The National Credit Act was introduced back in 2007 with the aim of promoting a fair and non-discriminatory marketplace for South Africans to access credit.
The Act itself is 200 pages long, with a supplementary set of regulations and amendments. Not exactly bedtime reading, and unless you’re a Legal Eagle it’s very difficult to understand.
The good news is that we are going to break down everything you need to know about the Act in some bite-size blog articles, and it’s all going to be in layman’s terms so it’s easy to digest.
Let’s start right at the beginning with the main purpose of the Act. There are 4 things the National Credit Act does for South African consumers:
The National Credit Act regulates the consumer credit space in South Africa
The National Credit Act replaced 3 older pieces of legislation and its primary objective is to regulate the consumer credit space in South Africa. If you apply for any type of credit in your personal capacity (like a personal loan, credit card, mortgage or car finance) each step in that process is regulated by the National Credit Act. From a consumer standpoint, this is important to know because the credit provider needs to tow the line, and you have recourse if they don’t.
The National Credit Act prohibits unfair credit and credit-marketing practices
Outside of promoting and regulating a fair and non-discriminatory credit marketplace, probably the second most important purpose of the Act is to protect consumers from unscrupulous marketers and reckless lending. A fair portion of the Act deals with “grey marketing” and what consumers are legally allowed to do if they feel they have been duped into taking out a credit product. An example of the type of marketing that is prohibited pertains to anything that is completely misleading.
Do you remember personal loan marketing that looked something this?
“Hi Mr Jones, you’ve been pre-qualified for a R50 000 personal loan.’’
That simply doesn’t fly anymore under the National Credit Act.
More of that to follow in future blog posts.
The National Credit Act protects consumers from “reckless lending”
Reckless lending is nothing more than a credit provider who is pushing through a loan deal, knowing very well the person applying for the credit can’t make an informed decision (or even worse is already over-indebted). The Act is ruthless when it comes to credit providers dishing out credit to people who are up to their eyeballs in debt or haven’t been taken through the Ts&Cs. As a credit consumer, if you feel like you’ve been pushed to make a decision, you are protected via the Act.
The National Credit Act allows for debt restructuring in the case of “over-indebtedness”
If you are constantly in a negative cashflow position at the end of every month because you have too many debt repayments, you might be a candidate for Debt Review (also referred to as Debt Counselling).
The National Credit Act makes a provision for anyone who is legally “over-indebted” to apply for the Debt Review process. Debt Review is a voluntary process that you enter, and it allows a registered Debt Counsellor the opportunity to negotiate reduced debt repayments on your behalf, with your credit providers. Once you are in the Debt Review process you will not be able to apply for any additional credit (that’s the downside) until you have squared away all your outstanding debts.
Not everyone is a candidate for the Debt Review process and the Act uses a formula to work out if you are indeed “over-indebted”.
Feel free to use our calculator to work out if you are over-indebted.
The SA Debt Advisors Team
