With the economic drought and struggle hitting South Africa which is largely due to the consumer’s spending boom, which is to a large extent been a result of spending money by use of credit.
Credit suppliers have perhaps overwhelmed consumers with proposals of laidback credit or as consumers one assumes that it is the best way to live a “relaxed” lifestyle.
This notion has resulted in many consumers becoming unprincipled creditors and consumers tend to forget the interest rates and the fees associated with credit contracts.
It is very easy to place everything on credit, but the problems usually arise when one realises a little to late on spending money which one TECHNICALLY do not have. Buying on credit does not mean that you can just purchase, it means that what you spend needs to be paid back. It is easy to get away with the swiping and forgetting the trail of debt you are leaving behind.
A quote by Charles Dickens states perfecting that a “[Credit is a system whereby] a person who can’t pay, gets another person who can’t pay, to guarantee that he can pay.” Eventually the person who gets the other to pay, has to repay the “loan” to person who took to pay.
The National Credit Act is essential for all those creditors and consumers to note and understand as purchasing on credit is not a “get free” spending spree.
Purpose of the NATIONAL CREDIT ACT
The importance of the National Credit Act (NCA) is to support and improve the societal and financial welfare of South African consumers. The NCA attempts to achieve this by supporting a fair-minded, translucent, economical, maintainable, responsible, competent, effective and manageable credit marketplace and commerce; and to protect consumers from over indebtedness while balancing the rights of providers.
The NCA permits consumers to make more well-versed choices beforehand when considering to purchase goods and services on credit. It further places larger obligation on credit benefactors to decline to provide consumers credit if they are unable to manage to pay for it. The habit is to break the thought that credit means ‘your’ money.
It is imperative to all South Africans to comprehend and understand the applicability of the NCA, which refers to all written credit contracts amongst parties and established within South Africa.
National Credit Act applies to certain parties
The NCA applies to all credit contracts between parties such as all natural persons and some juristic persons.
The NCA protects the privileges for consumers for all kinds of credit contracts such as home loans; overdrafts to trade funding and also protects consumers entering contracts relating to credit facilities, credit guarantees and credit dealings etc. which falls within the ambit of the NCA.
NATIONAL CREDIT ACT EXCUSES CERTAIN CREDIT PROVIDERES
Credit providers who has fewer than 100 contracts or where the total primary debt is less than R500 000 is excused from the NCA.
WHAT ARE CREDIT CONTRACTS?
The NCA describes credit contracts to include credit cards, cheque accounts, loans by financial establishments, clothing accounts on credit, overdraft facilities, cell phone accounts on credit, revolving credit and credit guarantees (such as suretyships), pledge or reduction dealings, incidental credit contracts, repayment contracts, mortgage contracts or loans, lease contracts etc.
Hastening clauses in credit contracts
The addition of hastening clauses in credit contracts setbacks the purpose of the NCA.
The hastening clauses, also known as the acceleration clauses, if effected, will lead consumers to becoming over-indebted and being incapable to fulfil all their credit obligations in a dependable means.
An acceleration clause, when effected, will force the consumers to abandon their other credit responsibilities in order to reimburse the full balance on the exaggerated credit contract.
It is imperative that consumers are made aware of these acceleration clauses and understand their credit obligations to various credit providers.
NATIONAL CREDIT ACT CRUCIAL ASPECTS TO NOTE
It is important that all credit agreements comply with the following:
- The language in credit contracts must be simple and clear.
- Explanations must be delivered to the consumer if a credit request is refused by the credit provider.
- Costings must be provided prior to the credit contracts being concluded.
- Marketing and publicizing must encompass information on the price of credit.
- Credit transactions at individual’s homebased or employment are prohibited except if the consumer requests it.
- Automatic escalations in credit restrictions are permitted except if the consumer requests otherwise.
- Irresponsible loaning is barred.
- Interest and charges are charged as permitted by the NCA.
- Credit bureaus are controlled and consumers have the right to view their credit bureau record.
privileges as a consumer/CLIENT
A consumer has the following rights, namely to:
· apply for credit;
· be protected against judgement in respect of the granting of credit;
· be given explanations for credit being declined;
· material in simple and comprehensible language;
· obtain forms; and
· protection of consumer rights.
Rights to protect consumers is ensured by the NCA by: – “
· promoting equity in the credit market by balancing the respective rights and responsibilities of credit providers and consumers;
· addressing and correcting imbalances in negotiating power between consumers and credit providers by –
Ø providing consumers with protection from … unfair or fraudulent conduct by credit providers …;
Ø providing for a consistent and harmonised system of debt restructuring, enforcement and judgment, which places priority on the eventual satisfaction of all responsible consumer obligations under credit agreements.”
NATIONAL CREDIT ACT protectS a consumer against over-indebtedness
The NCA necessitates that credit suppliers must execute a complete credit valuation prior to concluding a credit contract with the client. A valuation of the client’s financial position comprises captivating rational phases to safeguard that the client comprehends the privileges, responsibilities, dangers and charges related with the credit contract; and it is a requisite that the valuation of the client’s financial status is considered.
A consumer may be over indebted if, subsequently taking rational corporeal expenditures from the consumer’s entire salary, it is deduced that the consumer will not be capable to reimburse their credits.
Debt counselling agencies are able to assist in rearrangement of credits for over-indebted consumers.
National Credit Regulator (NCR)
The NCR is a self-governing juristic person that controls the South African credit commerce.
The NCR ensures that they:
· Record credit suppliers, credit bureaus and debt counsellors; and observe the deportment of these agencies.
· Inform and generate attentiveness of the safeguard aspects that the NCA provides.
· Investigation and monitoring of the credit marketplace and the charge of credit.
· Ascertain dynamics that may challenge the right to use credit and affordability thereof.
· Counsel administration on policy and legislation alterations.
· Accept and scrutinize grievances.
· Warrant that a consumer’s privileges are secure.
· Impose the NCA and enforce action against violating establishments.
National Consumer Tribunal (NCT)
The NCT is self-governing and separate from the NCR and applies relaxed hearings on matters referred in relation to non-compliance with the NCA.
Customers and credit suppliers may petition to the NCT in contradiction of a verdict of the NCR. The NCT subjects itself to issue of penalties and affords reimbursement to customers.
So before deciding to buy on credit, note that if you do not have the money to spend then do not try to find means of making promises to pay if you know you will not honour the obligation to repay. To spend is easy, but to repay will be a portion of your lifetime.
“Credit of time in your life is limited” – quote by Sunday Adelaja.
(NOTE: this article is for information purposes only. Each case depends on merits of matter and should be consulted with an attorney)