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What is the National Credit Act and National Credit Regulator?


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National Credit Act

The purposes of the National Credit Act is to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers. The Act establishes a National Credit Regulator, to carry out education, research, policy development, registration of industry participants, investigate serious complaints, and ensure enforcement of the Act.

Objectives of the National Credit Act

“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.”

Key features of the National Credit Act

• Language in credit agreements must be in simple and understandable;
• Quotes must be given on all credit agreements, and are binding for 5 days;
• Advertising and marketing must contain prescribed information on the cost of credit;
• Credit sales at a person’s home or work are strictly limited;
• Reasons must be provided if a credit application is declined;
• Automatic increases in credit limits are regulated;
• Reckless lending is prohibited;
• Interest and fees are regulated on all agreements, including micro-loans;
• Credit Bureaux are regulated and consumers have the right to a free credit bureaux record;
• Debt counselling is introduced, to enable restructuring of debts for over-indebted consumers.

When Did The Act Come Into Effect?

The Act comes into effect on the 1 June 2006. Certain sections will become effective at a later date. Institutions:
• The National Credit Regulator is established with effect from 1 June 2006.
• The National Consumer Tribunal is established with effect from 1 September 2006. Registration:
• Credit providers and credit bureaux must register within 40 working days from 1 June 2006.
• Debt Counsellors must register before 1 June 2007. Conduct & compliance:
• The sections on credit bureaux and credit information become effective on 1 September 2006.
• The remaining compliance sections become effective on 1 June 2007. This includes the sections on disclosure, limits on interest & fees, reckless lending and all related compliance requirements.
• The sections on debt counselling & debt restructuring become effective on 1 June 2007.

Which transactions fall under the Act?

• Loans and other credit from banks, including mortgages, overdrafts, credit cards, vehicle finance and any other personal finance;
• Furniture finance, clothing accounts and any other type of credit from retailers;
• Micro-loans and pawn transactions;
• Any other type of credit or loan provided to a consumer.

What is the role of the National Credit Regulator?

The National Credit Regulator has to
• Register credit providers, credit bureaux and debt counsellors, and monitor the conduct of these parties;
• Educate and create awareness of the protection which the Act offers;
• Research the credit market and monitor access to credit and the cost of credit to identify factors that may undermine access to credit, competitiveness and consumer protection;
• Advise government on policy and legislation;
• Receive and investigate complaints and ensure that consumer rights are protected, and
• Enforce the Act and take action against contravening institutions.

What is the National Consumer Tribunal?

The National Consumer Tribunal hears cases on non compliance with the Act, issues fines and provides redress to consumers. Consumers and credit providers may appeal to the Tribunal against any decision of the National Credit Regulator. The Tribunal is a separate institution that is independent of the National Credit Regulator. The Tribunal consists of a Chairperson and at least 10 other members.