# Regulatory Compliance Category > National Credit Act Forum >  National Credit Act

## Dave A

I'm trying to make head or tail of the National Credit Act - which looks like it should be the subject of this month's project. I've quoted from this page of the Cliffe Dekker website to indicate why:




> All grantors of credit need to determine whether or not they are regarded as "Credit Providers" for purposes of the Act as Credit Providers must submit their registration documentation by 27 July 2006, otherwise all agreements they have entered into will be unlawful and unenforceable.


And folks, from what I have read so far, if you grant credit to your customers, you might well be a "Credit Provider". 

But tracing the logic to work out who is and who isn't is like deciphering a bowl of spaghetti. And I haven't found any clear guidance anywhere on the internet yet either.

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## I Robot

I'm busy reformatting the act to make it more understandable. I just love this section:




> 64. (1) The producer of a document that is required to be delivered to a consumer in terms of this Act must provide that document—
> _(a)_ in the prescribed form, if any, for that document; or
> _(b)_in plain language, if no form has been prescribed for that document.
> 
> 
> 
> (2) For the purposes of this Act, *a document is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the document is intended, with average literacy skills and minimal credit experience, could be expected to understand the content, significance, and import of the document without undue effort,* having regard to—_(a)_the context, comprehensiveness and consistency of the document;
> _(b)_the organisation, form and style of the document;
> _(c)_the vocabulary, usage and sentence structure of the text; and
> _(d)_the use of any illustrations, examples, headings, or other aids to reading and understanding.


Now if only we could get the lawmakers to practice this.  :Rant1:

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## duncan drennan

> 64. (1) The producer of a document that is required to be delivered to a consumer in terms of this Act must provide that documentÃ¢â¬â
> 
> 
>     (a) in the prescribed form, if any, for that document; or
>     (b)in plain language, if no form has been prescribed for that document.
> 
> 
> 
> (2) For the purposes of this Act, a document is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the document is intended, with average literacy skills and minimal credit experience, could be expected to understand the content, significance, and import of the document without undue effort, having regard toÃ¢â¬â
> ...


So here is an interesting one...let's use the good ol' domicilium et exucandi.

If I've signed a document that for example says all summons etc will be served at my domicilium, and I've not updated my details (by registered post as always) and things follow the usual path of default judgements etc. etc. THEN...

Surely I can say well, I don't feel that the use of latin and the terminology was, 




> ..plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the document is intended, with average literacy skills and minimal credit experience, could be expected to understand the content, significance, and import of the document without undue effort..


Could this give people a way out of surety documents and so forth? Is a contract still enforcable if these terms are not adhered to?

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## Dave A

I'm organising for a reformatted version of the whole Act to be published on this site. The purpose is to aid understanding (but not re-define interpretation of the Act). 

From my scan so far, there are two issues to consider:
The consequences from the point of view of a credit provider, andThe consequences from the point of view of a consumer.
From there we can try to work out possible answers to questions such as Duncan's.

I have asked for interpretative assistance from some contacts at the DTI and been given some people to talk to - let's see how we go.

From what I've seen, the legal fraternity has already sensed there is money to be made interpreting the Act in relation to business owners. For example, there are many teasers that basically say any business owner needs to see if they might be deemed a credit provider, but there is no guidance as to roughly what the criteria are. And IMHO it's not easily spotted when reading the Act either. 

Can I suggest everyone post their questions over the next few days and I'll try to get answers.

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## I Robot

Just set up the National Credit Act accessible from the home page - at this stage for members only.

Not everything is behaving exactly as it should be, but the content is there for the meanwhile. Some sort of clash with the BB code.  :EEK!:  

I'll work on tidying up the glitches and then getting the cross-referencing links going.

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## Dave A

I see the reformatting is done. Now to make sense of it all.

Or maybe the answer is just "business as usual" until some officious notification arrives telling us we are in contravention?  :Frown:

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## Candy Bouwer

> As at 1 September 2006 Chapter 4, Part B of the National Credit Act 2006 which concerns \"Confidentiality, personal information and consumer credit records\" comes into effect.  In addition, under Chapter 2, Part B the National Consumer Tribunal comes into effect on the same date and this tribunal will have the power to investigate disputes and make orders compelling creditors and credit bureaus to comply with the provisions of the NCA.
> 
> Regulation of credit bureaus
> As at 1 September 2006, credit bureaus will, for the first time, have to comply with regulations, made under the NCA, which set out exactly when consumer credit information may be added to and deleted from credit records.  
> 
> Temporary removal of challenged credit data
> All challenged information must be removed for twenty days while the credit bureau investigates to see whether the credit data is incorrect.  No credit record will be issued by the credit bureau while such an investigation is taking place.
> 
> Reduction of default listing period
> ...


This information is written user friendly and make a lot more sense.

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## Dave A

Thanks Candy. A great contribution - just what the doctor ordered.

I think that really helps from a consumer point of view. 

My struggle at the moment is whether my companies have to register. We have debtors, but I don't consider ourselves a "finance company".

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## Candy Bouwer

I love this one!

LETTER TO TRUWORTHS FROM SIPHO
Next time you get a letter to pay your debts from your creditor's, be sure to remember Sipho's letter. 

LETTER TO TRUWORTHS 

Dear Sir/Madam 
I acknowledge receipt of your letter dated 1 May in which for the third time you request that I pay the monies owed to you. I first want you to know that by no means do I dispute my debt and I intend to reimburse you as soon as possible. 
However, I bring to your attention that I have many more creditors, quite as honourable as you, and whom I wish to reimburse too. That is why, each month I throw all the names of my creditors into a hat and draw one randomly whom I hasten to refund immediately. I hope that yours will come out shortly.


Sincerely Yours, 
Sipho

PS: I have great regret in informing you that given the unceremonious tone of your last letter, you will not be taking part in the next three draws.

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## Dave A

Great report here dealing with how sureties will be covered by the act.



> People who stand surety for others' debt will be protected against over-indebtedness and reckless credit by the new National Credit Act, the ombudsman for banking services (OBS) said on Monday.
> 
> The Act, which came into force on June 1, would give credit guarantors the same status and protection as it does credit consumers.
> 
> These were the people who stood surety for the debt or obligations of others, often through "emotionally-transmitted debt" or "sexually-transmitted debt".
> 
> The former referred to parents assisting their children with student loans while sexually-transmitted debt to one spouse acting as surety for the other.
> 
> Company directors who, sometimes unwittingly, accepted liability for debts run up on the company credit card, and small business owners who made themselves personally liable for the credit facilities of the business, would also be protected under the new Act.
> ...


Whilst this is mostly good news, I find this comment somewhat disturbing:



> This is an unexpected and perhaps even unintended windfall from the National Credit Act.

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## I Robot

Another article on M&G here on the need to register by tomorrow. Whilst the main thrust is about getting registered, it also sheds more light on the criteria that determine whether you need to register or not.



> "The implications of not registering when you should have registered are severe," charged Motshegare. She also cautioned that credit agreements signed by unregistered credit providers will be declared "unlawful and unenforceable" as from June 1 2007.
> 
> According to Motshegare, the main criteria for the registration of credit providers are: a credit provider must have signed at least 100 credit agreements or have a loan book of at least R500 000.
> 
> She explained that whilst the Credit Agreements Act, Usury Act and Usury Exemption Notice had been repealed by the National Credit Act (NCA), the provisions of the repealed Acts remained enforceable until the relevant provisions in the NCA are implemented.
> 
> Motshegare also expounded that entities that provide incidental credit do not have to register with the NCR.
> 
> "This means entities such as doctors, dentists or anyone who provides goods or services on account, with the possibility for the client to pay at the end of the month 'without charging interest'," she explained.
> ...


All articles I have read so far seems to miss one aspect - if you offer a COD discount, this could be interpreted as a credit agreement.

So in order to avoid having to report every credit transaction with a private individual or business with an annual turnover (or assets) less than one million Rand, you may not charge interest (or any other charge) on overdue accounts or offer a COD discount!

And yes - you have to report *every* credit transaction that falls under the Act whether you are required to register as a credit provider or not.

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## Dave A

This article from Personal Finance reports that The Regulator is making sure it can enforce compliance.



> In a hard-hitting message to the credit industry this week, Gabriel Davel, the chief executive of the National Credit Regulator (NCR), said his office will pull out all the stops to enforce the Act.
> 
> The office of the NCR will brook no arguments from the industry in ensuring that it complies with the Act, Davel said at the official inauguration of his office.
> 
> The office of the NCR is responsible for regulating the South African consumer credit industry, and its tasks include educating consumers, conducting research, developing policy and investigating complaints.
> 
> 
> 
> He warned that the prosecutions division of the NCR has been beefed up more than any other division.
> ...

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## Yvonne

Yesterday I was asked by our housekeeper (A fairly well educated person), if it is true that becuase of a new act which she called the credit bill, if she owed money on an account and could not pay it, that she was no longer forced to pay the account!!!  
With Christmas just around the corner, a fair number of "clothing" type account holders are possibly going to overspend - hoping that the rumour is correct.  I know for a fact that she is constantly receiving mail offering credit and loans, she has a Woolworths, Edgars and a credit card. She owes me approx. R10,000 which she has never yet honored the agreed monthly payment on, and just run up a R2,000 cell phone bill - and was unbelieving that it could be so high.  
If this is how an educated person handles her finance, it is going to be "open season" on any gullible person!. Could this act at the end of the day, cause more harm than good?

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## Sieg

Hi Yvonne

One thing to remember at this stage about the National Credit Act is that, although the Act is now Law, it will only come into operation on 1 June 2007. I think that's all that needs to be told to your housekeeper at this stage to make her understand that this Christmas is not yet "free", maybe at the end of 2007 it all will be!  :Smile:  

That reminds me of a speech made by our then Prime Minister, Adv B J Vorster, many years ago, when he said "Ladies and Gentlemen, this year, my government and I are hoping for a white Christmas!"

Sieg


"Victorious Peace"

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## Dave A

Sometimes you just have to join the dots. In today's M&G we have the question:



> *Why are consumers still buying?*
> 
> South African real retail sales growth in September rose considerably to 13,6% year-on-year (y/y) from August's 8,8%, with consumers possibly buying strongly in anticipation of tighter conditions which beckoned.
> 
> Total retail trade sales amounted to R35,8-billion, while real growth for the year to date -- recorded by Stats SA -- came in at 9,9%.
> 
> "Just when it looked as though retail sales were beginning to moderate on the back of the cumulative 100 basis point rate hikes in June and August, sales surged in September. Year-on-year sales growth was the highest in the past six years, while month-on-month (m/m) sales growth was nearly 6%, an extremely strong m/m growth rate," say independent economic analysts RLJP.
> 
> The analysts say it may well be that consumers have been engaging in pre-emptive buying ahead of the final quarter in anticipation of higher interest rates.
> full story from M&G here


And right on queue out comes the rate increase because, amongst other things, credit extension is running amok:



> *Mboweni's not-so-merry Christmas*
> 
> South African Reserve Bank Governor Tito Mboweni's words in mid-November that South Africans need to tighten their belts came home to roost on Thursday when he put a dampener on the Christmas spirit by raising the repo rate by 50 basis points to 9%.
> 
> The recent spate of poor economic data, including unexpectedly strong credit growth at 27,5% and a leap in producer-price inflation to 10%, had raised particular concerns last week that the tightening cycle could last past February next year.
> full story from M&G here


And with the scoop on the real problem we have Yvonne Symons at The Forum SA:



> Yesterday I was asked by our housekeeper (A fairly well educated person), if it is true that becuase of a new act which she called the credit bill, if she owed money on an account and could not pay it, that she was no longer forced to pay the account!!!  
> With Christmas just around the corner, a fair number of "clothing" type account holders are possibly going to overspend - hoping that the rumour is correct.  I know for a fact that she is constantly receiving mail offering credit and loans, she has a Woolworths, Edgars and a credit card. She owes me approx. R10,000 which she has never yet honored the agreed monthly payment on, and just run up a R2,000 cell phone bill - and was unbelieving that it could be so high.  
> If this is how an educated person handles her finance, it is going to be "open season" on any gullible person!. Could this act at the end of the day, cause more harm than good?


I wonder what the chances are of Tito taking Sieg's advice as to how to solve the problem?  :Big Grin:

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## Dave A

It seems Tito is aware that other measures might be required.



> The SA Reserve Bank might "adjust" the reserve requirements of commercial banks to discourage the offering of credit to customers who do not need it, Reserve Bank Governor Tito Mboweni warned on
> Thursday.
> 
> Citing consumer demand and credit extension as two of the factors which led the banks to increase the repo rate by 50 basis point to nine percent, Mboweni said the way credit cards were offered to consumers was "madness".
> 
> "Some of our colleagues received phone calls offering them all kinds of credit cards. Someone was offered two credit cards and told he could use the one to pay off the other. *Clearly there is some madness out there that needs to be stopped*," Mboweni said.
> 
> He had already met with chief executives of some of the big commercial banks, but they did not think it to be a problem.
> 
> ...

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## sitho

I'm currently working within the furniture industry..and as most of you know that the business practically thrives on credit sales.
I would like to be enlightend about the consequences and their impact of non-compliance with NCA after it has come into effect on the 1 June 2007.

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## Dave A

Hi sitho and welcome.

I think we've still got a way to go to get a full handle on the consequences of the NCA - except that in the worst case scenario - the granting of "reckless credit" - non-compliance could mean that the debt might not be collectable through legal process. 

There are other pitfalls. Options to collect interest and collection costs may be harmed if we don't educate/notify the debtor in advance of the transaction. It seems there are still a number of practice notes/guidelines that still have to be published. Hopefully it will aid clarity on these issues.

My hope is that we will be able to develop a step-by-step guide here that will ensure that we as business owners don't fall foul of the NCA. Perhaps if you read through the existing work that has been done and then post some comments/questions from your point of view it will help.

The idea is to develop the solutions as a team, thus making it easier for anyone to find the right answers. Maybe it's time we did another push to understand this legislation better.

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## Dave A

I've started working on the National Credit Act using our Wiki here.

The goal is to structure an understanding of the Act in a useful format. Anyone else feel like joining me in this project?

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## Dave A

Whilst working on our Wiki project for the NCA, I've found that this statement may not always be true:



> Company directors who, sometimes unwittingly, accepted liability for debts run up on the company credit card, and small business owners who made themselves personally liable for the credit facilities of the business, would also be protected under the new Act.


A surety is dealt with in the NCA by what is called a Credit Guarantee, which only applies if the credit itself falls within the ambit of the NCA. If the company is a juristic person to which the NCA does not apply, then the surety does not seem to be subject to the NCA either.

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## Sieg

The first cases dealing with aspects of the National Credit Act are filtering through. 

For example, in the November 2008 Jutaâs Law Reports, there is a case reported, _Bridgeway vs. Markam_ where the Witwatersrand local division of the High Court held that a discounting agreement whereby a Seller sells his rights to receive payment of the purchase price, is NOT a credit agreement as defined in the _National Credit Act_ 34 of 2005 and accordingly the discounter (who advances funds) does not have to comply with Sections 129 and 130 of the National Credit Act before the discounter can take legal steps.

Sieg

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Dave A (10-Nov-08), duncan drennan (17-Nov-08)

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## DenP

Hi
My husband, sadly has applied for liquidation (awaiting appointment of liquidator, not much assets) of his business a registered cc, after 30 years, due to bad economy. SARS and one supplier are who he owes monies to. The supplier has sent individual letters of demand to my husband, the business and myself. I have not been a member for about five years. My husband and I are married ICP, . We signed surety way back in 2008. What are our options? Thank you

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## Justloadit

I am not an attorney or lawyer, so this is not legal advice.
This is one reason why the companies act has stopped the registration of CC's as the members of the CCs are personally responsible for any debt that the CC incurs.
The fact that you signed a surety, no matter how long ago, that is one reason why retraction of sureties is difficult and a MUST when circumstances change retract the surety with signed paperwork on the person holding the surety is allowing you to retract, means that you are still responsible for the debt on which the surety was covered. Being married ICP, makes you just as responsible as your husband for the debt, hence the reason they got you and your husband to sign the surety, so that you are aware of the document.

Liquidating the CC, is going to cost you money, and in my opinion should not be followed, It's not going to resolve your position with respect to the CC debts, and will not relieve you of the debts that the  company has in its books. In fact liquidating the CC will place you in a very precarious position because you personally are also going to be sequestrated if you can not cover the CC debts.

I suggest you contact a lawyer who is versed in company law to advise you on your next steps from here on wards.
Be careful which lawyer you talk to, as many are there just to get the last few Rands out of you as they know you will not be able to fight them due to lack of funds.
Making a payment plan and staying away from liquidation if at all possible is my suggestion.
Being sequestrated is a terrible place to be in, from stories of a number of people I know who went through it, as it affects all aspects of your life for the next 5 years.
But if there is absolutely no other choice then there is not much you can do.

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DenP (20-Feb-19)

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## DenP

phew that does not sound good, the liquidation is in process already  :Frown:

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## Andromeda

I am also not attorney, but rest assured that the members are not automatically liable for the close corporation's debts. Like directors of a company they are only liable in certain circumstances. Some circumstances are seldom thought of:

In terms of Section 22 of the Act the abbreviation “CC” – in capital letters –must appear behind the name of the Close Corporation in any sign on any of the premises of the Close Corporation.  It must also be clearly visible in any documentation that the Close Corporation uses or signs.

In terms of Section 23 of the Act the full name and registration number of the Close Corporation must be clearly visible at its place of business as well as on any documentation that the Close Corporation uses or signs.  This name and registration number must also be visible in at least one other official language

A member who signs or uses documentation and the details of the Close  Corporation is not as set out as required, will be personally liable for any debt of the Close Corporation. 

SECTION 24(4) requires that members have actually paid their members contributions.

SECTION 26(5) specifies that on de-registration any debts of the close corporation become the debts of the member.

SECTION 42(3) abandoning the fiduciary duties towards the close corporation by "taking" it's income for oneself.

SECTION 43 If the close corporation trades negligently. This in general means if it trades while not meeting solvency tests.

SECTION 63 refers to abuse of the cc and the law; especially where the members hides behind the corporate veil.

So *generally* speaking, if there was no reckless or negligent trading and unless there are sureties, then the members are not automatically liable.

To voluntarily liquidate the close corporation, the member must be a creditor. In other words the close corporation must owe the member, if memory serves me, at least R30.00. If not then the member is not a creditor and cannot proceed.

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Justloadit (21-Feb-19)

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## Justloadit

> We signed surety way back in 2008





> So *generally* speaking, if there was no reckless or negligent trading and unless there are sureties, then the members are not automatically liable.


Unfortunately she stated that she had signed surety, and hence my reply.

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## DenP

> Unfortunately she stated that she had signed surety, and hence my reply.


Has anyone got legal advise about how to approach the supplier, there is only one ? So i gues the credit act does not apply to surety  :Frown:

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## Andromeda

> Unfortunately she stated that she had signed surety, and hence my reply.


Sorry Justloadit, I didn't even see that. The reality these days is that very often no surety means no credit.

Denp, as far as I know if your turnover or net assets exceed R1m, then the Act does not apply. You would need to consult an attorney though (you would probably need to do so anyway) to make this as pain free as possible.

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DenP (28-Feb-19)

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## Derlyn

Hi Dave

Did you ever have this question of whether to register or not answered.

Most electrical contractors, like myself, when supplying COC's for properties being sold, issue the COC and invoice the attorney handling the transfer. The custom in the industry is that your invoice will be paid on registration of said property. This can take anytrhing from 2 to 7 months. Very seldom sooner. My question is:  Must the electrical contractor be registered as a credit provider, seeing that he is providing credit on a regular basis ?

Derek

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## Dave A

With the threshold being dropped to zero, it seems anyone who provides credit is required to register...

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## Derlyn

Thanks Dave.  That's the way I see it as well.

One now has 2 options.

1.  Insist on cash payment for a COC.
2.  Register as a credit provider and charge interest as prescribed.

Me thinks that most electrical contractors are unaware of this and most attorneys are aware but keep quiet for obvious reasons.

Once again, thanks. Appreciated.

Derek

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## Andromeda

Derlyn, I reckon the credit you refer to is incidental and you are not required to register. I presume at the outset your terms are 30 days, but delays frequently result in interest charges?

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Dave A (26-Mar-19)

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## Derlyn

What is incidental credit? Can someone explain that so that an electrician can understand. :Confused:

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## Andromeda

This link explains it fairly well.

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