September 2015

BROTHER CAN YOU SPARE A DOLLAR? – AD HOC LOANS AND THE

NATIONAL CREDIT ACT

Samantha Horsfield and Nikhil Bhogal

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Structure -

• Purpose of the National Credit Act• Scope of the NCA• When is one required to register as a credit

provider under the NCA?– Threshold requirements.

• The consequences for failure to register under the NCA.- Consideration of legislation and case law

• Conclusion• Q & A

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Purpose of the National Credit Act.

• Carl Sagan - ‘You have to understand the past to understand the present.’

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Purpose of the National Credit Act

• Credit market in South Africa prior to the NCA

• Promulgation of the NCA

• Purpose

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Scope of the NCA

• Applies to all credit agreements made between parties acting at arm's length in South Africa in terms of which payment is deferred and interest is levied.

• Hence we see four elements

• Only credit agreements to which the NCA applies are considered when determining whether a credit provider needs to register. 

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When is one required to register as a credit provider in terms of the NCA?

• Not every person who grants credit is required to register as a credit provider.

• Section 40 of the NCA (prior to the amendment Act) required registration if:

– that person was a credit provider under at least 100 credit agreements; or

– the total principal debt owed to that person under all outstanding credit agreements was equal to or greater than R500 000.  

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Loan sharks?

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Register – Yes or No?

Opperman v Boonzaaier 2012 JDR 0619 (WCC)

V

Friend v Sendal 2015 (1) SA 395 (GP)

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Section 40 in terms of the Amendment Act

• ‘‘(1) A person must apply to be registered as a credit provider if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds the R500 000."

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Consequences of Failure to Register under the NCA

• Section 40(3) of the NCA:– "A person who is required in terms of subsection (1) to

be registered as a credit provider, but who is not so registered, must not offer, make available or extend credit, enter into a credit agreement or agree to do any of those things."

• Section 40(4) of the NCA:– "a credit agreement entered into by a credit provider who

is required to be registered in terms of subsection (1) but who is not so registered is an unlawful agreement and void to the extent provided for in section 89“

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Section 89(5) of the NCA

"If a credit agreement is unlawful in terms of this section, despite any provision of common law, any other legislation or any provision of an agreement to the contrary, a court must order that- • (a) the credit agreement is void as from the date the agreement was

entered into; • (b) the credit provider must refund to the consumer any money paid by

the consumer under that agreement to the credit provider, with interest…

• (c) all the purported rights of the credit provider under that credit agreement to recover any money paid or goods delivered to, or on behalf of, the consumer in terms of that agreement are either-

• (i) cancelled, unless the court concludes that doing so in the circumstances would unjustly enrich the consumer; or

• (ii) forfeit to the State, if the court concludes that cancelling those rights in the circumstances would unjustly enrich the consumer."

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S89 in application - Cherangani Trade and Investment 107 (Pty) Ltd v Mason NO and Others 2011 JDR 0344 (CC)

– Facts• Free State High Court

– Courts finding– Strict and literal interpretation of the law

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S89 in application - Opperman v Boonzaaier 2012 JDR 0619 (WCC)

• Facts• Court’s findings• Constitutional Court

– National Credit Regulator vs Opperman 2013 (2) SA 1 (CC)

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Chevron (Pty) Ltd vs Dennis Edwin Wilson t/a Wilson's Transport 2015 JDR 1055 (CC)

• Facts• Courts findings• Reasoning

– Arbitrary deprivation of property– S25 of the Constitution vs the limitation of rights.

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National Credit Amendment Act

• Changes to s89 of the NCA.– "If a credit agreement is unlawful in terms of this section,

despite any other legislation or any provision of an agreement to the contrary, a court must make a just and equitable order including but not limited to an order that:

(a) The credit agreement is void as from the date the agreement was entered into

(b) ……………………………………………..(c) ……………………………………………..

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Much-ado-about-nothing

• S40 – Lacuna

• Proposed new examination for s40

• Loan sharks and ‘friends in need’?

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Practical Obligations of a Registered Credit Provider

"52(5) A registrant must (a) post the certificate or duplicate registration certificate in any

premises at or from which it conducts its registered activities; (b) reflect its registered status and registration number, in a

legible typeface, on all its credit agreements and communications with a consumer;

(c) comply with its conditions of registration and the provisions of this Act;

(d) pay the prescribed annual renewal fees within the prescribed time;

(e) keep any prescribed records relating to its registered activities, in the prescribed manner and form; and

(f) file any prescribed reports with the National Credit Regulator in the prescribed manner and form."

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Proposed Registration Requirement

S40: A person must apply to be registered as a credit provider if that person, alone or in conjunction with any associated person, grants credit in their line of business in credit agreement(s), excluding incidental credit agreement(s).

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QUESTIONS