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									National Credit Act 34 of
          2005

14 JUNE 2007
Presented by Tania Jooste
JOOSTE & LEIDIG INC.
                  Objectives
•   Welcome
•   Backround to National Credit Act
•   Aims and purposes
•   Role players
•   Registration as credit provider
•   Application of Act
•   Rights of consumers (consumer credit policy)
•   Impact on credit process
•   Debt enforcement procedure
•   Miscellaneous matters
•   Questions and answers
                Role Players ito NCA

       National Credit Act
(Department of Trade and Industry)
                                     Tribunal

       National Credit
       Regulator (NCR)


        Credit providers


                                      CONSUMER
        Credit bureaux



        Debt counsellors
  National register of credit agreements



• One single register established and monitored by the
  NCR
• Reflect all outstanding credit agreements
        Credit providers must register

• credit provider under > 100 credit agreements
• total principal debt owed to credit provider under all
  outstanding credit agreements > R500 000
• each associated person:
   – that credit provider in own name and
   – fall within the above requirements
   must apply for registration in its own name
• A credit agreement entered into by a credit provider
  required to be registered - but not, is an unlawful
  agreement
  AND VOID!
            Duties of registrant

• Must post the certificate or duplicate in any
  premises at or from which conducts
  registered activities

• Reflect registered status and number on all
  credit agreements and communication with
  consumers
• Comply with conditions of registration and
  provisions of Act
          Which credit agreements?
• ―arms length‖ made within, or having effect within
  RSA
• Where NCA applies to credit agreement:
   – continues to apply to agreement even if a party to
     that agreement ceases to reside or have its
     principal office within the Republic; and
   – applies in relation to every transaction, act or
     omission under that agreement, whether
     transaction, act or omission occurs within or
     outside the Republic
 Credit agreements it will NOT apply to?
• Policies of insurance and leases of immovable property.
• Agreements between parties dealing closer than at arms length
  (between family members, partners and friends on informal basis)
• CONSUMER:
   – juristic person (as defined) whose asset value or annual
      turnover equals or exceeds the threshold value of R1 000
      000
   – the state or an organ of state
• Large agreement where consumer a juristic person whose asset
  value or annual turnover is, at the time the agreement is made,
  below the threshold value of R1 Million
• Credit provider located outside the Republic, approved by the
  Minister on application by the consumer in the prescribed
  manner and form
• Where Reserve Bank the credit provider
                      Juristic person
                                                 Juristic   Natural
Private Individual                                          a
Trust/s     ≥ 3 Trustees
                                                 a
            1 Trustee (1 Juristic Trustee)*      a
            1 Trustee (1 Natural Trustee)                   a
            2 Trustees (1 Juristic Trustee & 1
            Natural Trustee)                     a
            2 Trustees (2 Natural Trustees)                 a
            2 Trustees (2 Juristic Trustees)     a
Sole Proprietor                                             a
CC                                               a
Pty (Ltd)                                        a
Partnerships                                     a
     When Act not applicable to Juristic
           person as consumer
• Asset value or annual turnover ≥ the threshold value of R1 Million
• Large agreement where juristic person asset value or annual
  turnover is, at the time of the agreement ‹ the threshold value
  of R1 Million
• Sections that do not apply where juristic person consumer:
   – Chapter 4 Parts C and D
       • credit marketing practices, over-indebtedness and
         reckless credit
   – Chapter 5 Part A section 89 (2)(b)
       • agreement that results from negative option marketing
   – Chapter 5 Part A section 90(2)(o)
       • provision in contract that interest rate variable but not
         linked to a reference rate
   – Chapter 5 Part C
       • interest, charges and fees
          Types of credit agreements
                          credit facility,
                        credit transaction,
                       credit guarantee, or
                  any combination of the above
• Credit facility
   – credit card, line of credit , overdraft
• Credit transaction
   – mortgage (of immovable property), lease of personal
     property, secured loan (secured by pledge of personal
     property), instalment account, discount account, pawn
     transaction, incidental credit agreement, or other similar
     transaction - eg unsecured loan
• Credit guarantee
   – surety
   – NCA applies to a credit guarantee only to the extent that it
     applies to a credit facility or credit transaction in respect
     of which the credit guarantee is granted
      Categories of credit agreements
• Provides for the use of thresholds to sub-divide the market by
  size of transaction, creating three categories of credit
  agreements, as follows:

   – Small (prescribed F20)
      • credit facilities, if credit limit ≤ R15 000, or
      • credit transactions (not mortgages) and principal debt ≤
        R15 000
   – Intermediate (any form that complies with prescribed
     requirements)
      • credit facilities, if credit limit falls › R15 000, or
      • other credit transactions and principal debt between
        two thresholds of R15 000 and R250 000
   – Large (any form that complies with prescribed
     requirements)
      • mortgages of all sizes; and
      • other credit transactions ≥ R250 000
    Right to apply for credit and not be
       unfairly discriminated against
• Every-one (adult natural and juristic person) has a right to apply
  for credit
• Credit provider has right to refuse to enter into credit
  agreement on reasonable commercial grounds that consistent
  with its customary risk management and underwriting practices
Right to reasons for credit being refused

• On request and in writing the dominant reason for:
   – refusing to enter into a credit agreement with that
     consumer;
  Right to receive documents in official
                 language
• Consumer has right to receive any document required
  ito the Act in an official language that consumer
  reads or understands
• Submission to NCR proposing at least two official
  languages
        Right to information in plain and
            understandable language
•   Documents to be provided:
     – in prescribed form, if any, for that document; or
     – in plain language, if no form prescribed for that document
•   Plain language
•   NCR may publish guidelines for methods of assessing whether
    document satisfies requirements
           Right to receive documents
• Must deliver in prescribed manner, if any and in paper or
  printable electronic form
• If no method prescribed for delivery, document must be made
  available through one or more of the following mechanisms—
   – in person
       • at business premises of credit provider, or
       • consumer can designate at the consumer's expense
   – by ordinary mail, fax, email or printable web-page
• Consumer may choose
• Must not charge fee for original copy
• On written request must give consumer:
   – single replacement copy without charge to the consumer
      within 1 year after original delivery; and
   – any other replacement copy, subject to search and
      production fees permitted by regulation
       Right to confidential treatment
• Confidential information about consumer/prospective consumer
  to be treated in specific manner
• Number of persons have access to this information - such as:
   – credit providers, debt counsellors, credit bureaux, the
     Tribunal, the Regulator
   – when they receive, compile, retain or report the information
   – must protect confidentiality of the information.
• Must only:
   – use information for purpose permitted in NCA and other
     legislation; AND
   – report or release information only:
       • to extent that NCA or other legislation requires or
         allows;
       • as instructed by consumer/prospective consumer;
       • as directed by order of court or Tribunal.
                      Advertising
   Must not advertise availability of credit if required
    to be registered, but is not
   Must comply with Act and not advertise a form of
    credit that unlawful, misleading, fraudulent or
    deceptive;
   In any advertisement concerning the granting of
    credit must contain interest rate and other credit
    costs in prescribed manner and form.
   Solicitation with purpose to induce person to apply
    for or obtain credit must contain statement required
    by law
    (eg a/m payable; number of repayments; deposit
    payable; interest rate percentage etc.)
                      Marketing

• Negative option marketing prohibited

• Credit agreement entered into as a result of this
  practice or such provision will be unlawful and void!
                     Marketing
• May not market credit at consumer’s home or
  workplace
• Only allowed if consumer invites credit provider to
  visit for that purpose
• May enter into a credit agreement at consumer’s
  home if:
   – consumer arranged visit with credit provider;
   – credit provider visited to offer goods or services
     for sale and incidentally offered to provide or
     arrange credit to finance the goods or services; or
   – the Act allows for the type of credit agreement to
     be entered into during visit to house
     (eg developmental credit)
      Interest rates, fees and insurance

• Principal debt
   – amount deferred in terms of agreement (plus value of any
      item as per section 102)
• Initiation fee
   – only if application results in establishment of credit
      agreement
   – may not exceed prescribed amount
• Service fee
   – on credit facility - may be payable monthly, annually, per
      transaction basis or a combination of periodic and
      transaction basis; or
   – any other case - may be payable monthly or annually
   – must not exceed prescribed amount

   In duplum
      Interest rates, fees and insurance
• Interest
   – annual percentage rate calculated in prescribed manner
   – not to exceed applicable max prescribed rate
   – interest rate applicable to an amount in default or an overdue
     payment may not exceed the highest interest rate applicable
     to any part of the principal debt under that agreement
   – an interest charge may only become payable or be debited at
     any time after the day to which it applies
   – may provide for the interest rate to vary during the term of
     the agreement only if the variation is by fixed relationship to
     a reference rate stipulated in the agreement
      Interest rates, fees and insurance
• Default administration charges
• Collection costs
   – prescribed maximum and imposed only to permitted extent
• Ito s102 may include in principal debt of instalment agreement,
  mortgage agreement, secured loan or lease - IF applicable:
   – an initiation fee;
   – the cost of an extended warranty agreement;
   – delivery, installation and initial fuelling charges;
   – connection fees, levies or charges;
   – taxes, licence or registration fees; or
   – premiums of any credit insurance payable in respect of that
      credit agreement (subject to section re insurance)
         Prevention of reckless credit

• CREDIT PROVIDER PROHIBITED FROM ENTERING INTO
  RECKLESS CREDIT AGREEMENT WITH PROSPECTIVE
  CONSUMER
• Take reasonable steps to assess consumer’s understanding and
  appreciation of:
   – risk and costs of the credit and
   – rights and obligations under the credit agreement
• Assess consumer’s debt re-payment history and existing
  financial means, prospects and obligations
• Take reasonable steps to assess if business venture consumer
  has in mind by applying for credit, will be successful.
• Credit provider may determine what type of evaluative models
  and procedures to use to do required assessments
   – provided it is fair and reasonable.
26
           Pre-agreement statements

• Must give consumer pre-agreement statement and quotation in
  the prescribed form (F20) before entering into small agreement
• Before entering into intermediate or large agreement must give
  consumer
   – pre-agreement statement in form of proposed agreement; or
     in another form addressing all matters required and
   – quotation in prescribed form, setting out principal
     debt,proposed distribution of amount, interest rate and
     other credit costs, total cost of the proposed agreement
     etc.
• QUOTATION TO BE VALID FOR 5 BUSINESS DAYS!
• Pre-agreement statement and quotation must be delivered to
  consumer in a paper form or in a printable electronic form
                  Credit agreements
• Small credit agreement must be in the prescribed form (F20)
• Intermediate or large agreement must be in the prescribed
  form, if any, for category or type of credit agreement
  concerned - otherwise must comply with any prescribed
  requirements
• Consumer must be given a copy of the credit agreement without
  charge in a paper or printable electronic form
• Credit agreement must not be unlawful or contain unlawful
  provision
• A unlawful provision is VOID AB INITIO
• If credit agreement unlawful ito Act - court or Tribunal must
  order void from date entered into:
   – credit provider to refund consumer any money paid with interest
   – credit provider’s rights to recover money paid or goods
     delivered cancelled, unless would unjustly enrich the
     consumer - then forfeited to State
Unlawful credit agreements and provisions

• Unlawful agreements:
   – minors; mentally unfit; under administration and
      administrator has not consented; unregistered credit
      provider; ―negative option credit‖
• Except if credit provider ―induced‖ or ―mislead‖ into entering
  into agreement
• Unlawful provisions:
   – deceitful; fraudulent; general purpose of effect to defeat
      Act; purports to waive prescribed ―common law rights‖;
      automatic increases in credit limit; alterations without
      consent; retains bank card ID or pin; representative is agent
      of consumer; pre-authorisation to enter premises for
      repossession; power of attorney; consent to payment
      prioritisation; allow general set-off; interest variations
             Debit order authorisation
• No priority may be given to one credit provider over another in
  processing of payments
• Charge or series of charges may be made only for an amount
  that is:
   – calculated by reference to the obligation it is intended to
     satisfy under the credit agreement and
   – specifically set out in the authorisation
• Charge or series of charges may be made only on or after a
  specified date, or series of specified dates:
   – corresponding to the date on which an obligation arises, or
     the dates on which a series of recurring obligations arise,
     under the credit agreement and
   – specifically set out in the authorisation
• Any authorisation not given in writing, must be recorded
  electromagnetically and subsequently reduced to writing
    Consumer’s right to rescind agreement
•   Applies only to lease or instalment agreement entered into at any
    place other than the credit provider’s registered business premises

•   Consumer may cancel agreement within 5 business days after date
    agreement was signed by consumer, by:
     – delivering a notice in the prescribed manner (regulation 34) to the
        credit provider;
     – returning any money or goods received, to the provider; or
     – paying in full for any services received from the provider.
•   When the consumer cancels agreement, the credit provider must return
    any money paid by the consumer within 7 business days of receiving
    notice of the cancellation
•   Credit provider may require consumer to pay for reasonable cost of
    having goods returned and restored to saleable condition and
    reasonable rent for the time that had use of the goods
     – unless the goods are in their original packing and have obviously not
        been used.
               Statement of account

• Must offer to deliver to each consumer periodic statements of
  account
• Maximum period between issuing statements of account is—
    one month, except as otherwise provided for in this
     subsection; or
    six months in respect of a mortgage.
• May agree to reduce frequency, but not more than three months
• No statement of account required where no movement on credit
  facility
• Form and content of statement of account for different
  categories of agreements regulated.
  Changes to interest, fees and charges

• Credit provider may not unilaterally increase service
  fees or applicable interest rate (except where
  variable interest rate)
• Must give 5 business day written notice if change in:
   – rate of interest;
   – amount of fee or charge; or
   – change in frequency or time for payment of a fee
     or charge
• Written notice of change to variable interest rate to
  consumer within 30 business days after day takes
  effect
       Alterations to credit agreements
• Any change to a signed and delivered credit agreement
  document is void UNLESS:
    the consumer's liabilities under the agreement is reduced;
    the consumer signs or initials in the margin opposite the
     change after the change is made;
    the change is recorded in writing and signed by the parties;
     or
    any oral change is recorded electromagnetically and
     subsequently reduced to writing.

• If parties agree to change the terms, credit provider must
  deliver document that reflects their amended agreement within
  20 business days!
  (does not apply where increase or decrease to the credit
  limit under a credit facility)
               Statement of account
• When consumer requests, must give free statement within 10 -
  20 business days (depending on whether info relates to 1 year or
  less) of all or any of following:
   • current balance;
   • amounts credited or debited during a period specified in
      request;
   • amounts currently overdue and when became due; and
   • amount currently payable and date became due.
• Must provide statement
   • orally, in person or by telephone; or
   • in writing, either to the consumer in person or by sms, mail,
      fax, email or other electronic form of communication, as per
      consumer when making request.
• Not required to provide written statement again within
  3 months from when gave last requested statement
       Statement of settlement amount

• Must deliver a free statement of amount required to settle
  credit agreement when requested by the consumer
• Must be delivered within 5 business days;
• May be delivered:
   – orally, in person or by telephone; or
   – in writing, either to the consumer in person or by sms, mail,
      fax or email or other electronic form of communication, as
      directed by the consumer when making the request; and
• Binding for 5 business days after delivery - except with regard
  to:
   – credits to credit facility account, or
   – charges made to credit facility account by or on behalf of
      consumer, after date on which statement was prepared
                     Right to settle
• Consumer entitled to settle credit agreement AT ANY TIME
  WITH / WITHOUT NOTICE OR PENALTY
• Amount required to settle credit agreement is total of :
   – unpaid balance of principal debt at that time;
   – unpaid interest charges and all other fees and charges
     payable by consumer up to settlement date
• Large agreements slightly different:
   – where fixed interest rate, an early termination charge of no
     more than prescribed charge; or
   – not fixed rate of interest, an early termination charge equal
     to no more than the interest that would have been payable
     under the agreement for a period equal to the difference
     between three months and the period of notice of
     settlement if any, given by the consumer.
       DO NOT ENTER INTO A RECKLESS CREDIT
                   AGREEMENT
•   Consumer may apply to debt-counsellor to be declared over-
    indebted (prescribed fee for consumer)
•   During the period of suspension:
     – consumer not required to make any payment required under the
       agreement;
     – no interest, fee or other charge under the agreement may be
       charged to the consumer; and
    – credit provider's rights under agreement unenforceable
                            Agents
• Credit provider must train employees or agents in respect of the
  matters to which the Act applies.
• Where agents used for solicitation, completion or conclusion of
  credit agreements:
   – agents must show identification card in prescribed manner
      and form (Regulations Form 37) to any person with whom
      agent interacts in solicitation, completion or conclusion of
      credit agreements
   – credit provider must maintain a register in the prescribed
      manner and form of all agents
• Register of Agents must contain
   – name of agent
   – identity number of agent / CIPRO or other official
      registration number
   – date of appointment of agent
   – description of activities which agent is authorised to conduct
• Register in written or electronic format accessible for
  inspection by NCR
                          Agents

• If a person who is not an employee or agent of a credit
  provider, solicits, completes or concludes a credit agreement
  for or on behalf of a credit provider or a consumer—
   – that person must be identified by name and identity
     number in the credit agreement and disclose to the
     consumer the amount of any fee or commission that will be
     paid if the agreement is concluded; and
   – any fee or commission to be charged to the consumer
       • must not exceed the prescribed amount; and
       • may be paid to that person only if the agreement
         is concluded
                      Keep records
• To keep records of all applications for credit, reasons for
  rejection of credit, credit agreements and credit accounts for
  prescribed time.
• Time period for such record keeping is currently 3 years as per
  Regulation 53:
   – from date of termination of credit agreement or
   – where application was declined, from date of receipt of
      application
• Maintain in paper or electronic format that must be reproduced
  in paper form within 5 business days after NCR request
• Regulation 52(4) states that if a person outsourced record
  keeping to a third party (ie Metrofile), the person remains
  responsible for maintenance of the records as required by the
  NCA
   – must ensure availability of the records without
      undue delay
    Pre-Existing Agreements
• Provisions that apply   • Provisions that have
  fully :                   Partial Application to
                            Pre-Existing
• Chapters1,2,3             Agreements:
• Sections 67,68,70-72,   • Chapter 4 – Part D
  95-98                     Sections 78 – 88
• Chapter5 – Part E       • Chapter 4 - Part A &
• Sections 122 & 123         Sec 91
• Chapters 6-9            • Sec 69
• Schedules 1 & 2         • Sec 89 and 90
                          • Sec 93 & Chapter 5
                             Part D
                                                     42
                        Legal Proceedings
 Credit Provider may
 proceed if                         Consumer in Default for 20 Business
                                    Days
                                                 AND
Sec 129(1) notice                   At least 10 business days have
delivered to consumer               lapsed since sec129(1) or s 86(10)
                                    notice has been delivered




                                   Consumer has not responded
                                   Consumer has rejected the
                                   proposals
                                   Not surrendered the goods – if
                                   lease, instalmentsale or
                                   secured loan.
                                   Shortfall after sale
                   PARTICULARS OF CLAIM
   Credit Provider registered
   and Registration Number      Consumer in Default for 20 Business
                                Days
                                             AND
                                At least 10 business days have
                                lapsed since sec129(1) or s 86(10)
                                notice has been delivered
Sec 129(1) notice
delivered to consumer
Annexed ?




                 Jurisdiction
                                NO DEBT REVIEW PENDING
    Alternative dispute resolution
             possibilities
Consumer has a                    National Credit
complaint                         Regulator
                    OR

Consumer has a                    Ombud with jurisdiction, e.g.
                                  Ombudsman for Banking services
complaint

                 OR if no Ombud


Consumer has a                    Consumer court
complaint
                    OR

Consumer has a                    Alternative dispute
complaint                         resolution agent
QUESTIONS
   AND
ANSWERS?

								
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