Ronél (Lewies) de Klerk
separately despite the fact that the nature of the cost is an expense to
the credit provider. The decision has been taken on appeal.
Micro Loan financiers have complained that the Barko decision
will suffocate them financially. To aggravate the situation, the NCR
and credit providers have vastly different interpretations of the
sections of the Act pertaining to service fees. What is quite obvious
is that what was an attractive market segment has developed into
a costly and dangerous one. What caused this paradigm shift?
Section 101(1)(c)(iii) of the NCA reads as follows:
‘Cost of Credit – (1) A credit agreement must not require payment
by the consumer of any money or other consideration, except…. (c) a
service fee, which… must not exceed the prescribed amount relative
to the principal debt.’
SECTION 105 READS:
‘Maximum rates of interest, fees and charges – (1) The Minister…
may prescribe a method for calculating… the maximum fees…
the Minister must consider, among other things… the need to
make credit available to persons contemplated in section 13(a); (b)
conditions prevailing in the credit market, including the cost of
credit and the optimal functioning of the consumer credit market;
and (c) the social impact on low income consumers…’
REGULATION 44 READS:
‘…The maximum monthly service fee, prescribed in terms of section
105(1) of the Act, is R50…’
The NCA has been described as a nebulous piece of legislation and
Regulation 44 surely adds to the confusion. Regulation 44 prescribes
only one amount for a service fee, R50, regardless of the principal
debt. It seems obvious that section 101 in actual fact envisages
a fluctuating service fee reliant on upon the size of the principal debt.
One should also question whether the requirements in Section 105
were properly considered. The requirement ‘…condition prevailing
in the credit market, including the cost of credit and the optimal
functioning of the consumer credit market…’ is of significant
importance to the Micro Finance industry.
I submit that the credit
provider is entitled to
charge a service fee of
R100. The NCR is of the
view that a fee of only
R50 is payable.
The service fee has remained at R50 since inception of the
regulations, now almost seven years.
There appears to be no difficulty in the calculation of the service
fee in circumstances where a loan has been granted and has to be
repaid within the same month it was granted. In such event both
credit providers and the NCR are agreeable that a R50 service fee
is entitled to be charged. The dispute arises in circumstances where
a loan is granted during a particular month (for example on 20
January 2013) and is repayable the following month of that year (for
example 5 February 2013) and the loan is for a period of less than 30
days. I submit that the credit provider is entitled to charge a service
fee of R100. The NCR is of the view that a fee of only R50 is payable.
At the centre of this dispute lies the question of how a “month”
is defined, as the NCA is silent in that regard. In terms of the
Interpretation Act 33 of 1957, a month means a calendar month.
I am of the view that the monthly service fee chargeable is not
dependent upon the number of days to which the loan relates, but
rather whether or not those days span either one or two calendar
months or parts thereof. It is particularly important here to bear in
mind that service fees relate to the “routine administration cost of
maintaining a credit agreement” and are not to be confused with
interest. The consumer who seeks a longer loan would obviously
incur a higher interest charge.
CONCLUSION
Whatever your emotional response to Micro Loans, one thing is
certain: the South African economy cannot afford the deterioration
of this important sector. If Micro Loans are breaking the proverbial
bank, the powers must crisply intervene to prevent this developing
into a situation where Micro Loans break the actual bank. By Ronél
(Lewies) de Klerk ■
RONÉL (LEWIES) DE KLERK
Attorney and Director of Lewies Attorneys
www.lewies.co.za
Edition 6
Subbed Banker issue 6 Legal view.indd 51
BANKER SA
51
2013/07/17 3:20 PM