The National Credit Act

The National Credit Act, Act 34 of 2005, more popularly known as the colloquial term, "the NCA" became fully operational in South Africa on 1 June 2007.

The NCA replaces the Usury Act, 73 of 1968, the Credit Agreements Act, Act 75 of 1980 and the Integration of Usury Laws Act, 57 of 1996, which was the primary legislation governing the granting of credit within the financial services industry since 1968.

The NCA, though overshadowed by much contention, should be seen as a positive step in the development of South African Law ensuring citizens are not over-extended with credit which they are unable to repay or to service the payments on a monthly basis.

Although it has caused must strife among estate agents, property developers, sellers, bond originators and buyers, the positive aspects of the act should be borne in mind before any broad attack is launched against this legislation.

The proverbial belt-tightening began at the time of implementation of the Act but has since relaxed slightly to allow people to operate within the confines of the Act rather than be restricted by it.

The main purpose of the Act can be summarised into the following points:

• To promote a fair, competitive, accessible, equitable and sustainable credit market.
• To educate consumers so that they are empowered to make informed choices, borrow responsibly and within their means.
• To enforce affordability assessments within the lending process to prevent reckless lending and/or borrowing.
• To protect consumers who feel they have been unfairly treated in a credit agreement by giving them access to a National Credit Regulator and the National Consumer Tribunal.
• To provide a debt counselling process for consumers who are not able to find a solution for their inability to repay their debts, in conjunction with their credit providers.

The following are the main institutions that are effected by the Act:

Banks

• Loans
• Mortgage Bonds
• Overdrafts
• Credit Cards
• Vehicle Finane
• Other Personal Finance

Retailers

• Furniture Finance
• Clothing Accounts
• Store Cards
• Any other type of Credit or Finance from retailers

Other Catagories

• Micro-loans and pawn transactions
• Any other type of credit or loan provided to you             

The preamble to the Act provides particular insight into the positive aspects of law the legislation seeks to protect:

To promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide for the general regulation of consumer credit and improved standards of consumer information; 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.

Author:                   Bradley Berman