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

## Dave A

I received this query via the Contact Us link from Brian0807:

I took out a rental agreement on a printing machine with a cost of R104,000.00.
The rental agreement has an annual escalation clause of 15%.
After 19 instalments I phone for a settlement figure and was told I still owed R123,000.00. R19000.00 more than the printer cost. The settlement figure is worked on 41 months X monthly instalments. How is it possible to owe more than the printer cost after 19 instalments and under the new credit act can this still happen.

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## Dave A

I think a problem here might be that the deal was made prior to the effective date of the NCA. I'm not sure if the early settlement provisions of the NCA will apply. Hopefully Eugene or someone else can clarify that point.

Personally, I don't like those escalating office equipment rental deals. They cost more than you think. You've got to be very careful about who has ownership at the end of the deal. And all the sales talk about being able to upgrade during the term of the contract does not mention the massive financial penalties involved - which effectively makes upgrading not financially viable.

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## Eugene

It is pretty much clear that the agreement was entered into before the NCA and the conditions of the NCA (or the earlier settlement conditions) will not be applicable on this type of service agreement or lease agreement. That the agreement entered into was to the absolute disadvantage of the poor consumer, is abundantly clear. In the fine print, I am sure that one would find certain conditions like balloon payment, or a residual value placed on the office equipment, hence the high settlement figure. In all probability a very high finance charge (not on an HP, but structured as a loan or a loan rental agreement) would be evitable once one reads through the agreement. The only suggestion I could offer is to negotiate with the rental company to take back the equipment and have the agreement terminated - otherwise your only remedy would be to take the matter to any consumer forum for assistance.

In terms of the NCA (should a contract be entered into after 1 June 2007) the position would fall under a "lease" agreement: A 'lease' is defined as an agreement whereby:
*	The consumer is given temporary possession or use of the movable property.
*	The consumer is granted the right to use the movable property
*	The payment for the possession or use of the property is
	- made on periodic basis; or
	- deferred in whole or in part
*	Interest, fees or other charges are payable to the credit provider
*	At the end of the agreement, ownership of that property either
	- Passes to the consumer absolutely; or
             - Passes to the consumer subject to specified conditions. 
The definition of lease is entirely different from the traditional view of lease. Traditionally ownership remained with the owner. A good example is leasing a fax/copier from a company such as Nashua where the agreement states that at the end of the lease period, the consumer has the option of paying Rxx and taking ownership of the fax/copier.

In the case of a lease or an instalment agreement which is entered into at a place other than the business premises of the credit provider, a consumer has what is commonly referred to as a cooling off period of five business days within which the consumer is entitled to terminate the agreement by giving notice to the credit provider. The consumer is also required to tender the return of any money or goods or make payment for any services received by the consumer.

The credit provider must within seven business days refund all monies paid by the consumer, but the credit provider is entitled to receive payment for the cost of having any goods returned and restored to a saleable condition and for reasonable rental for use of the goods unless it is clear that the goods were not used by the consumer.

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## QUINN

The cooling off period EUGENE mentions is not much help if you only realize months later you got a rotten deal.
I have had a similar experience with Nashua and now I am the proud owner of two printers worth about R20 000 second hand but with a lease over 5 years and a total liability of R600 000... :Slap:

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## Dave A

> I have had a similar experience with Nashua and now I am the proud owner of two printers worth about R20 000 second hand but with a lease over 5 years and a total liability of R600 000...


Ouch!

I'm a director of a section 21 company, and we had to get a printer.

We determined the needs, suppliers made their proposals and we went with their recommendations.

Within a week we had to order an upgrade on the memory and fax card.
Within two months it was clear that the machine was not meeting our needs, and we had already upgraded everything to the maximum on this machine.

Needless to say none of us are too happy about the expertise behind the recommendations. And Canon (oops, did I say that) are not taking responsibility for their recommended machine either.

But, more to the point of this thread, at the time I dug my heals in and insisted the company bought the machine outright instead of on a rental agreement. My view is that a section 21 should not be budgeting against "future income" in its financial affairs, besides which the directors would have to stand surety - a simply ludicrous expectation of an unpaid director of a section 21 company.

In the end, that decision has saved us a fortune. We can trade in for a bigger machine, admittedly at a loss, but nowhere near the size of the loss we would have incurred had we gone the hiring route.

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## Brett Bentley

The important issue to consider here is the ludicious definition of lease in terms of the NCA.

As referred to by Eugene, the definition of lease in terms of the NCA refers to ownership passing at the end of the agreement. In a true lease agreement, as understood by any body that wasn't involved in the drafting of the NCA, lease does not involve transfer of ownership at the end of the agreement. 

So the effect is that there are going a large number of lease agreements that don't fall under the defintion of lease i.t.o. the NCA and therefore these agreements are not going to be bound by the provisions of the NCA.

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## duncan drennan

Brett, that is quite interesting. So really, in terms of the NCA "lease" is what I would call "hire purchase"

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## Dave A

Hang on a sec here. The key difference as to whether a lease falls under the NCA is whether the lessee ends up with the property in the end?

An aside: Just to clarify the difference between an HP and a financial lease - in an HP you get ownership at the end of the period. In a financial lease you get ownership right at the beginning, but the asset is security against the financing instrument.

WOW! So I can sign as many fixed period rental agreements as I like and there are no NCA implications. However, if the lessee ends up with ownership and I've got 100 such deals, then I have to register. 

Have I got that right?

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## Rebel

Hi Bret - Eugene Joubert here - Forum name REBEL - trust you are well.

Jan Augustyn (adv at the NCR) points out that you should not look at the name of the contract - you should look at the detail and find the devil there. If the "true lease or simulated lease has an element of finance charges it it the chances are great that you are inside the NCA. Lease on property is excluded - rational - people need to have homes without being subject to the affordability testing.

True rentals are suspect because ownership is passed on at the end by way of some formula or some R 1 deal - we used to hide that letter which stated that you become the owner after the last payment because it was an issue with SARS and deductable expenses for tax puposes.

Bottom line look at sec 8 and forget the name of the contract - see if the elements of a credit agreement is there - ie - deferral of a portion or the whole AND charges of some sort for the deferral. 

WESBANK offerred a lot of these lease agreements BUT have stopped as they were advised that it seems to fall under the NCA.

Regards, REBEL.

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## Dial a Copier

I have joined this site because of a discussion thread I stumbled across while Googling something else.  The thread in question dealt with the rental of office equipment and the hidden pitfalls attached when entering into these types of agreements for printers and copiers etc.  99% of the posts were from people who are extremely unhappy with the deals they had entered into.  As a current copier salesman, herewith my thoughts;

I abhor some of the practices in the industry and feel that, in most instances, the negative perceptions surrounding the industry have been earned and are totally justified.  It boggles my mind that the finance houses in this industry require rigorous background checks, lengthy finance applications, personal sureties, company financials, management accounts etc etc, for equipment that is RENTED and never becomes yours.  And then, just when you think you have reached the end of the term of the original agreement, and you failed to give notice on your contract, the evergreen clause kicks in and you pay for another year!

I have recently started a company called Dial a Copier which tackles these exact issues within the industry.  My clients can rent machines for a maximum contract length of 6 months with a 2 month notice period should their circumstances or business requirements change.  They also get rewarded for referring clients to us PLUS the machines become their asset should they remain loyal to us for 36/60 months.  And NO big finance applications, no sureties, no lengthy contracts, no financials required, no credit checks.  If my client doesn't pay, I just fetch the machine and place it elsewhere, no fights!

The bottom line is that I understand and agree that people feel ripped off in certain instances (not all).  I offer flexibility and decent value to my clients, and I reward loyalty.  The mainstream guys may not like me, but my clients do!

Cheers all, I hope this post was helpful.

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