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The National Credit Act, Act 34 of 2005
The enforcement of the National Credit Act (herein referred to as
the Act) came into full effect on 1 June 2007 and it repealed the
Usury Act of 1968, the Usury Act Exemption Notice of 1992 and the
Credit Agreements Act of 1980. The various provisions of the
Credit Act have been implemented in phases starting from 1 June
2006, to 1 September 2006 and 1 June 2007.
The broad objective of the Act is to protect consumers, prevent
over-indebtedness and reckless lending, and to regulate the credit
industry as a whole.
The Act regulates all types of credit agreements, which are credit
facilities, credit guarantees, credit transactions and a combination
of the three. The agreements can be small, intermediate and large.
Examples of credit agreements are micro loans, instalment sales,
leases, overdrafts, mortgages, etc.
The Act provides consumer rights and awareness by ensuring that
consumers know their rights and make informed decisions regarding
credit. It also places the responsibility on credit providers to
ensure that credit is provided responsibly and in a transparent
manner.
The Act creates enforcement institutions, which are the National
Consumer Tribunal, empowered to deal with consumer concerns and
provide redress and the National Credit Regulator (NCR) that is
responsible for the enforcement of the regulation in the South
African credit industry.
Some of the key areas in the Act include amongst others:
- Before a consumer enters into an agreement, the consumer must be
provided with a written quote, which must be in a standard and a
prescribed format, and is binding for 5 days.
- The consumer has a right to access credit and should credit not be
granted, has a right to be furnished with the reasons for such refusal.
- The marketing and information in advertisements is regulated.
- Contracts are regulated, prescribing the information that must be
included and prohibiting certain unfair contractual clauses.
- It creates the mechanisms for Debt Counsellors to review the
financial position of over-indebted consumers and to make a proposal
for debt re-arrangement to the Magistrates Court.
- It regulates interest rates and fees to be charged and restricts
the extent to which credit life insurance can be added to credit
agreements.
- It creates the right to settle any credit agreement without any
notice or penalty with the only exception of large agreements including
mortgages, where a 3 month notice may be required.
- It regulates credit bureaus and credit bureaus information,
allows every consumer to receive one free credit bureaus record per
year and allows for information to be disputed and such disputed
information to be hidden. In addition, the consumer has a right to
challenge any inaccurate information.
- It gives consumers the right to confidentiality as far as consumer
credit information is concerned.
- It gives consumer the right to raise complaints with Alternative
Dispute Resolution Agents, Ombud Schemes and with the National
Credit Regulator.
Click below for the Act and regulations.
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