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What you need to know about the National Credit Act (NCA)

Posted: 01 Aug 2016

4 mins to read

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The National Credit Act 34 of 2005 (NCA) is the most important piece of legislation that governs credit in South Africa. We look at the aim, purpose and features of the NCA.

What is the NCA?

  • “To promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide for the general regulation of consumer credit and improved standards of consumer information;
  • to promote black economic empowerment and ownership within the consumer credit industry;
  • to prohibit certain unfair credit and credit-marketing practices;
  • to promote responsible credit granting and use and for that purpose to prohibit reckless credit granting;
  • to provide for debt re-organisation in cases of over-indebtedness;
  • to regulate credit information;
  • to provide for registration of credit bureaux, credit providers and debt counselling services, to establish national norms and standards relating to consumer credit;
  • to promote a consistent enforcement framework relating to consumer credit;
  • to establish the National Credit Regulator and the National Consumer Tribunal, to repeal the Usury Act, 1968, and the Credit Agreements Act, 1980;
  • and to provide for related incidental matters.”

What is the aim of the NCA?

To protect you as a consumer, therefore it aims to:
  • Increase access to credit at reasonable rates by reputable credit providers
  • Promote a fair, competitive and sustainable credit market
  • Help consumers make informed decisions
  • Create mechanisms to deal with debt
  • Provide protection for consumers, securing redress (which means you have options available to complain or take action) and ensuring compliance from stakeholders, such as credit providers.

The purpose of the NCA

  • Promote a fair, non-discriminatory marketplace
  • Improve standards of the consumer credit industry
  • Prohibit unfair practices
  • Promote responsible credit granting
  • Regulate credit information
  • Provide for debt restructuring in a regulated environment

What does it say about credit?

  • The language of credit agreements must be simple and understandable
  • A pre-agreement statement and quotation, which is binding for five days, must be given for all credit agreements
  • All advertising and marketing material must contain prescribed information on the cost of credit, and is prohibited from using specific terms
  • A credit provider cannot sell credit at a person’s home or work unless invited
  • If a credit application is declined, the credit provider must be able to give a valid reason to the consumer
  • Reckless lending is not permitted and credit providers must take all reasonable steps to determine a consumer’s creditworthiness and affordability before granting credit
  • There are limitations on how much interest and fees can be charged on all credit agreements, including micro-loans
  • Consumers have the right to a free credit report from a credit bureau once every twelve months.

The NCA and the credit provider

According to the NCA, credit providers also have the rights to:
  • Access your credit records when you apply for credit (with your permission, of course)
  • Decline credit; however, they must provide you with a sufficient explanation why you were declined
  • Receive regular payments as agreed on the credit given, including interest and fees
  • Enforce the agreement. They may take steps to collect the debt as agreed in the credit agreement and according to the NCA, which also means recovering any goods sold or used as security for the loan.
  • Request a court order to retrieve collections costs from a consumer
  • Suspend a credit facility (such as a credit card or overdraft on a cheque account) at any time if you are in default, or otherwise close the facility with 10 business days’ notice

Your responsibilities

The NCA expects you, as a consumer, to assist credit providers by:
  • Providing them with honest and factual information
  • Paying for services rendered and goods received according to your credit agreement
Want to know more? You can download the complete Act here.