NATIONAL CREDIT ACT NO. 34 OF 2005 Presented by Richard Scott of Austen Smith

1. NATIONAL CREDIT ACT NO. 34 OF 2005Presented by Richard Scott of Austen Smith

2. INTRODUCTION • The National Credit Act provision effective dates: • most provisions on 1 June 2006 • National Consumer Tribunal on 1 September 2006 • Credit bureau and credit information on 1 September 2006. • Disclosure, limits on interest and fees, reckless lending etc on 1 June 2007 • Debt counseling and debt restructuring on 1 June 2007 • The Usury and the Credit Agreements’ Act repealed 1 June 2007

3. PURPOSE AND APPLICATION • Increase access to credit • Fair competitive and stable market • Assist and inform consumers • Mechanisms for over indebtedness • Protection from reckless credit providers • Regulate credit information • Prohibit unfair practices • Credit agreement exceptions: • juristic person whose asset value =/> R1 million; • State or an organ of State; • a large agreement; • credit provider is SA Reserve Bank; and • credit provider is located outside the Republic

4. DEFINITIONS • Credit agreement is a credit facility / transaction / guarantee or a combination • Credit facility defers payment or bills for a fee / interest • Credit transaction is: • pawn or discount transaction; • incidental credit agreement; • instalment agreement; • mortgage agreement or secure loan; • lease of movable property; and • any other agreement, where payment is deferred for a fee • Incidental credit agreement for late payment • Credit guarantee satisfaction for another consumer • Agreement is not a credit agreement if it is: • a policy of insurance; • a lease of immovable property; • a transaction between a stokvel and a member of that stokvel

5. CONSUMER CREDIT INSTITUTIONS • Two consumer credit institutions monitor and enforce: • National Credit Regulator (NCR) • Registers providers • Educates and creates awareness • Researches and monitors • Advises on policy and legislation • Enforces and takes action • The National Consumer Tribunal (NCT) • adjudicates cases, issues fines and provides redress to consumers

6. CONSUMER CREDIT INDUSTRY REGULATION • Credit providers must be registered as a provider with the NCR if: • at least 100 credit agreements • total principal debt exceeds R500,000.00 • If provider unregistered, loan is unlawful • National record of registration by NCR: • Credit bureaux and debt counsellors • all other persons under the Act

7. CONSUMER CREDIT POLICY • Rights for consumers: • application for credit • protection against discrimination • reasons for refusal • information in official language • receive documentation • confidential treatment • information held by a credit bureau iro rearrangement • access to information

8. NATIONAL CREDIT REGISTER • Established to keep a register of credit agreements • Reporting of information to NCR: • provider’s name, address and registration no. • consumer’s name, address and ID or registration no. • information iro credit transactions/guarantees: • principal debt • previous credit agreements terminated with new agreement • amount and payment schedule • date of release once fulfilled • Provider must report termination of credit agreements concluded by it

9. CREDIT BUREAUX AND DEBT COUNSELLORS • Credit Bureaux does business in: • credit applications • credit agreements • payment history or patterns; or • other credit information • Debt counsellors are natural persons who: • determine “over indebtedness” • accepts court referrals or applications to compile reports • recommendations to rearrange debt • investigate repayment circumstances • issue of clearance certificate if fully paid up • Debt counselling is an intermediary step

10. OVER INDEBTEDNESS AND RECKLESS CREDIT • This only applies to natural persons • Over indebted if unable to satisfy all obligations in a timely manner • Reckless credit if: • provider failed to conduct assessment • agreement entered despite consumer not appreciating risks or obligations

11. OBLIGATIONS OF CREDIT PROVIDERS • Assessment of proposed consumer: • understand of risks, costs and obligations • debt repayment history • existing financial means, prospects and obligations; • reasonable basis to conclude commercial purpose may be successful • must fully and truthfully answer any requests for information

12. UNENFORCEABILITY • Court may declare credit agreement reckless and set aside or suspend obligations • Effect of suspension: • consumer not required to make payment • no interest, fees or other charges • provider’s rights unenforceable

13. UNLAWFUL CREDIT AGREEMENTS • Unlawful in these circumstances: • consumer an unassisted minor; mentally unfit; subject to administration order without consent of administrator • supplementary agreement contains provision that make it unlawful • provider unregistered if required by Act • provider subject to notice by Regulator • offer prohibited in terms of provisions of marketing requirements • Unlawful credit agreement is void as from date of commencement and provider must refund the consumer

14. UNLAWFUL PROVISIONS • Following provisions unlawful: • effect defeats purposes or policies of Act • purports to waive or deprive consumer of rights • purports to waive any common law rights • purports to exempt the credit provider from liability for act, omission or misrepresentation • agreement by consumer to forfeit money when exercising right of rescission or failure to comply before receiving goods or services • Unlawful provision is void from date provision purported to take effect

15. CREDIT MARKETING PRACTICES • Negative option marketing and opting out requirement • Marketing and sales of credit at home or work • Advertising practices • provider not registered must not advertise • advertisement must not: • advertise credit that is unlawful; • be misleading, fraudulent or deceptive; or • contain any statement prohibited by regulation • may contain a statement of comparative credit costs to extent permitted • must state rate of interest and other credit costs

16. CONCLUSION AND ADMINISTRATION • Quote before extending credit must set out: • principal debt • proposed distribution • interest rate and other costs • total cost of the proposed agreement; and • basis of any costs that may be assessed if rescinding • Must state if subject to limited availability • Cost of agreement must be clear • Copy must be supplied in paper or printable electronic form

17. LIABILITY FOR INTEREST, CHARGES AND FEES • Prices of cash versus credit sale • Cost of credit only for principal debt; initiation fee; service fee and interest in percentage terms at annual rate • Instalment, mortgage, secure loan or lease for initiation fee; extended warranty agreement; delivery, instalment and initial fuelling charges; connection fees, levies or charges; taxes, licence or registration fees and premiums of credit insurance • Interest • may not exceed the value of the principal debt • may provide for interest rate to vary • may not unilaterally increase 30 business days written notice

18. STATEMENTS • Monthly statement • Additional statements TERMINATION AND RESCISSION • Lease or instalment at premises other than registered business - terminate within five business days • terminate by settling amount; surrendering goods; or payment of remaining amount

19. DEBT ENFORCEMENT • May propose referral to debt counsellor, alternative dispute resolution agent, consumer court or Ombud • Provide notice before legal proceedings • intermediary procedure by debt counsellor • Request order if in default for 20 business days and: • at least 10 business days have elapsed • no response to notice or rejected proposals; and • iro instalment sale agreement, secured loan, or lease, relevant property not surrendered

20. DISPUTE SETTLEMENT • Any person may initiate complaint to Regulator • NCR may initiate complaint in its own name • Ombuds, consumer courts and alternative dispute resolution agents may also hear complaints • Regulator power to refer matter to National Prosecuting Authority where offence committed • No complaint may be referred more than three years after the cause of complaint