Marketing to Consumers
The National Credit Act restricts and outlaws certain practices of loan canvassing such as door to door selling, uninvited canvassing at workplaces or homes. The NCA also increased control over marketing practices and advertisements such as automatic credit limit increases and negative option marketing i.e. if you do not decline, we will assume you agree. In addition, the National Credit Act provides for clear and understandable marketing communication. Consumers must receive a detailed written quote, which is valid for 5 business days, to enable quote comparisons from different credit providers.
Capped Interest Rates And Other Fees And Charges
The National Credit Act effectively caps the interest rates, fees and other charges which credit providers can charge, depending on the type of credit and when the credit was granted. The maximum interest rate, in most cases, is based on a formula which is dependent on the SA Reserve Bank Repurchase (Repo) rate at the time that the credit was granted. Essentially, there are seven rate categories namely mortgage agreements; credit cards/facilities; unsecured credit transactions; short-term credit transactions; developmental credit agreements; other credit agreements and incidental credit agreements.
The NCA places a cap on the maximum amount that a credit provider can charge for other fees such as initiation fees, monthly service, and default and collection costs. While a loan protection policy is permitted, the charges must “be reasonable” and the Consumer may use/cede an existing insurance cover.
The National Credit Act requires credit providers to supply simple contracts that are easy to understand, in two official languages and the Consumer must receive a free copy. Consumers are also entitled to a reason, on request, when credit is denied by the credit provider. The NCA requires credit providers to do due diligence to ensure the Consumer can afford the loan and all loans must be recorded on a register to prevent Consumers becoming over-indebted.
Credit providers are in contravention of the NCA and may be judged guilty of reckless lending if the Consumers ability to afford loan repayments is not assessed before granting credit. Credit providers may be subject to severe penalties and may even forfeit their right to recover the debt if they are judged guilty of reckless lending. However, Consumers who failed to fill in the loan application fully and honestly are not protected by the NCA.
The Debt Counsellor & Counselling
The National Credit Act gives Consumers the right to apply for financial management and debt counselling assistance if he or she is unable to pay their debts. The Debt Counsellor (DC) is registered by the NCR after successful course and exam completion. Debt counsellors will help over-indebted Consumers restructure/rearrange their debt repayments, this process can be voluntary or made an order of the court.
All DCs must be registered with the National Credit Regulator and fees are prescribed in terms of the NCA. Consumers must understand and accept the process, charges and payments before undergoing debt counselling. Once the Consumer has signed for debt counselling, the credit bureaux are notified and the Consumer will be unable to obtain further credit for the duration of debt counselling until the process is finalised/withdrawn.
The National Credit Act requires all credit bureaux to be registered with and submit reports to the National Credit Regulator. Credit bureaux are required to ensure data is accurate at all times and that inaccurate information is immediately removed without cost to the Consumer after the Consumer has lodged a complaint. The NCA regulations stipulate how Credit bureau information is obtained, used, and for how long it should remain on a Consumer’s profile.
In addition, Consumers are eligible for one free credit report from each credit bureau each year in order to effectively manage their credit profiles.
The National Credit Regulator (“NCR”) and the Consumer Tribunal (“CT”)
The National Credit Act established the National Credit Regulator (NCR) to regulate the credit industry and ensure that credit providers comply with the NCA. In addition, the NCR is responsible for investigating and evaluating Consumer complaints about alleged contraventions of the NCA by credit providers. All credit providers, credit bureaux and debt counsellors must register and report to the NCR.
In addition to the NCR, the National Credit Act established the Consumer Tribunal with equal status to a court of law to hear and adjudicate on: Applications made in terms of the National Credit Act (34 of 2005) by Consumers; credit providers and credit bureaux; debt counsellors and the National Credit Regulator including applications for interim relief and a review of the National Credit Regulator's decisions; matters referred to by the National Credit Regulator or complaints related to allegations of prohibited conduct, and consent orders.