Lu 6

Learning Unit 6:
The National Credit Act 34 of 2005
Lecturer : S Ndlovu
IIE MSA is an educational brand of The Independent Institute of Education (Pty) Ltd which is registered with the Department of Higher Education and Training as a
© 2019 IIE MSA private higher education institution under the Higher Education Act, 1997 (reg. no. 2007/HE07/002). Company Registration number: 1987/004754/07.
CONFIDENTIAL & PROPRIETARY
The prescribed textbook for this learning Unit is :
 Nagel et al Commercial Law 6th edition Lexis Nexis Part 6 Chapter 19 to
22 only, page 289- 293 And L.U 6, Theme 1, 2 & 3 on Learn!!!!!!
 The book is available in the library and on EBSCO!!!!!!
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CONFIDENTIAL & PROPRIETARY 2
Prescribed Textbook- Click on “Part 6-Credit Agreements”
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Learning Outcomes as per the M.O
By the end of this Unit, you must be able to:

•Provide an overview of the history and purpose of credit transactions;
•Discuss the purpose of the NCA;
•Explain how debt counsellors assist in regulating credit matters.
•Define a credit agreement;
•Apply each sub-category of credit agreements in a given scenario;
•Apply the exemptions of the NCA in the appropriate circumstances in a given scenario;
•Classify credit agreements as small, intermediate or large in a given scenario;
•Apply the requirements for pre-agreement disclosures in a given scenario;
•Explain the connection between assessment mechanisms; over-indebtedness and reckless credit.
•Discuss the consequences of agreements that are unlawful;
•Explain the process involved in making changes to credit agreements
•Explain collection, prepayment, surrender, debt enforcement and prescription;
•Explain debt procedures as they are carried out in court.
•Define a consumer;
•Define a credit provider;
•Apply the rights and duties of the credit provider to a given scenario;
•Apply the rights and duties of the consumer to a given scenario; and
•Illustrate the path of a dispute and resolution between the different parties.
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NATIONAL CREDIT ACT 34 OF 2005(NCA)
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National Credit Act 34 of 2005( NCA)
 The NCA is legislation that is meant to protect you( the consumer) by limiting
the potential for you to borrow too much money from credit providers(eg banks)
and prevent those credit providers from engaging in irresponsible lending.
It’s basically trying

To protect people from
Being in debt by prescribing formalities
For contracts where you borrow money
 Main Credit agreements that were on the rise= CREDIT CARDS!!!!!!!!!!!!!!!!

 The NCA Replaced the following legislation:
-Credit Agreements Act+ Usury Act & The Integration of Usury Laws Act
 Other Consumer Legislation= Consumer Protection Act + Alienation of Land Act.
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 The Purpose of the NCA( as per the Act)
 Promote and advance the social and economic welfare of South Africans;
 Promote a fair, non-discriminatory, controlled, competent, sustainable,
responsible, efficient and accessible credit marketplace;
 Simplify and standardise the manner in which information is disclosed in credit
agreements;
 To regulate credit bureaux and the information they keep on record about
consumers;
 To ensure that all credit products are handled in the same way by different credit
providers;
 To assist over-indebted consumers to restrict their debt;
 To have a regulator to regulate the entire credit market, being the National
Credit Regulator;
 To establish the National Consumer Tribunal to adjudicate matters relating to the
Act.
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 What is a Credit Agreement?( Section 8)
 A credit agreement has the following elements;
 There must be deferral of payment(buying on credit) or pre-payment
 There is a fee/charge/interest imposed with respect of that deferred
payment or discount given when prepayments are made
 Forms of Credit Agreements;

1. Credit Facility
2. Credit Transaction Credit Agreements
3. Credit Guarantee
4. Or any combination of the 3 above
( see next slide on what these are/include)
 However generally speaking a credit agreement is an agreement entered into between a

credit provider(bank/company) and a consumer(person) in which the credit provider
supplies goods or services or lends money to the consumers.”
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Credit Agreements
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NB; THESE ARE NOT CREDIT AGREEMENTS:
1. Insurance Policies
2. Lease of houses(immovable property) The National Credit Act (NCA) does not apply to lease
of immovable property. However, when a Property Practitioner or landlord engages with a credit bureau the
Property Practitioner or landlord will need to comply with the NCA, eg in doing credit checks and defaulting
3. Stokvels
THE NCA DOES NOT APPLY TO THE FOLLOWING TRANSACTIONS;
1. Loans between family members/shareholders( dealings at arms length)
2. Loans to the state/ organ of state
3. Juristic person(company) with assets and or turn over equals or exceeds
1million( So if the juristic persons annual turn over is Less that
1million and the transaction size is less than R250k, the NCA
will apply)
4. Credit provider is reserve bank
5. Consumers is a juristic person( company) whose asse value or annual turnover
is below 1million
6. Credit provider is outside of S.A
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 Sizes of agreements
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Consumer & Credit Provider as per the Act!!
Consumer Credit Provider

•the party to whom goods or services are sold under a •the party who supplies goods or services under a discount
discount transaction ,incidental credit agreement or transaction, incidental credit agreement or instalment
instalment agreement agreement;
•the party to whom money is paid, or credit granted, •the party who advances money or credit under a pawn
under a pawn transaction; transaction;
• the party to whom credit is granted under a credit • the party who extends credit under a credit facility;
facility; •the mortgagee under a mortgage agreement;
•the mortgagor under a mortgage agreement; •the lender under a secured loan;
•the borrower under a secured loan; •the lessor under a lease;
•the lessee under a lease; • the party to whom an assurance or promise is made under
a credit guarantee;
•the guarantor under a credit guarantee; or
• the party who advances money or credit to another under
•the party to whom or at whose direction money is any other credit agreement; or
advanced or credit granted under any other credit • any other person who acquires the rights of a credit
agreement; provider under a credit agreement after it has been entered
into;
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Consumer Rights in Credit Agreements
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 Consumer Rights(Chapter 4 part A)
1. Right to apply for credit
2. Right to NOT be discriminated by credit provider on any grounds in the
Constitution or PEPUDA when assessing/making a decision/ proposing terms of
the agreement etc.
3. Right to request reasons for refusal of credit
4. Right to receive documents in an Understandable language of choice. contract/
agreement entered into.There can be exceptions to language of choice eg
complexity of the documents
5. Right to apply for debt review and re-arrangement of obligations.
6. Right to a cooling off period! Meaning if you are offered a product, you have 5
business days to cancel the agreement.
-Only applicable in leases and instalment agreements only
- termination must in writing eg email.
 Rights to information held by the credit bureax
Credit Bureau-institution that provides credit provider with a consumer’s credit
worthiness/ history. The information has to be accurate.
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DUTIES OF THE CREDIT PROVIDER
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 Duties of the Credit Provider
1. Register as a credit provider with the National Credit Regulator
 ONLY REGISTER IF:
1. Concluded at least 100 agreements permitted by the act
2. Debt of the concluded credit agreements exceed R500k
 If not registered when required the agreement is Unlawful and Void and
consumer refunded
 Du Bruyn v Karsten 2019 (1) SA 403 (SCA)
Facts
• Mr Karsten was had to register as a credit provider in terms of the monies len to Du
Bruyn.Mr Karsten was duly registered as a credit provider in terms of the Act, However,
his registration occurred years later after the conclusion of the respective sale
agreements.
• By the regiatration time Du Bruyn has defaulted on payment and had breached the sale
agreements and defaulted on the instalments owing to Mr Karsten.
• As a result of the abovementioned facts, Mr Karsten instituted proceedings for payment
of the balance of the purchase price as a consequence of the breach of the sales
agreement .
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• In his defence, Mr Du Bruyn argued that the sale agreements were null and void, as Mr
Karsten had not registered as a credit provider at the time the respective sale agreements
were concluded
Legal Question
Whether the agreement constituted a credit agreement at arms-length and turned its attention to the main enquiry into
whether S40 of the Act applied to so called “once-off” or “single transactions”.
Held:
 According to the court, and its interpretation of S40, the determining factor of whether one
must register as a credit provider is the amount of the credit provided and whether that
amount exceeds the threshold prescribed in terms of S42(1) of the Act.
 the Act does apply to once-off and/or single transactions
 The amounts exceeded the threshold at the time (Five-Hundred Thousand), so Karsten had
to register as credit provider.
 Karsten failure to register as a credit provider before the conclusion of the
respective agreements rendered the agreement unlawful for non-compliance with
S40 of the Act.
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Duties of the Credit Provider
2. Make a credit assessment before granting credit.

Otherwise the court or tribunal can declare RECKLESS CREDIT/ RECKLESS
LENDING and the consumer can be declared over-indebted
• Reckless Lending means the credit provide a credit agreement to a
consumer and failed/ignore in assessing the if the consumer understands
risks, cost and rights and obligations( think of it as giving a credit card
to someone who does not understand how they work and cannot afford
to pay it)
•the reckless credit provisions not apply to= student loans schools loans and
emergency loans.
 In terms of Section 80(1) credit is considered reckless when the credit
provider;
a) Failed to conduct a proper assessment( see next slide what proper
assessment entails
b) Or conducted the assessment BUT proceeded to conclude the agreement
knowing the creditor does not understand it and will lead to over-
indebteness.
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 Obligations of the credit provider to PREVENT reckless credit;

1. Must ensure the consumer UNDERSTANDS AND APPRECIATES the risks,
costs, rights and obligations of the agreement.
2. Assess the repayment history by checking from credit burea
3. Assess the consumers financial means
4. Assess if it is reasonable to conclude that agreement
 Orders that can be made by court in cases of reckless credit

1. Suspension order- all obligation to consumer are suspended until consumer can
afford it.
2. Debt Review- apply to have a debt counsellor to declare him over-indebted.
© 2019 IIE MSA

3. Provide a consumer with pre-agreement sale.
 Information that the credit provider obligated to disclose to the

consumer, prior to the conclusion of a credit agreement.
1. Name/ business address and registration number of the credit provider
2. Nature of the proposed agreement
3. The credit providers current annual interest rate and other cost of credit
4. Whether deposit or security or residual payment is required
5. If credit agent is involved with his details and commission fee
4. Provide periodic statements of his accounts free of charge

5. Report details of the agreement to credit register
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 The NCA regulation on the consumer's right
to confidentiality and privacy=
 privacy is protected and may not release information to anyone except
those allowed to have the information in terms of the act. Eg Sec 69
provides register for outstanding credit agreements, so credit providers
must provide them this information and the credit burea.
 Advance Payments or Early Settlement of Accounts by Consumer
 Allowed without notice or any penalty.
 the payment mut be credited in the following order
1st= to satisfy interest charges
2nd=satisfy unpaid fees/charges
3rd= then principal debt
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MARKERTING TO CONSUMERS BY SERVICE PROVIDERS
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 Negative Option Marketing
• This is when an agreement automatically comes into existence unless the
consumer declines offer.
• These types of agreement are VOID and UNLAWFUL.
 When a credit provider and a consumer conclude a credit agreement;
must be given the opportunity
a) of declining the option of pre-approved annual credit limit increases.
CANNOT UNILATERALLY INCREASE UNLESS CONSUMER GAVE
WEITTEN PERMISION TO DO SO.
b) and of being excluded from any telemarketing campaigns of the credit
provider, marketing or customer lists that may be sold or distributed by the
credit provider or any mass distribution of e-mail or SMS messages.
© 2019 IIE MSA

 Consumers are also protected against certain marketing
practices.
Thus a credit provider MUST NOT;
1. harass a consumer in attempting to persuade the consumer to apply for credit
or to enter into a credit agreement;
2. enter into a credit agreement at a consumer’s private dwelling EXCEPT where -
the consumer pre-arranged the visit, OR where the credit provider sells goods
or services and the credit is then incidentally offered or if the credit agreement
falls into a category of credit agreements that is permitted to be concluded
during such a visit.
3. visit a consumer’s place of employment for the purpose of inducing the
consumer to obtain or apply for credit,
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 Right to Surrender
 I can no longer afford the goods / items I bought on credit, can I return them to
the credit provider and get the debt cancelled?
 Section 127 of the act provides that a consumer has the right to surrender or
return the good under an instalment sale agreement, secured loan or lease
agreement to the credit provider, and the credit provider must sell these goods
to settle the debt of the consumer.
 The consumer must give a written notice of their intention to surrender the
goods.
 the proceeds of the sale are insufficient to cover the outstanding debt, the
consumer is liable for the shortfall.
 The credit provider must, within 10 days of the sale of goods, demand that the
consumer pay the shortfall, before instituting any legal proceedings to recover
the balance outstanding amount. If there is extra money then paid to consumer.
© 2019 IIE MSA

 Statutory Protection provided by the NCA to consumers who access a
credit facility by use of a card, PIN or other identification device.
Section 94 provides protection and states that;
 The Contract must provide consumer with telephone number where loss or theft
can be reported.
 The credit provider May NOT hold the consumer liable for use of credit facility
after loss or theft has been reported UNLESS the credit provider has evidence of
consumer using the facility or allowing someone to se the facility.
© 2019 IIE MSA

UNLAWFUL CREDIT AGREEMENTS AND UNLAWFUL PROVISIONS
This Photo by Unknown Author is licensed under CC BY-NC
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 Unlawful Agreements(Section 89)
Any agreement is unlawful when:
1. Consumer is a minor/ mentally ill
2. Agreement with a person under admin order without administrator consent
3. Agreement results from negative option marketing
4. Supplementary agreements- unlawful agreements.
5. Credit provider not registered/ stopped by NCR
 THESE AGREEMENTS ARE VOID, The court can order the following:
 The credit provider Refunds consumer all the money with interest
 Regarding the credit providers contractual agreement with consumer to recover
money paid or goods delivered court can order that
a) The agreement is Cancelled
b) Goods or money be Forfeited to the state
UNLESS the above will unjustly enrich the consumer.
© 2019 IIE MSA

 Unlawful Provisions (Section 90)
 Section 90 provides for 11 unlawful provisions that can be included in the
contract . These includes clauses that Defeat purpose of the act/deceive
consumer/fraudulent/intent to waiver consumer rights etc check section 90.
 Contracts with these caluses are VOID and the Court can do the following:
1. sever the provision- (meaning remove it)
2. Alter agreement- ( change the agreement)
3. Declare agreement unlawful in its entirety is they cannot do the above.
© 2019 IIE MSA

Regulatory Bodies and Institution in the NCA
NATIONAL CREDIT REGULATOR

(www.ncr.org.za)
The watchdog!!!!!!!!!!!!!!
develops + reports +monitors + enforcement & registration.
 responsible for the regulation of the South African credit industry.
 Tasked with registration of credit providers, credit bureaux and debt counsellors;
 Receive and investigate complaints and ensure that consumer rights are
protected
 Enforce compliance with the NCA.
 Takes action against institutions not adhering to the provisions of the act.
Regarding registration with the NCR=NOT ALL CREDIT PROVIDERS MUST
REGISTER;
ONLY REGISTER IF:
1. Concluded at least 100 agreements permitted by the act
2. Debt of the concluded credit agreements exceed R500k
 If not registered when required the agreement is Unlawful and Void and consumer refunded
© 2019 IIE MSA
NCR
 National Consumer Tribunal= forum that hears complaints related to the act.
forum in the sense that NOT strict like a court,
-Can declare credit agreement reckless( will be
discussed later)
-there order are the same or hold the same
power as that of a High Court
- decisions are binding on the national regulator
 Debt counsellors= only natural persons, they have a duty to assist the
consumer in assessing their credit status.
- receive application for a party to be considered
overindebted( to be discussed late)
© 2019 IIE MSA

 Options available to a person, who complains that the NCA has
been contravened
1. Lodge a complaint with the National Credit Regulator. It can then apply to
the National Consumer Tribunal for the tribunal to resolve the dispute.
However, from the NCR website the require that you First try to resolve the
complaint with the credit provider and Give the credit provider 20 business
days to resolve the complaint ONLY If you are not satisfied with the outcome,
or if you did not get an answer from the credit bureau, then lodge a complaint
with them
2. Utilize Alternative Dispute Resolution Mechanisms Made Available by
the act. the relevant ombud, consumer court or alternative dispute resolution
agent assists the parties in resolving a dispute, the resolution of the dispute
may be recorded in the form of a written order. If the parties to the dispute are
in agreement, it may then be submitted to a court or the Tribunal to be made a
consent order.
© 2019 IIE MSA

Breach of Contract by Consumer,
(The Credit Providers Enforcement of the Credit Agreement)
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 Remedies are available to a credit provider, should the consumer commit
a breach of contract= common law remedies( eg breach of contract) and
contractual remedies.
 The NCA limits a credit provider’s rights and remedies, to protect consumers
in enforcing the agreement by requiring that they cannot direct approach the
court for relief. There is statutory duty to first give notice to the consumer of
breach of the agreement.
SECTION 129 NOTICE
( this is just a letter of demand but populary known a section 129 notice
because you have to notify the consumer and tick the boxes in section 129 of
the act)
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 Legal action CANNOT be taken against a consumer in default if the Section 129
notice as has not been delivered;
b) Legal action may not be taken against a consumer should the requirements
as stated in Section 130 not be met. This section gives the debtor an
opportunity to remedy the default.
 Meaning the consumer must be informed of the extent of the arears so as to
decide how to move forward regarding the management of their debt.
 The Sec 129 Notice MUST specify the amount and nature of the default
Amardien and others v Registrar of Deeds and others.
A debt becomes due when it is immediately claimable or recoverable. Where
there is a statutory requirement that the agreement must be recorded, the
correct position is that the instalments only become due and payable on the
recordal of the agreement.
In this case there were no arrears and the s129 notices were not valid and did
not provide a gateway for the credit provider to institute legal action against the
consumer
© 2019 IIE MSA

 A section 129 notice will have to fulfil the general requirements and should
possess some key elements. Below is the information that you will see on the
notice:
 The specifics of the agreement in which the client is in default of, including
the amounts owed and the original terms of the agreement.
 A statement indicating that the letter serves as “notice in terms of section
129”.
 A statement about the client having defaulted.
 The amount of time (usually 10 - 20 days) that you have to remedy the
situation before action is taken.
 The actions that will be taken should you continue to default on payment.
 Information regarding steps you can take to remedy the situation and avoid
legal action, induction the suggestion that you go under Debt Review and
that you should contact a registered debt counsellor.
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 Delivery of Section 129 Notice to Consumers
 The notice contemplated in subsection (1)(a) must be delivered to the consumer
–
(a) by registered mail; or
(b) to an adult person at the location designated by the consumer.
 Proof that its been delivered as can be;

(a) written confirmation by the postal service or its authorised agent, of
delivery to the relevant post office or postal agency; or
(b) the signature or identifying mark of the recipient
 Kubyana v Standard Bank of South Africa Ltd 2014 (3) SA 56 –
 Sebola and Another v Standard Bank of South Africa Ltd and Another 2012
(5) SA 142 (CC),
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 Sebola and Another v Standard Bank of South Africa Ltd and Another 2012 (5)
SA 142 (CC),
 Mr Sebola, had his house attached for sale-in-execution of his mortgage bond he
concluded with Standard Bank.( basically Standard Bank wanted to sell his
house because he had defaulted on bond payments)
 He did not receive either the summons or a section 129 notice. He then raised as
a defence to the fact that he did not receive a section 129 notice. His application
was dismissed on the basis that the bank need only show that it sent the notice,
not that Sebola received it.
 He appealed in the Constitutional Court and the Con Court held that a notice
under section 129(1) of the National Credit Act must be properly delivered to the
consumer, who will be entitled to contest the enforcement of the credit
agreement in the event that she did not receive the notice. The Sebola Case it
was sufficient for a credit provider to show that it had sent the notice to the
consumer’s address. It did not matter if the consumer had not received it.
© 2019 IIE MSA

 Kubyana v Standard Bank of South Africa Ltd (CC)
Mr K defaulted on his credit agreement with Standard Bank. They sent the sec 12
notice to him. After the first notification was sent to his address by the post office
he failed to collect the registered mail. Seven days later, a second notification was
sent to the same address. He again failed to collect the mail and the post office
returned the s 129 notice to Standard Bank
 The Constitutional Court had two questions to answer.
1) Firstly, what are the steps a credit provider(Standard Bank) must take to
ensure that notice of default reaches a consumer before it may commence
litigation?
2) Secondly, what must the credit provider prove in order to satisfy the court
that it discharged its obligation to effect proper delivery of statutory notice?
 Held that the notice must reach the consumer but it does not mean that
the notice must be actually viewed by the consumer or come to his or
her attention.
 To prove delivery of notice the credit provider, which shows that the notice, on
the balance of probabilities, reached the consumer, and left before the
court where the proceedings are launched to decide
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The End
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Learning Unit 6:

The National Credit Act 34 of 2005

© 2019 IIE MSA

© 2019 IIE MSA

By the end of this Unit, you must be able to:

© 2019 IIE MSA

© 2019 IIE MSA

It’s basically trying

 Main Credit agreements that were on the rise= CREDIT CARDS!!!!!!!!!!!!!!!!

© 2019 IIE MSA

© 2019 IIE MSA

 Forms of Credit Agreements;

 However generally speaking a credit agreement is an agreement entered into between a

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

Consumer Credit Provider

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

2. Make a credit assessment before granting credit.

© 2019 IIE MSA

 Obligations of the credit provider to PREVENT reckless credit;

 Orders that can be made by court in cases of reckless credit

© 2019 IIE MSA

3. Provide a consumer with pre-agreement sale.

 Information that the credit provider obligated to disclose to the

4. Provide periodic statements of his accounts free of charge

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

This Photo by Unknown Author is licensed under CC BY-NC

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

NATIONAL CREDIT REGULATOR

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

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© 2019 IIE MSA

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 Proof that its been delivered as can be;

© 2019 IIE MSA

© 2019 IIE MSA

© 2019 IIE MSA

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