Real Estate Investor Magazine South Africa April 2015 | Page 24

LEGAL

The National

Credit Act
How this affects consumers
seeking to obtain finance
BY MARLON SHEVELEW

T

he National Credit Act (NCA), Number 34 of
2005, was assented to by the President in 2006
and came into operation during the following
12 months. The purpose of the NCA is to “promote
and advance the social and economic welfare of South
Africans by promoting a fair, transparent, competitive,
sustainable, responsible, efficient, effective and
accessible credit market and industry, and to protect
consumers against unscrupulous lenders.”
The burning question which remains is, how this piece
of legislation affects consumers seeking to obtain
finance?
It must be established whether this particular agreement
constitutes a ‘credit agreement’ as defined by the NCA
and whether the Act is applicable (i.e. a juristic entity
which enters into a credit agreement in excess of R250
000 is exempt from the ambit of the NCA.
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April 2015 SA Real Estate Investor

Responsible lending
One of the main objects of the NCA is to discourage
reckless lending. Thus, the NCA created a mandatory
obligation on credit providers to complete a credit
assessment on consumers, prior to entering into any
credit agreement. This does not apply to consumers
who are part of any social entity such as a community or
association of people which by law has an independent
right of existence.
A failure to do so may result in the credit agreement
being that of reckless lending and may in turn result in
the offending provisions of the credit agreement being
held to be un-enforceable by the credit provider.
In addition, the NCA prohibits the credit provider
from entering into credit agreements unless a preagreement statement and quotation has been provided
to consumers. In essence, these documents require the
credit provider to make clear to consumers what the
costs of the credit agreement will be.
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