National Credit Act

PURPOSE OF THE NCA

• Promotes the social and financial interest of  consumers
• Promotes a fair but competitive credit market
• Ensure that consumers knows what is included in their credit contracts
• Prevents discrimination and ensure  credit is available to all consumers
• Makes provision for the establishment of the national credit regulator (NCR).
• Ensure registrations of credit bureau and debt counselling services

IMPACT OF THE NCA ON BUSINESSES

• POSITIVE ADVANTAGES
• The whole credit process is transparent e.g. both businesses and customers know their responsibilities
• Authorised credit providers may attract more customers.
• Lower bad debts resulting in better cash flow.
• Increases cash sales as credit can only be granted to qualifying customers
• Protects businesses against non-paying consumers.
• Increase cash sales as credit can only be granted to qualifying customers
• Stamps out reckless lending and prevents businesses from bankruptcy
• business do through credit checks and receive up to date documentation from the consumers as proof that they can afford the repayment
• Credit bureau information is made available to businesses so that they can check the credit worthiness of consumers before granting credit.

NEGATIVES / DISADVANTAGES

• Businesses can no longer carry out credit marketing.
• Leads to loss of sales as many consumers may no longer qualify to buy on credit.
• The paperwork and administrative process required by the act are costly and time consuming.
• The business needs to appoint additional staff to deal with the extra administration.
• Should the credit agreement be declared reckless, the business could forfeit the outstanding debt and the goods that were sold.
• Businesses that are official credit providers must submit a compliance report every year.
• A businesses must make sure that all attempts have been made to recover the debt before blacklisting the consumers
• Debt collection procedures are more complex and expensive
• Increases the administration burden on credit providers
• More working capital is needed as businesses cannot sell many goods on credit due to stricter credit application process.
• Businesses struggle  to get credit such as bank loans/overdraft
• businesses that do not comply with NCA may face legal action.

DISCRIMINATORY ACTIONS ACCORDING TO THE NCA

• Refusing credit to customers based on gender and race.
• Charging different interest rates to customers based on gender/race
• Blacklisting the customers without making effort s to recover debt

PENALTIES/CONSEQUENCES FOR NON COMPLIANCE WITH THE NCA

• The court may declare the granting of credit by the business reckless and may order consumers not to repay the credit/or part thereof to the business.
• The business may not demand payment, sue or attach the client’s/consumers salaries/assets.
• The business may not charge any fee/interest/other charges under the specific credit agreement.
• The national credit regulator may impose a fine/penalty on the business for non compliance
• The business will bear the cost of removing the native information of clients/consumers who were blacklisted as result of reckless lending.

WAYS IN WHICH BUSINESSES CAN COMPLY WITH NCA

• Credit providers must be registered with the National Credit Regulator.
• Businesses must submit an annual compliance report to the National Credit Regulator.
• Conduct affordability assessment to ensure the consumer has the ability to meet his/her
• obligation.
• Conduct a credit check with a registered credit bureau and could also consult the National
• Credit Register.
• Verify the identity of clients, report suspicious transactions/train staff on their obligations in
• terms of FICA.
• Disclose all costs of loan/No hidden costs should be charged/added.

CONSUMER PROTECTION ACT

PURPOSE OF THE CONSUMER PROTECTION ACT

consumers have a right to:

• Obtain reasons for credit being refused
• Apply credit and be free from discrimination
• Receive- pre-agreement  documentation before concluding any credit transaction
• Fair and responsible marketing
• Choose which goods they will buy and return such goods if they are not satisfied
• Receive information in plain and understandable language.
• Receive documents as required by the act
• Access and challenge credit records and information