# Regulatory Compliance Category > Consumer Protection Act Forum >  Credit applications

## ians

If I decide to open and account with a company, with lets say a credit limit of lets say R5000, I fill out all the documentation and the company accepts the application, does credit checks on me to find that I have a bad credit history, but they still accept the application form and notify me that I can purchase for the amount agreed on the application. We do business for a couple years then one day the company I am dealing goes through some rough patches so they look for investors, the company goes through some changes, and during this process my account runs into the tens of thousands, so my account is put on hold, we agree on a sum that I pay, R30 000, but when I arrive the following day, I am told my account is still on hold and they don't want to do business with me any longer until I pay the full amount, I have committed to a project and need the balance goods to complete the project.

Just to put a spanner in the works, they quoted for the goods but when I was awarded the project I was told by the company that because the salesman who quoted for the goods is no longer working at the counter, the quote is no longer valid and the prices they charged me for the goods was marginally higher. So I had to shop around for the goods and pay cash up front, which caused a major cash flow problem in my business.

Now a couple months down the line a lawyer has sent me a registered letter demanding the outstanding money, which totals a lot more than the credit application.  :Boxing: 

What would the customer protection act say about this?

By the way I am paying the account I just thought it would be an interesting topic to discuss.

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## Justloadit

The fact that they gave you more credit than the application, does not detract from the fact that you owe them the money.

Most of the credit applications have a clause in which the supplier can request the full amount at any time, and the onus is on you to pay it as and when it is requested.The fact that it places you in a predicament is not really their problem.

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## sterne.law@gmail.com

The quote still stands irrespective of the salesman leaving. Estoppel applies - where  even though a representation made isnot authorised but due to a representation you act to your detriment the representation stands.
If an agreement was reached, then the original agreement is novated' and the R30000 and relevant terms  are in play.
Although I can refuse to do business with whoever (discriminate aside)', the quote acts as a contract and possibly  the new payment agreement.

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## Blurock

Remember that credit can be called up at any time. Even a bank overdraft is only an overnight facility and is repayable on demand. Always make alternate arrangements as a backup for when it hits the fan. 

Business rule number one: Never be out of cash! Cash flow is king. :Wink:

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## ians

Firstly, being a businessman I understand when you owe someone money you must pay it, be it in a contract or otherwise, however when people don't stick to their side of the deal it makes it a little more complicated.

If you as a supplier quote a price for a contract you need to stick to it otherwise the contractor will loose money, which in turn will cause cash flow issues, which means you the supplier will not get your money.

Secondly, when you have an agreement verbal or otherwise you need to stick to it, if for some reason you cant, don't agree on it , in my case a large portion of money was paid over to the supplier even though the supplier didn't stick to the quote, then didn't stick to the agreement to keep supplying goods even though I was prepared to pay the price they were charging and not the quoted price, which in turn meant I had to go to another supplier and pay cash upfront at a higher price.

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## ians

Blurock, if we all had enough cash to run companies, we wouldn't need banks, overdrafts, credit cards, supplier accounts, though I agree with you 100 %, cash is king.

I am once again finally in a position where I no longer have accounts, HP on vehicles, all my equipment is paid up, etc. I have even got a small savings which I didn't have 6 months ago, however I have this one issue still outstanding which will be sorted out in the very near future. One last thing, my bond, that will be next years goal.

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## Blurock

ians to not have any accounts may not be so good. One will always require credit along the way. Having accounts also builds up a credit profile which may help you in times of need. Accounts just need to be managed so they do not become a burden.

Now when you pay up that bond, keep the account open so that you can draw against it in case of an emergency. Then put the money back as soon as you can. If you have surplus cash (we never have) you can put it in a call or money market account or a type of investment that is accessible so you can just do an internet transfer when required. Again, after the crises, put the money back.

Having access to cash also allows you to take advantage of opportunities where you can get a discount on early settlement or buy stock at a discount. :Wink:

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## ians

That is ultimately my goal, stop making everyone else rich by finances charges, accounts, etc , pay off my bond and have access to a few bob when I need it to finance a project or go on a holiday buy a new vehicle or what ever, considering how low the interest rate is on the bond anyone who doesn't strive to do this is wasting hard earned money.

Buying stuff for cash is also king, there are pros and cons, but more pros, better price negotiations, buying stuff directly from suppliers because I no longer support one wholesaler, cheapest price gets the order, which means I can now mark up my materials slightly higher and increase my profit margin. It also forces me to insist on up front deposits, so when you take a knock from a bad paying customer your losses are less. I stay away from customer who don't want to pay deposits, because my theory is that if they cant pay the deposit how they going to pay the final whole bill.

One of the cons is that you cannot take on big projects, quite honestly I don't want to go big again, I see too many little contractors like myself go big and fall hard.

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## Justloadit

Just remember that buying cash also limits you when you have a problem with goods, the supplier already has your money, and the motivation to exchange is very small, where as if you have an account, and the goods are not paid, the exchange process works far better.

I would think that the best way is to have both worlds, you can buy cash but also buy on account, when you buy on credit, as soon as you complete the job, and get paid, you settle the account immediately, and demand a 2 to 5% early settlement discount.

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Blurock (10-Apr-13)

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## ians

This is one of things I enjoy about the internet, when you run a small business and don't have boardroom full of people to help make decisions or point out minor/major issues you might have over looked, you can have a forum full of smart people at the touch of the mouse.

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## Mike C

Hi All,

I have just received an email saying that due to the Credit Act we may not have Credit Applications older than 5 years. 

I have looked at the Credit Act and can't find this specified anywhere - unless I am looking right past it!

Is it true that all Credit Applications need to be renewed after 5 years?

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## Dave A

I love emails like that. 

I can see an argument that a current credit assessment should be based on a current credit application. But once past that hurdle, I'm not aware of anything that requires regular revaluation of a standing credit facility.

Seeing as they're making the claim, just ask them to substantiate it by pointing you to the relevant section or regulation.

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Mike C (08-Aug-15)

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## Mike C

You should see the "legalese" language in the suretyship that they provided.  Words like "excussion" and "Exceptio errore calculi, Exceptio non numerate pecuniae and Exceptio non causa debiti" ...

When I pointed out that the Credit Act specifically says that "All the information that is disclosed in a credit agreement must be comprehensive, clear, concise and in plain language", and that the rights of those three legal terms may not be signed away I received this response:

"JHB has said our legal department approved this information form plus surety.
They are more than happy for you to go ahead and get legal advice, should there still be a query let us know & we can go back to our Legal department."    

 :Mad:

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## Dave A

I take it the *real* reason is they're seeking to change the terms of the credit facility then...

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## Blurock

> I love emails like that. 
> 
> I can see an argument that a current credit assessment should be based on a current credit application. But once past that hurdle, I'm not aware of anything that requires regular revaluation of a standing credit facility.
> 
> Seeing as they're making the claim, just ask them to substantiate it by pointing you to the relevant section or regulation.


In my experience a supplier has the right to, but will only require updated information when there has been a change in circumstances e.g. a change in shareholding or a default. In other words, something that may materially influence the risk that the lender/supplier is exposed to. Most of this information can be obtained by requesting a new bank report and credit checks. A new credit application may serve only to slip in a surety clause as part of the document. The buyer may still delete the surety clause if not happy with the conditions.

It would be rather silly of a supplier to risk losing a customer just because some financial wizkid wants updated information to tick the blocks! Although it now happens more frequently where big corporations  have become arrogant and have little disregard for the small business operator. Fortunately there are still those that value their name and ethics.

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Mike C (10-Aug-15)

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## Mike C

Came across another one today that I need to check out with the forum.  It reads:

_The Customer warrants that the Customer is a juristic person as defined in the National Credit Act.
The customer warrants that its assets and/or annual turnover exceeds one million Rand and that this agreement therefore falls outside the ambit of the National Credit Act 
The Customer acknowledges and accepts that by virtue of the above, this agreement will come into acceptace of this Credit Application by the Company.
The customer acknowledges and accepts that this agreement shall not be subject to the provisions of the National Credit Act._


I found this reference on "gottaquirk.com/2011/04/04/" which has bearing, but raises the bar to 3 million.

_It is widely expected, however, that once the Minister of Trade and Industry has passed the long-overdue Regulations which are required to give practical meaning and effect to much of the CPA, the definition of “consumers” will be limited to exclude juristic persons (i.e. CCs, companies, trusts) whose asset value or annual turnover is equal to or exceeds R3 million._ 

Can any light be shed on this by those who know?

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## BusFact

I can't give you a reference, but I've seen the R1mil amount thrown about a few times. The R3mil one looks like  someone's estimate at the time of what may happen.

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Mike C (03-Sep-15)

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## Dave A

As far as I can tell, no notice has been published amending the thresholds set out in Notice No. 713 of 2006, so those thresholds remain of force and effect.

i.e R1 million appears to still be the correct threshold.

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Mike C (04-Sep-15)

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