The NCA In A Nutshell
The National Credit Act 34 of 2005, which was implemented on the 1st of June 2007, is a voluminous affair. The NCA itself is 116 pages long and the Regulations that apply to it, a further 168 – more than most consumers would volunteer to digest under normal circumstances.
If reading the entire 284 pages does not exactly appeal to you, but you would like to get a general idea of what the NCA covers, then this synopsis should do just fine.
Why was the NCA implemented?
The idea behind the NCA was to implement rules through which to better govern the credit industry, to ensure that all credit consumers are dealt with in an even handed manner and to protect credit consumers from becoming over-indebted. The NCA repealed some of the older laws, such as the Usury Act of 1968 and the Credit Agreements Act of 1980, and made it a legal requirement for credit providers, debt councillors and credit bureaus to register with the National Credit Regulator (NCA).
Who does the NCA apply to?
The NCA applies to all individual consumers; to partnerships, close corporations and companies with a turnover less than R1 million; to trusts that have more than three trustees; and to credit providers who have a credit book of R500,000 or more and who have entered into 100 or more credit agreements.
What does the NCA cover?
The NCA covers just about everything related to credit. From a consumer perspective three of the most important areas are credit agreements, credit records and the Act’s governing structures.
1.Credit Agreements: With the exception of incidental credit, all small-, intermediate- and large credit agreements entered into (after 31 May 2007) between an individual consumer and a credit provider, are covered by the NCA. The Act does not cover credit agreements entered into by a trust with three or fewer trustees, or partnerships, close corporations and companies with a turnover R1 million or greater.
2.Credit Records: The NCA governs the way in which credit bureaus keep consumer records and how they deal with consumer information.
3.Governing Structures: The NCA compelled the establishment of the National Credit Regulator (NCR) and the National Credit Tribunal. The purpose of the NCR is to ensure that the Act is enforced, that consumers have the wherewithal to seek recourse in the case of disputes and to provide assistance should they find themselves in a position of over-indebtedness.
How does the NCA affect consumers?
The NCA affects credit consumers on every front. Some of the main effects are listed below:
More difficult to qualify for credit
To help protect consumers against over-indebtedness, the Act has made it more difficult for consumers to qualify for credit. The banks are now forced to do a check on your credit and debt repayment habits each and every time you apply for a line of credit. They also need to take your disposable income instead of your gross income into account when calculating whether you can afford repaying the credit you are applying for.
Improved Consumer Rights
As a consumer, your rights are not only clearly defined by the Act, but also enforceable by the NCR. The most important of these rights are:
1.Any adult consumer may apply for credit
2.In evaluating your application, the credit provider may not unfairly discriminate against you.
3.If your application is rejected, you have the right to know why,
4.If you are approved, the credit provider must supply you with a quote and all the information pertaining to the credit agreement. The information must be in a language that you find easy to read and understand, and layman’s terms should be used instead of industry- and legal jargon.
5.You have the right to confidentiality
Improved governance of the credit bureaus
The credit bureaus are now subject to the following rules:
1.Unless you give your consent, they may not disclose any of your information
2.They have to ensure that the information offered to credit providers is accurate, failing which they will be held liable to compensate you.
3.They have to remove bad payment records from their files upon receiving a clearance certificate from the creditor
4.They have to adhere to the record retention requirements stipulated in the NCA
In addition to these rules, you have the following rights:
1.A free copy of your credit report every twelve months from both credit bureaus
2.You may request the removal of inaccurate information on your credit report. The credit bureau has 30 days to assess your request. If they do not respond or if they do not agree to your request, you may escalate the issue to the Ombudsman.
Access to a formal channel for disputes
Any disputes or complaints you may have can be logged with the NCR. On their site (www.ncr.org.za) the NCR clearly describes how you can go about logging these. Your dispute or complaint is first assessed, investigated and mediated by a Complaints Officer. If no resolution can be found, it will be referred to the Tribunal for adjudication.
Access to debt counselling
If you think that you may be over-indebted, you can approach one of the NCR’s debt councillors for assistance. The councillor will assess your situation to determine whether you are over-indebted or not. If the councillor finds that you are, he or she will make a recommendation to the Magistrate’s Court. The court will usually go with this recommendation and rule accordingly.
Although it extends a high level of protection to consumers, the NCA does not encourage bad credit behaviour at all. Consumers who are irresponsible in dealing with their repayments are, as always, going to find themselves faced with legal repercussions.
The debt enforcement process is clearly defined in the Act. It safeguards the credit provider against irresponsible credit repayment behaviour on the part of consumers and still affords credit providers the ability to recover their money by means of repossessions, attachment orders, garnishing orders and the like.