Had it not been for the National Credit Act (NCA), South Africa would have been affected far worse by the global economic turmoil than what it is – but what exactly does the Act entail and how does it impact on everyday consumers?
The NCA was signed into law in 2005. In a nutshell it establishes rights for consumers, including measures that enable them to make informed decisions.
It also places a greater responsibility on credit providers to refuse credit to those who cannot afford it and regulates how credit bureaus – which hold and provide information on your creditworthiness – do business.
The NCA covers the following issues:
Registration: Any organisation that lends money (such as shops, banks etc.) must register with the National Credit Regulator (NCR).
Better disclosure to borrowers: Consumers must be informed of the nature of the credit agreement in clear and understandable language.
The Act also specifies that consumers must be given a quotation which is valid for five business days before they enter into the agreement.
The quotation must contain the following: The full cost of the credit, ongoing costs, initiation fees, fixed or variable interest rate, the annual interest rate expressed as a percentage and as a rand amount, any residual or final amounts payable at the end of the period, the number of instalments and the amount of each instalment, delivery and installation charges, connection fees, taxes, license or registration fees and the nature and cost of any additional insurance and the consumer’s right to waive such insurance and replace it with a policy of their choice.
Consumer Information held by bureaus: The NCA requires that all businesses and shops that provide credit bureaus with information, must take all reasonable steps to ensure that the information is accurate, up to date, relevant, complete, valid and not duplicated.
Any organisation that intends to list adverse information about a consumer to credit bureaus must give the consumer 20 business days’ notice of its intention to do so. There are also steps listed that consumers can take to challenge or dispute information.
Unsolicited Selling: This prohibits any credit provider from harassing consumers in an attempt for them to apply for credit. Consumers may not be hassled at home or work unless they have expressly agreed so. A consumer’s overdraft limit, credit card limit etc. may also no longer be automatically increased by the credit provider.
Misleading advertising: The Act bans misleading advertising and sets out requirements for advertisements such as cost of credit, installment amounts, number of installments, total number of installments, interest rate and any residual or final amounts.
Negative option advertising: This selling practice (where an agreement will automatically come into existence unless the consumer declines the offer) is completely outlawed.
Reckless credit: The Act prohibits the provision of reckless credit. Examples are where credit is given without the provider assessing the consumer’s ability to repay, where the consumer is over-indebted as a result of new credit and where it can be proved that the consumer did not understand the costs, risks or obligations of what was signed.
Over-indebtedness: A consumer is over indebted if their expenses exceed their income. A court may refer such a consumer to a debt counselor to assess their financial position. The counselor reports back to the court on the consumer’s situation.