The objective of the National Credit Act No. 34 of 2005 (“the Act”) is, amongst other, to:
The onus is on credit providers to ensure compliance with the requirements of the Act. It is therefore important to know who is a credit provider and when the requirements of the Act must be met.
The Act, with certain exemptions, regulates all credit provided to consumers by credit providers under a credit agreement within the Republic of South Africa. Section 8 of the Act defines what a “consumer” and a “credit agreement” are.
The Act defines a consumer as all natural persons as well as certain legal entities. Only legal entities that qualify as small businesses (companies with an asset value or annual turnover of less than R1 million) will enjoy protection as a consumer in terms of the Act. Specifically excluded from the definition of a consumer are organs of state.
In terms of the Act, an agreement must have two features before it qualifies as a credit agreement, namely:
However, the Act distinguishes between three types of credit agreements, namely:
Any combination of the above.
Registration as a credit provider
The Act requires persons to register as a credit provider if the principal debt under all outstanding credit agreements exceeds the prescribed limit. This limit was R 500 000 at the promulgation of the Act but was amended with effect since 11 November 2016, where the monetary limit was reduced to zero.
However, this does not mean that every person or business has to register as a credit provider. The following must still be taken into account:
Requirements in terms of the Act:
When a credit provider provides credit to a consumer in terms of a credit agreement, the Act requires the credit provider to comply with certain requirements. The credit provider must –
If a credit provider fails to register in terms of the Act or fails to comply with the requirements of the Act, the credit agreement may be declared unlawful and invalid. It is therefore important for credit providers to comply with the requirements of the Act.