KEY QUESTIONS & ANSWERS
During the workshops key questions and answers emerged which were recorded. The
undertaking was provided to capture these on the BANKSETA and IOB websites, serving to
provide follow up support to the delegates.
The legislation and its impact is still emerging, as are the regulations, and it is important to
continue to provide input and information to affected companies and individuals in order to
assist with the understanding and implementation of the National Credit Act.
The table below contains most of the frequently asked questions and some of the more
infrequent that were considered to be general useful.
Table 1: Key Questions and Answers
Question
General
Does this supplement or replace the
Debt Collection Act?
Whose responsibility is it to inform
the public of their rights?
How is “plain” language defined?
Will the regulator regulate all
providers including retailers?
If a provider does not have to
register is he only excluded from the
interest rate restrictions?
Individual vs legal entity
Do you lose individual protection if
you stand surety for your company?
Is the juristic person excluded
completely?
Reckless lending, Credit
Assessments and Quotes
Reckless lending – what if the
consumer applies for a number of
loans/ credit on the same day? As
the provider you may not know this
Are there thresholds for reckless
lending?
Interest rate hikes could cause a
consumer to become over-indebted,
however, the last loan could have
been responsible lending- what
happens in this situation?
Is the 5-day quote period the same
as a ‘cooling off’ period?
How does one show products which
have imbedded insurance?
Answer
The NCA should be seen as supplementary, The
regulations relating to Debt Collection fees, for example,
are not affected by the NCA.
The National Credit Regulator has a consumer education
responsibility
Legal terms and those in Latin should be avoided
All credit providers, regardless of sector will fall under the
new legislation
Although a provider may be small enough not to register,
he will still be governed by all the provisions of the Act –
except registration and reporting to the NCR
Correct. If an individual stands surety for a bond registered
in the name of the juristic entity, they cannot, for example,
insist that the interest rate falls within the regulations set
out in the NCA regulations
There is limited application of the Act to juristic persons, in
particular, credit marketing practices, reckless lending,
unlawful agreements and provisions and the cost of credit
are excluded.
A provider can only be held responsible for what can be
reasonably expected to be known – which excludes
circumstances where the consumer deliberately chose to
mislead him or her.
Nothing explicit. The NCA associates reckless lending with
over-indebtedness - which will rely on the assessment of
providers
It is possible that a change in individual circumstance or an
unexpected hike in interest rates could cause a consumer
to become over-indebted and distressed. In this case, no
provider may be deemed to have been reckless, but they
are still likely to be affected by debt-rescheduling
No. It refers only to the validity of the quote. If a consumer
decides on the basis of the quote to accept the credit
immediately, there is no compulsory cooling-off period
Insurance charges must be explicitly disclosed
Question
How often must the provider
evaluate - on every credit application
or at the beginning of the term
agreement
Caps & Fees
Does the monthly fee include
statements and mailing and other
transaction fees, e.g. debit order
fee?
Is the consequence of the Act that
providers will increase their prices to
up to the upper limit of the caps? i.e.
what happens to providers who
charge initiation fees lower than the
proposed limits
Will the mortgage evaluation fee be
included in the initiation fee?
How does credit life insurance work?
Answer
The provider must assess every credit application, with the
understanding that this assessment applies to the term of
the loan. An extension will require a re-assessment.
Yes. It includes all monthly fees associated with servicing
the loan
Remember these are ceilings. Ideally, providers will be able
to operate below them
Yes. It includes all fees associated with initiating the loan
Will VAT be charged?
This may be charged on a monthly basis or annual basis –
but may not be amortized across the entire loan term.
On fees, yes.
Is the provider entitled to change
interest rates – as in, say, a variable
interest rate mortgage?
Do the service fees include debt
collection costs?
Yes, the Act allows for this, although, clearly this needs to
be disclosed to the consumer before the agreement is
signed informed.
No. These are separate - and not set by the NCA
regulations
Registers & Record keeping
Can the consumer dispute
information with the credit bureaux
directly?
Does the ‘on-seller of information’
have to be registered as a credit
bureaux?
Who provides the information to the
credit register?
Debt counseling & debt
counsellors
Will there be a register of people who
are debt counselors?
Does debt counseling take over from
administration orders?
Who pays the debt counselor? How
can debt counselors be deemed
neutral if they are outsourced by the
provider?
Do the regulations imply that a
person must go through debt
counseling before they go the
magistrate?
Tribunal & Legal Issues
Yes.
Yes.
Credit providers
Yes. All debt counselors must be registered
The NCA does not address admin orders directly, but
section 130 (3) of the Act has relevance. Debt counseling
may be seen as a parallel - and hopefully over time - better
route than admin orders
The consumer being assessed will pay a fee (currently set
at R20). Debt counselors may not be "outsourced" by
providers - but they can be "outsourced" by employers
willing to help their employees
It is not a compulsory stage, although it is possible a
magistrate may refer a case to a debt counselor
Question
Will the Tribunal automatically
enforce the counselor’s
recommendations? Is there a right to
representation?
Scope of Application of legislation
Does this apply to motor leases?
Does this apply to staff loans?
Does the Act apply to incidental
credit such as cellphone, electricity
interest?
With development finance does one
have to assess the creditworthiness
of the consumer at the time of
application or the time that the site is
complete, i.e. a building takes 18
months to complete?
Transitional arrangements
What are the transitional
arrangements?
Will there be retrospective action
after the Act is signed?
Answer
The Tribunal will hear representation and will evaluate the
recommendations of the debt counselor
Yes. Only leases of fixed property are excluded.
Yes. Could still be seen as reckless, for example, if make
no assessment of borrower (employee)
There is limited application of the Act to incidental credit see section 5 of the Act
At the time of application.
The Usury Act, its exemption and the Credit Agreements
act will continue to apply
No. The only matter relates to disclosure in the case of long
term loans that are still in force at the effective date and
entered into between now and then. In this case a provider
would have to provide the prescribed disclosure to clients
within six months of the effective date of the regulations
(Schedule 3).