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

## Dave A

I've just been discussing the practical aspects of implementation of the National Credit Act with a debt collection agency. Some aspects still need to be cleared up, but there has been some progress.

Additional regulations were published on 30th November 2006 which deals with much of the administrative issues. The relevant Government Gazette can be found here. 

I've done a quick skim - it does clear up quite a few issues in respect of blacklisting. When I get a chance, I'll post a summary of the implications.

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## Eugene

Despite the government gazette update of November which cleared up some issues regarding blacklisting, much confusion still exists regarding the practical implimentation of the act after 1 June 2007 - especially in the debt collection industry. For example: if I buy goods from a furniture retailer on 31 May 2007 (a day before the Act kicks in) and I refuse to pay the following month (when the new Act is in operation). Will the old Credit Agreements Act conditions still be in force as it has been repealed by the new Act? How will defaulting consumers then be summonsed (as usual in terms of the "old" Act or the new Act or a combination of both?) With regards to the statutory letter of demand (as contemplated in the "old" section 11 of the Credit Agreements Act): will that time frame of 30 days still be in force or will it have to be changed to the new time limits of the NCA? These are just a few questions which seems to be unanswered - even a call to the legal department of the National Credit regulator could not give me clear and simple answers. Can anyone help?

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## Dave A

I think there's going to be  fair amount of "winging it" during this change over.

Here's something I got from Standard Bank.



> The National Credit Act (NCA) comes into effect in June 2007. The act is designed to better regulate all players in the credit market as well as to improve consumer protection. All loans granted by us to personal customers, and in some cases to those seeking business banking services, will be governed by the new act after June 2007. 
> 
> We fully support the objectives of the NCA and have, over the past 12 months, been preparing to comply with the new   legislation. As a result, some of our processes will change from June 2007 and you may be affected by the following: 
> We may ask you for additional information when you apply for a new loan. In this regard, we encourage you to bring documents such as copies of payslips, bar-coded identity documents and proof of residence with you when you apply for a loan.We are required to ensure that you understand the risks, obligations and costs associated with any loan. Our consultants will explain these in detail to you when you apply for a loan.Some of our application forms and documents have also been changed.
> If you have any questions or need more information, our branch staff will be able to assist you. Further details are   (blah, blah)


You know what - that doesn't sound like much more than business as usual. But I'll try to snaffle a copy of the "new" fine print and see if anything's changed really. I've got some finance docs to sign on Friday...

I think the wrinkles on the real practicalities are only going to really shake out down the line. My best suggestion is that we all keep a sharp eye out for anything really useful and help each other's response time in adjusting to any revealed kinks.

From my side, I'll try to do some more homework on this over the coming weekend (or earlier if I catch a break to do some work on it).

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## duncan drennan

Eugene I wish I could give some insight, but I'm not too clued up on the issues. I suspect that some things will only be clear once they have been tested in court  :EEK!: 

I'm not sure if it will help, but maybe follow the links here to have some info sent to you.

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## duncan drennan

> These are just a few questions which seems to be unanswered - even a call to the legal department of the National Credit regulator could not give me clear and simple answers. Can anyone help?


So how did that call with the National Credit regulator go?

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## Eugene

Apart from a couple of eish's and long silence, I was none the wiser.

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## Dave A

I think that seals it. Hidden obstacles ahead I reckon.

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## duncan drennan

> Apart from a couple of eish's and long silence, I was none the wiser.


 :Rofl:

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## Johan

I do not believe the NCA is such a monster, it has and will unfortunately create a lot of misunderstandings especially with some clients and the media unfortunately does play a major roll in this misinformation in that only the half of the story that has news value would be published. Yes the Act in itself still will have to be tested in courts whom I believe is at present as confused as many of the public. Who the Debt Counselors will be and the exact roll they will play considering their expertise is also still to be seen

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## duncan drennan

Hi Johan, welcome to the Forum  :Smile:  Nice to have you here.




> I do not believe the NCA is such a monster


I think the tricky thing for most people at the moment is that it is an unknown monster. It seems to be a good thing, but there are a few questions around how it can impact on our business. Does it mean that debtors can worm out of paying us, etc? It seems to be consensus that we'll have to wait for some case law to clear up the details.

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## Eugene

I totally agree with Johan (I should as he is a collegue in the office next to me) and with regards to my previous post I might add the section 7 of Schedule 3 of the NCA:

_General preservation of regulations, rights, duties, notices and other instruments
7. (1) A registration that had been issued in terms of section 15A of the Usury Act, 1968 (Act No. 73 of 1968), by an authority administering exemptions under that section, for an indefinite term and in force immediately before the effective date, has a duration, as from the effective date, of the period determined by regulation for that category of
registration.
(2) Any other right or entitlement enjoyed by, or obligation imposed on, any person in terms of any provision of the previous Act, which had not been spent or fulfilled immediately before the effective date must be considered to be a valid right or entitlement of, or obligation imposed on, that person in terms of any comparable provision of this Act, as from the date that the right, entitlement or obligation first arose, subject to the provisions of this Act.
(3) A notice given by any person to another person in terms of any provision of a previous Act must be considered as notice given in terms of any comparable provision of this Act, as from the date that the notice was given under the previous Act.
(4) A document that, before the effective date, had been served in accordance with a previous Act must be regarded as having been satisfactorily served for any comparable purpose of this Act._

Bottom line would therefore be that: although the old Credit Agreements Act have been repealed and replaced with the NCA, the rights and obligations as per the old Act will still be in force for that specific matter. So Duncan I believe that debtors will not be left with a loophole to sidestep their obligations when it comes to paying your debt.

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## Rebel

> Hi Johan, welcome to the Forum  Nice to have you here.
> 
> 
> 
> I think the tricky thing for most people at the moment is that it is an unknown monster. It seems to be a good thing, but there are a few questions around how it can impact on our business. Does it mean that debtors can worm out of paying us, etc? It seems to be consensus that we'll have to wait for some case law to clear up the details.


Guys,

Maybe by why of a little introduction - I have spent 30 years as a keen student of the orphan subject called "credit". Firstly from behind the desk at a major attorney firm and then in business itself. I have pioneerd the 4 year degree in credit management -drafted the silabus and lobbied till it was recognised - the learnership in debt collection is also my brainchild. For my sins I am an investigator (since 08/08) with the NCR. My spesiality is looking at the debt enforcement practises under the NCA. So don't shoot me - I am only the messenger.

Various declaratory orders are on the table. The most significant that of Gabriel Davel (NRC himself). It has 10 sets of facts that the High Court must look at and see which way the intrepretation will go. Needless to say with the 4 big banks as respondents which ever way the orders are going either the NCR or the banks would appeal.

Just to give you one example - NCR recons that once the "in duplum bucket" is full and the debtor pays a portion of the debt - then the creditor is still not allowed to debit any more section 101 (b) to (g) items. NCR recons once the in duplum max is reached is reached for ever and a day.

Just a point from your discussions - if a debt was incurred before the NCA then the rules of the previous Acts apply except (see transitional provisions in the NCA) that the debtor now needs to get a section 129 letter before you can get any court order AND that debt would be included in debt restructuring IF no legal action in terms of section 130 of the NCA was taken. OPTION - get the legals out before a debtor applies for debt restructuring.

Happy NCA'ing

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## Rebel

Hi,

If my spelling and grammar offend you - remeber I am born and grew up in the states - sorry free states - have no secretary and no spell check - but will try

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## IanF

> Hi,
> 
> If my spelling and grammar offend you - remeber I am born and grew up in the states - sorry free states - have no secretary and no spell check - but will try


Rebel
You can load a spell checker for your browser just Google it for the browser you are using. Load it and you have it.

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## Dave A

More than happy to have you here, Rebel.

On spelling - I normally leave spelling errors unless they are in the thread title, but I'll be more than happy to play secretary and run spellchecks on your posts if you like.

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## duncan drennan

> You can load a spell checker for your browser just Google it for the browser you are using. Load it and you have it.


Or you can use Firefox which has a built in spell checker...

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## Rebel

> More than happy to have you here, Rebel.
> 
> On spelling - I normally leave spelling errors unless they are in the thread title, but I'll be more than happy to play secretary and run spellchecks on your posts if you like.


Thanks Dave - I do type slower than my thoughts and then forget to review.

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## Dave A

> The National Credit Regulator (NCR) has asked the Pretoria High Court to provide clarity on the interpretation of the debt review provisions in the National Credit Act, it said on Wednesday.
> 
> This, after finding that most debt restructuring proceedings in magistrateâs courts were not being finalised because of differing views on the proper interpretation of these provisions.
> 
> "This had, and continues to have, a major impact on debtors in desperate need for relief by way of debt rearrangement orders as well as on credit providers whose debts are not being serviced," the regulator said in a statement.
> 
> "The NCR is of the view that the debt review proceedings should be as inexpensive, expeditious and informal as possible, given that debtors in need of debt re-arrangement are hardly in a position to go through expensive and time consuming court procedures, nor is it likely that such debtors can afford legal representation," it said.
> 
> However, it added that its application was opposed by the four major banks, the Credit Providers Association of South Africa, the Furniture Traders' Association of South Africa, Onecor (Pty) Ltd and a debt counsellor.
> full story from Business Report here


If the National Credit Regulator is seeking clarity, why the opposition from the banks _et al_?

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## garthu

From our point of view NCA has had really little to do with the banks willingness to lend. When it first came about, it had impact but minor. Money running out seem to have alot though... weird!! :Frown:

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## Reagen

The NCA, were fully implemented June 2007, this meant that over-indebted consumers could now approach a registered Debt Counsellor with the intent of having his/her debt obligations restructered, this meant that a Debt Counsellor would negotiate with creditors a reduced installement over an extended period of time.

Restructuring often proved very difficult, due to the fact that household debt is currently measured at 78%, which means for every hundred rand that we have, R78.00 goes towards outstanding debt, thus leaving the consumer with less disposable income. Furthermore, Industry decided on certain norms in order to expedite the process and ensure more consent eg. They agreed that morgage repayments be restructured in line with a term of 320 months, vehicles 84 months, credit cards 60 months. However the plight of the consumer is that not even these terms could be realised, the next sensible thing was to reduce the interest on a particular agreement. 

The NCR approached the Pretoria High Court for clarification on the process of obtaining a consent/restructered order as the NCA is silent on the process and Magistrates thus refer to the Magistrates Court Act, which opens up issues ranging from locus standi of Debt Counsellors, Monetary value, jurisdiction to name a few. The NCR is of the opinion that the process should be as informal and inexpensive as possible, the rule 55 application in terms of the Magistrates Court Act proves otherwise.

In line with enforcements of credit agreements, section 127 lays out the voluntary surrender, whereby a consumer applies for a credit agreement to be cancelled, and section 129 the procedure in enforcing an agreement. This provided that before a creditor can enforce any agreement notice should be served on the customer advising him/her that they are in default. Affording the customer with the option of referring the matter to a Debt Counsellor, by way of applying for Debt Review in terms of section 86 of the said Act.

The NCR expressed that they are optimistic that the court would clarify matters in order for over-indebted consumers to access the envisaged relief as set out.

Lets hope that by the 5th of March the court would grant the order and not direct the matter to DTI, this would be to the detriment of over-indebted consumers.

Cheers

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Dave A (27-Feb-09)

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## Rebel

Now that we are a few years down the line with the NCA - do you still hold this view ?

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## Rebel

How do you feel about all the "pains" the NCA introduced into consumers lives ?

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## Dave A

> How do you feel about all the "pains" the NCA introduced into consumers lives ?


What "pain"?

The only one that bugs me as a consumer is the monthly admin fee banks introduced on credit agreements. Apart from that, haven't really noticed anything that's much more of a pain than it ever was before.

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## Rebel

Dave,

yes the R 50 pm gets a bit much on each account - the pains I am talking about is:

1  1.8 mil families wants to go under debt review.
2  SA has 1,663 registered Debt Counsellors BUT only 300 active and practising as such.
3  The Mag Courts are jammed and only give dates for DC hearings in 2011 first quater.
4  43 Debt Counsellors has stolen the publics money.
5  Over-indebtedness tests to abtain new credit is impossible for Joe avagare Soap.
6  Only 160,000 families so far under debt review - since July 2007 - when will we see the others helped.

Thought

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## Dave A

Let's have a look at those then:



> 1  1.8 mil families wants to go under debt review.


An option they didn't have before - is this a pain?



> 2  SA has 1,663 registered Debt Counsellors BUT only 300 active and practising as such.


Invent a new job and there are bound to be shortages. OK - that's a pain, and one the regulators should have seen coming.



> 3  The Mag Courts are jammed and only give dates for DC hearings in 2011 first quater.


No change there  :Stick Out Tongue: 



> 4  43 Debt Counsellors has stolen the publics money.


Nothing new there either - happens all over in every industry. May the bastards go to jail.



> 5  Over-indebtedness tests to abtain new credit is impossible for Joe avagare Soap.


These are the people that shouldn't be getting credit anyway, right? Is this a pain? Or is the NCA actually succeeding in achieving one of its objectives?



> 6  Only 160,000 families so far under debt review - since July 2007 - when will we see the others helped.


When the over-indebted can afford to pay enough for debt counsellors to make real money.  :Stick Out Tongue:  This was the obvious stumbling block cynics were pointing out pretty much from early drafts. The broke don't pay very well.

To my mind, the obstacles for the over-indebted to dig their way out of debt were always there - the conduit has just changed a touch.

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## Rebel

> Let's have a look at those then:
> 
> An option they didn't have before - is this a pain?
> 
> Invent a new job and there are bound to be shortages. OK - that's a pain, and one the regulators should have seen coming.
> 
> No change there 
> 
> Nothing new there either - happens all over in every industry. May the bastards go to jail.
> ...


Dave - you have just won $ 500,000,000 - pain is that we have NO facility to transfer it to you as the number must be transferred in a single transfer and the banking system to do so has yet to be developed. The Goverment of the day promised consumers an alternative debt resolution mechanism and that is much needed as R 1,8 billion is at stake - but you have to wait - meantime the debtor drowns. It would have been NO PAIN if the NCR comnpleted the system - tied all the belts and checked the bells - and then released the solution. Now we have a half pregnant situation. That's the pain !

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## Dave A

To reinforce the point on the over-indebted not paying very well, I heard a news flash a day or two ago that 50% of people who are supposed to be paying instalments under a rescheduled debt agreement are in default on their payments.

Some people simply don't pay no matter what you do for them.  :Frown:

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## AndyD

I think there's a couple of common stumbling blocks for people who are choosing whether to work through their debt or whether to 'sod it' and just default on everything and ride out the five year blacklisting.

The law is certainly something you can hide behind if you in debt. The cost and time involved in litigation for creditors to recover monies owed and the pitiful settlement terms often given will almost certainly favour the person in debt.

Many have found themselves so far in over their heads that without light at the end of the tunnel it's just easier to give up and default.

Others consider themselves as victims. Victims of a recession they have no control over. Victims of greedy creditors who are trying to take them to the cleaners. Victims of who knows what....... but it's certainly not their fault. Things that go wrong never are their fault.

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Dave A (09-Sep-10), wynn (03-Aug-10)

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## Dave A

This story shows it takes a lot more than just enabling legislation to succeed.



> This week, banks, along with the National Credit Regulator and the Debt Counsellors' Association of South Africa (DCASA), launched a campaign to help people come to terms with their indebtedness.
> 
> The figures are frightening. Out of the 17-million people who have some form of debt, 47% have fallen more than three months in arrears with their payments. That means that nearly eight million South Africans are over-indebted.
> 
> The problem is that often people are too afraid to face their financial situation and ignore the growing problem until it is too late. This campaign is aimed at encouraging people to take action before it is too late.
> 
> ---
> 
> One of the problems is that debt counselling has not been a resounding success. Although about 190 000 people have applied for debt counselling, the majority have withdrawn or terminated their debt-review process.
> ...

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## Rebel

See my notes below



> Let's have a look at those then:
> 
> An option they didn't have before - is this a pain?


 :Frown: I think it is false and misleading the public when you tell someone that they have an option and then they pay for the option but receive shotty service for whatever reason. We should have rather waited with the option till the nuts and bolts were in place. Through this in-effective "thing" lots of people got more into trouble * yes I agree some were trying to escape their debt but some had no alternative - not even admin orders because their debt were more than R 50k - we read about the man in the FreeState who shot his family and then himself because he had no way out with his debt.




> Invent a new job and there are bound to be shortages. OK - that's a pain, and one the regulators should have seen coming.


 :Headbutt: No not shortages - inefficiencies on the side of the NCR who did not put into place better training before giving a license to do debt counselling. Imagine what do I know with a matric certificate and R 50 bucks - minimal qualification to become a debt counsellor !!!




> These are the people that shouldn't be getting credit anyway, right? Is this a pain? Or is the NCA actually succeeding in achieving one of its objectives?


 :Embarrassment:  Hey !!! credit makes the wheels of business turn NOT cash !!! Wrong on your side - The NCA stopped the right people getting credit and also the people who did not qualify - so we end up with little credit being granted and that removes the oil from business.

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## Dave A

Hi Rebel. I certainly don't disagree with your points, except for this:



> These are the people that shouldn't be getting credit anyway, right? Is this a pain? Or is the NCA actually succeeding in achieving one of its objectives?
> 			
> 		
> 
>  Hey !!! credit makes the wheels of business turn NOT cash !!! Wrong on your side - The NCA stopped the right people getting credit and also the people who did not qualify - so we end up with little credit being granted and that removes the oil from business.


I disagree on two fronts: 



> credit makes the wheels of business turn NOT cash


I'm having a hard time imagining things more poisonous to a business than debtors that don't pay. Credit and debt don't kill businesses - *cash* flow does.



> The NCA stopped the right people getting credit


Absolutely not - the *GFM* stopped the right people getting credit. I doubt there'd be any problem with the "right" people getting all the credit they qualifiy for if it wasn't for the global shortage of funds for credit finance.

And what caused the GFM? Essentially extending reckless credit - finance for people who couldn't pay their due!!

Don't be fooled - cash is the core. Credit only affects timing of when the cash is due, thereby leveraging the results, be it gainful reward or painful misery.

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## Rebel

Dave I hear you - Debtors who do not pay sink a business. We are debating on the NCA and my point is: the way Reckless Credit Granting is viewed scares a lot of businesess granting credit to consumers - even to consumers who qualified in the past (pre 2007). Assets was used to gear on - now you need to show you can service the debt with your income hence we lost some 1.8 million household from the credit market - not that we have a lot in the first place. SA has some 18 mil credit active people - half has bad credit records so we depend on few to make the economy work. from the 9 mil good debtors we know that 60% earns below R 2,195 per month so how much credit can they take up ?

Your second point - do you think we were actually part of the credit crunch and shortage of money supply - have a chat to the likes of the big fund masnagers and you will hear that they and the 4 big banks have more money to loan to you than what you can take up. Challenge is the NCA

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## Dave A

> the way Reckless Credit Granting is viewed scares a lot of businesess granting credit to consumers


I'll concede that one  :Thumbup: 



> Your second point - do you think we were actually part of the credit crunch and shortage of money supply


In short, yes. 



> have a chat to the likes of the big fund masnagers and you will hear that they and the 4 big banks have more money to loan to you than what you can take up. Challenge is the NCA


 :Cool:  Looking forward to that next interest rate drop then  :Big Grin: 

Glad to hear the big fund managers (I'm thinking of one in particular where I got passed from pillar to post for five months for payment) have turned their cashflow problems around.

If they're sitting on excess funds, it's relatively recent. SA is currently experiencing a (possibly excessive, looking at the exchange rate) capital inflow again...

Don't take my word for it - Ask any active estate agent what they've been finding since the GFM.

But that aside, we were talking about the impact of the NCA on overall credit extension. weren't we? Here's a thought:

Banks don't make money by sitting on it. It has to be deployed (read _loaned out_) for it to start working for them. I'd suggest NCA or not, the chief driver of what is made available for credit extension is what is available to be loaned.

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Rebel (21-Oct-10)

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## Rebel

> I'll concede that one 
> 
> In short, yes. 
> 
>  Looking forward to that next interest rate drop then 
> 
> Glad to hear the big fund managers (I'm thinking of one in particular where I got passed from pillar to post for five months for payment) have turned their cashflow problems around.
> 
> If they're sitting on excess funds, it's relatively recent. SA is currently experiencing a (possibly excessive, looking at the exchange rate) capital inflow again...
> ...


 :Fence: Banks and funds do have the funds - NCA is the drawback - In the past consumers got 110% bonds now down to 80% if you are lucky - where does people get 20-40% deposit ?(which they in the past did not need !)

 :EEK!: My clients (the banks) would like that money in the vault to work - you are 101% correct but reckless credit carries a hefty R1 mil fine tag. Another thing consumers do take up credit and then go under debt review and try to get an order for reckless credit - another reason for the banks NOT TO RISK too much.

 :Big Grin: How about this one : Debt Counsellor to consumer: how old is your car? Consumer: 4 years. Debt Counsellor: man considder buying a new one and then we place you under debt review. That old car will not last untill your debt review is over.

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## Dave A

> How about this one : Debt Counsellor to consumer: how old is your car? Consumer: 4 years. Debt Counsellor: man considder buying a new one and then we place you under debt review. That old car will not last untill your debt review is over.


Shocking and interesting.  :Hmmm: 

If the client is on the verge of debt review, what are the chances of them getting finance if they complete their credit application honestly?

 :Hmmm:  And even if the applicant isn't entirely honest in their application, the bank is still in the cart  :EEK!: 

But at least the debtor loses the protection of the NCA...

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