CHRONICLE by monkey6

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CHRONICLE

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									CRUE CONSULTING

CHRONICLE
Welcome to the May edition of the Crue Consulting Chronicle. With the National Credit Act taking effect on 1 June 2007, we thought it would be a good idea to summarise this important piece of legislation in this month’s Chronicle.

May 2007
agreement plus 10% of the amount of the loan facility over R1 000. This fee is capped at R10 000 or 15% of the principal debt, whichever is the lowest. The maximum interest rate will be the repo rate (currently 9%) multiplied by 2.2 plus 10% per year i.e. currently 29.8%. Micro-loans: For loans of less than 6 months, the maximum interest payable is 5% per month. For loans of more than 6 months, the maximum interest rate will be the repo rate multiplied by 2.2 plus 20% per year i.e. currently 39.8%. Incidental credit agreements: These include loans such as cell phone or doctor’s accounts. If you fail to pay the account by the due date and it runs into arrears, the supplier can levy interest of up to 2% per month. Mortgage bonds: The maximum initiation fee will be R1 000 per agreement plus 10% of the amount of the agreement over R10 000. Once again, this is capped at R5 000 or 15% of the principal debt, whichever is the lowest. The maximum interest rate on mortgages will be the repo rate multiplied by 2.2 plus 5% per year i.e. currently 24.8%. Interestingly, if a bank approaches you with a more attractive interest rate on your home loan and you agree to switch credit providers, the bank is not permitted to charge you an initiation fee on the transfer of your bond. In addition, the new legislation makes it clear that banks may no longer dictate which insurer you must use for your home-owner’s cover or your vehicle insurance. Whilst the bank may insist that you have sufficient insurance in place, you are free to purchase insurance through an insurer of your choice. How does the NCA assist those who are already in the debt trap? The National Credit Regulator (NCR) has, since January 2007, been training a number of debt counsellors. These debt counsellors are available to any individual who feels that he/she is over-indebted. The debt counsellor is able to provide advice with regard to budgeting and saving.

About the National Credit Act
The National Credit Act (NCA) has been designed to protect consumers from institutions offering loans or credit of any sort. The NCA will serve to put a stop to exorbitant interest charges, as well as fees hidden in credit agreements. It also puts an onus on the borrower to disclose his/her personal circumstances in order for the lender to fully assess the borrower’s ability to service the debt. What are the key features of the NCA? Some of the key features include: Credit providers have to explain your rights to you before you enter into a credit agreement and must ensure that you can afford the repayments. Individuals will be obliged to provide more comprehensive personal information when applying for loans or credit. Interest rates and the fees charged by credit providers have been capped. Individuals will have access to debt counsellors in the event of over-indebtedness. Prospective employers must obtain your permission before performing a credit check, and they can only request credit checks where the job entails the handling of money. Marketing of credit at your home or workplace is strictly prohibited. Negative option marketing is prohibited. This means that credit providers cannot offer you credit on the basis that, if you do not respond to the offer, you automatically receive the credit. Individuals have the right to be supplied with reasons if a loan or credit is not approved. Can the NCA determine interest chargeable by credit providers? Yes, with effect 1 June 2007, fees and interest rates will be as follows:

Vehicle finance, credit cards, overdrafts and store cards: The maximum initiation fee will be R150 per
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They are also able to act as mediators between the debtor and the credit provider. Individuals are able to approach debt counsellors directly, or they may be referred to a debt counsellor by a magistrate or creditor. Once an individual is registered for debt counselling, they are unable to take on new loans or credits until they have paid off all their debts and received a clearance certificate from the debt counsellor. How will the NCA affect credit bureaus? Under the new legislation, creditors will not simply be able to “blacklist” individuals with the credit bureaus. From 1 June 2007, credit providers must give individuals 20 days’ notice in writing before they report any adverse information about the individual to the credit bureau. The onus lies with the credit bureau to ensure that the information that they have is correct. What are the obligations of the consumer? As a consumer, the onus will be on you to disclose all relevant personal information to the credit provider when you make application for a loan or credit. This could entail providing the credit provider with a total expense amount of all your debts, or the balances and instalments of all your debts. Where do individuals lodge complaints about bad credit listings? You can contact the two main credit bureaus in South Africa at TransUnion on 0861 482 482 or Experian on 0861 105 665. The Credit Ombudsman is contactable on 0861 662 837.

planners from Crue Consulting will assist the delegates in preparing their own personal budgets.

Above: Craig Torr presents at the Financial Literacy Course for Domestic Workers which is run by Crue Consulting for the Pinelands and surrounding communities. For more information on this course, please visit our website at www.crue.co.za.

Andrew Bradley speaks at client function
On Thursday, 24 May, Andrew Bradley (CEO of acsis and co-author of Fortune Strategy) presented to about 30 of Crue Consulting’s financial planning clients at our offices in Pinelands. Andrew’s presentation focused on the concept of lifestyle financial planning. During the talk, Andrew explored issues such as timing the investment market, phasing-in and phasing-out your investments and the dangers of “stock-picking”. Andrew Bradley reinforced the acsis investment philosophy which is centered on “Choosing the life you want to live”. Essentially you, the investor, choose the post-retirement lifestyle you wish to lead. Your desired lifestyle will determine the returns that your investment needs to achieve in order to reach your goals. Your required investment returns will then determine the asset allocation of your investment. Your investment asset allocation will thereafter determine your risk profile as an investor. For more information on lifestyle financial planning, please visit our website at www.crue.co.za as well as the acsis website at www.acsis.co.za. Wishing you warmth and wellness through the chilly months! Yours sincerely

Financial Literacy Course

We have recently completed Part 2 of the Financial Literacy Course for Domestic Workers wherein we focused on loans from micro-lenders. The first session, which was held in April 2007, focused on Interest and the concept of paying Interest on debt and earning Interest on savings. In the second session, we placed emphasis on the impact that the National Credit Act will have on micro-lenders. We have been very encouraged by the attendance at these sessions, as well as by the participation of the delegates. The next session is scheduled for 28 June 2007, and the focus will be on teaching the delegates how to prepare and manage a budget. The delegates have been encouraged to bring a list of their monthly incomes and expenses, and financial

The Crue Consulting Team

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