# Regulatory Compliance Category > National Credit Act Forum >  Knowledge about NCA

## duncan drennan

Virgin Money is sponsoring Vincent Maher to blog about money matters in SA, and one of the things he referred to yesterday was the NCA.




> must confess I donÃ¢â¬â¢t really follow banking news but I have been hearing about the National Credit Act, which is supposed to protect consumers against over-zealous pawnbrokers and the like. Well, I canÃ¢â¬â¢t say I disagree with a law like this, because I know absolutely nothing about it at all except the brief snippets I heard on the news.
> 
> What might just start to irritate me though, is if the Act starts to become a hindrance. As far as I can tell furniture retailers are the worst at trapping people in long-term, high-interest loans and I found this article on IOL that describes the impact of the NC Act.
> 
> Read the full blog post


I would guess that this is common not just to the average "man on the street," but also for most business owners. I want to spend time on this, but it just doesn't get priority on my current list of things to get through.

Anyone have the will to put some effort into this? It just needs one person to start and get some momentum Ã¢â¬â after that I think other people will get involved.

Anyone willing to put their hand up?

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## Dave A

I've been quietly watching this and gathering information. The current challenge is that there are significant aspects whch impact exactly how the average business will go about this that are still awaiting finalisation and publication of regulations and codes of practice.

The latest development is that credit bureaus have been instructed as to how to handle existing listings, and a guideline has been published as to how long a listing can last based on the offence.

The establishment of a central credit registry seems yet to happen. This is where the rubber will really meet the road and we can start talking to practical issues for the average business.

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## duncan drennan

So it is pretty much a waiting game at this stage? When more info is available, the implications will be clearer?

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## Yvonne

I read an article the other day which claims that the average company providing 30 day terms to their clients,  is under the impression that the act will not apply to them, providing they do not charge interest, nor offer discounts.
Will try to find the article and provide the details, I have no idea of its validity.
I was trying to find information on the requirements of the Credit Act on our credit applications, on the internet when I came accross the article.
(After Dave's mysterious post!)

The article claimed that any business which carries out any business transaction with a client having over a certain figure (Think it was 1 million?) in turnover or assets, (it seemed as if the emphasis was on the clients financial affairs?) was required to register and provide the information as per the act, regardless of the period of terms offered.  

Would this mean that only companies dealing with cash paying clients, or having a client base without assets or turnover of a certain figure were excluding from the registration implication of the act. ie. Local cafes!
This brings up more humor from the far side. 
Clients entering a restaurant - lie detector test at the door?

We have received a form from one of our service providers requesting information of a financialy confidential nature, and they claim this is required in order for compliance with the Credit Act?  

There are also implications in the way we draw up our credit applications, and it is strongly suggested that our credit apps. be drawn up by a legal expert.
Surities have some implications for requiring that "partners/wives" are also credit checked!

Yvonne

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## Yvonne

Found the article I was referring to in my previous post.
www.creditmanagement.co.za 

Would appreciate some discussion on this. :Confused:  

Yvonne

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## Dave A

I have a question mark or two from the article.



> If the type of credit you are extending falls within the definitions of the NCA then the protection afforded by the NCA extends to:
> 
> 1. ALL sole proprietors
> 2. juristic persons( the definition of which is a lot more extensive then the rest of our law) whose annual turn-over and assets value are under 1 million rand
> 3. All sureties who fit into 1 or 2 above


First, it can't be *all* sole proprietors - only those with annual turnover and assets value under R1 million.

The sureties bit is really interesting. Not simply because we need to look at whether the surety qualifies for protection under the NCA, but also how the surety "risk element" is going to be assessed. What is a reasonable total value of sureties vs nett asset value ratio? If the measure is even going to be against nett asset value?

To get a handle on the complexities, lets look at vehicle finance with some guestimate figures.

The company leases a vehicle with a purchase price of R100 000.00, finance fees of R20 000.00. You sign surety on the deal, essentially a surety of R120 000.00. However, in the event of the company defaulting and you being called on the surety, there is no way you're in for anything close to R120 000.00. First, the underlying secured asset is sold, then the finance charges must be recalculated, and then the finance company starts looking for the shortfall. After the first few years there is unlikely to be a shortfall - but your surety is still at R120 000.00.

To my mind, the biggest loophole is the R1 million asset clause. When applying for credit, all you have to do is flash R1 million in assets and most of the provisions and complexity of the NCA fall away. If you don't have R1 million in assets to flash, getting credit is going to be a real chore.

Where that really starts dialing up some speed is where people have structured their lives with trusts!

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## Dave A

I had a meeting today with my new collections attorney. Of course, I asked his views on the practical implications of the NCA.

Quite clearly there is still a lot of regulation and practice notes to be issued - what has been issued so far still leaves lots of question marks.

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## Yvonne

Check out:
http://www.cliffedekker.co.za   :  an overview of the Credit Act.
Will there be many further changes which will affect our businesses?

Yvonne

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## duncan drennan

> http://www.cliffedekker.co.za   :  an overview of the Credit Act.


Yvonne, is this what you are referring to? http://www.cliffedekker.co.za/literature/ncb/index.htm

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## Yvonne

I obtained a more detailed overview, but cannot remember exactly how!
There was a link, perhaps the overview was e-mailed to us.
Yvonne

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## Dave A

Yeah. I got sent a pdf file - I'll run through it soon.

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