On 11 May 2016 the Department of Trade and Industry issued a Government Gazette Notice 39981 regarding the thresholds which determine whether or not a lender of credit or loans in terms of the National Credit Act (NCA) must register to do so.
National Credit Act applies to all consumer credit agreements
Firstly, the NCA applies to every credit agreement with consumers who are individuals, as well as with entities such as close corporations, companies, partnerships and trusts, whose asset value or annual turnover is below a prescribed threshold (currently R1 million).
The NCA defines credit providers as:
- the party who supplies goods or services under a discount transaction, incidental credit agreement or instalment agreement;
- the party who advances money or credit under a pawn transaction;
- the party who extends credit under a credit facility;
- the mortgagee under a mortgage agreement;
- the lender under a secured loan;
- the lessor under a lease;
- the party to whom an assurance or promise is made under a credit guarantee;
- the party who advances money or credit to another under any other credit agreement; or
- any other person who acquires the rights of a credit provider under a credit agreement after it has been entered into.
Furthermore, section 8 of the NCA describes credit agreements which fall under the ambit of the NCA and these include instances where an amount of interest or penalty for late payment is charged (known as incidental credit agreements).
Zero Rand threshold for credit provider registration
Section 40 of the NCA deals with registration of credit providers and section 42 deals with the thresholds applicable to credit providers. Previously, this threshold for registering was R500,000 or 100 agreements. It is now R0. What is the effect of this change in threshold and how did it come about?
The R0 threshold now means that anyone who provides credit in terms of the NCA, other than incidental credit agreements, must be registered with the National Credit Regulator (NCR) before providing the credit.
Failure to register makes the credit agreement void
In terms of section 42(3) and (4) read with section 89(2)(d) of the NCA, failure to register means that the agreement will be void and thus unenforceable.
In terms of section 42(2) any threshold determined by the Minister takes effect six months after the date on which it is published in the Gazette which means that applications needed to be lodged by 11 November 2016 in order to legally provide credit or loans.
The registration process includes the lodging of certain documents and paying of related fees.
For more information on how to register, or for any other related queries, please contact our expert Regulatory Law attorneys.
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