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Monday, 22 January 2018
NCA Incidental Credit

Despite all the hype and media attention around the National Credit Act, there still appears to be a degree of confusion out there about the implications of the NCA, particularly with creditors and whether they should be registered with the National Credit Regulator or not. It appears that some “credit consultants” out there are advising every man and his dog to register as credit providers.

A very large percentage of the creditors that I have come into contact with fall under the definition of incidental credit providers.

A central element in the NCA is the definition of credit agreement. If an agreement falls under the definition set out in Section 8, then there are various elements of the NCA which apply to that agreement and if the credit provider has more then 100 credit agreements (as defined) or the total value of the credit agreements is over R 500 000.00, then that credit provider has to register as a credit provider with the National Credit Regulator.

But tucked away in the Section 8 definition of credit agreement, under S8 (4) definition of credit transaction is an incidental credit agreement, Section 8(4)(b) . The definition of incidental credit is defined under Section 1 as:

“…an agreement, irrespective of its form, in terms of which an account was tendered for goods or services that have been provided to the consumer, or goods or services that are to be provided to a consumer over a period of time, and either or both of the following conditions apply:

  1. a fee, charge or interest became payable when payment of an amount charged in terms of that account was not made on or before a determined period or date; or
  2. two prices were quoted for settlement of the account, the lower price being applicable if the account is paid on or before a determined date, and the higher price being applicable due to the account not having been paid by that date;”

Now this section has to be read with Section 5(2) which reads as follows:

“The parties to an incidental credit agreement are deemed to have been made that agreement on the date that is 20 business days after –

  1. the supplier of the goods or services that are subject of that account, first charges a late payment fee or interest in respect of that account; or
  2. a pre-determined higher price for full settlement of the account first becomes applicable,

unless the consumer has fully paid the settlement value before that date.”

So based on this definition a large number of credit providers are actually incidental credit providers as defined in the NCA. Even a large portion of consumer retailers who provide interest free credit for a specified period before charging interest on their accounts, fall under this definition of incidental credit provider.

Now importantly for those who fall under this definition of incidental credit is the exclusion of various section of the NCA being applicable to them in terms of Section 5 of the NCA .

The sections which are excluded from being applicable to an incidental credit agreement include the following:

  • Pre-agreement disclosures
  • The form and contents of agreements
  • Unlawful agreements and unlawful provisions in agreements
  • Reckless credit (Sec. 80 to 84)
  • Registration requirements
  • Marketing practices
  • Surrender of goods
  • The consumer cooling-off right; and
  • The dispute settlement mechanisms of the NCA

These are some of the most onerous and controversial sections of the NCA, including registration as a credit provider.

So if you are not charging interest from the inception of your credit granting and only upon your debtor defaulting in their payment terms, the chances are that you fall under the definition of incidental credit and the major provisions of the National Credit Act do not apply to you. However there are some of the provisions of the Act which apply to you and we suggest you consult an attorney who is full competent in the National Credit Act to advise you.

 

 

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