magistrate’s Court on condition that the 20 business days notice period has been given. Once proceedings in the Magistrate’s Court start, the consumer may longer
Approach a debt counsellor for assistance.

REPOSSESSION

After the credit provider has advised the consumer to consult with a debt counsellor and the counsellor does not advise restructuring of the debt, and the period of 20 business days’ notice has expired, the credit provider can proceed in the magistrate’s Court.

Before the credit provider can repossess any goods purchased on an instalment agreement, a court order must be obtained, or the consumer must be voluntarily surrender the goods to the credit provider. Note that this voluntary surrender may not be obtained in advance of default.

Goods may not be repossessed by the credit provider or by an agent of the credit provider. The credit provider may not request power of attorney from the consumer authorizing the credit provider to enter the premises of the consumer with the purpose of repossession must be undertaken by an officer of the court.

INTEREST

The maximum interest that may be charged on any overdue account or any account, on which the payment has been deferred, is prescribed by the Act. The method of calculation is as follows:

Interest =              P x R x T

Where
P           =               the principle amount that is deferred
R           =               the repurchase rate (RR) of the SA Reserve Bank
Multiplied by 2.2 plus a prescribed factor
T           =                the number of periods

The prescribed factors are as follows (as at 1 June 2007)

For a mortgage bond                                  (RR x 2.2) + 5%

Credit facility                                               (RR x 2.2) + 10%

Other credit agreements                              (RR x 2.2) + 10%

Unsecured credit agreements                      (RR X 2.2) + 20%

Short term loans                                  5% per month max 6 months

Example
If you are two months in arrears on your account of R4000 with clothing store
Interest will be calculated as follows (assuming a repo rate of 8, 5%):
Interest =       P x R x T

=        R4 000 x (8, 5 x 2.2 + 10) % x (2 / 12)
=        R4 000 x 28.7% x 2
-------------------------------
12

=           R2 296
---------------
12

Interest =      R191, 33

Note that this is the maximum rate of interest that may be charged by the credit provider. Also note that interest may not be charged on interest. In other words
Interest may not be compounded.

Finally, bear in mind that the total amount of interest charged on an account may never be more than the principle amount of the debt.

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