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?
Pages to are hidden for
"Free Printable Lease Agreement - PowerPoint"Please download to view full document