South African private motoring consumers will experience increased affordability and more security in their finance agreements under the new National Credit Act which will come into effect on June 1.
The act came into existence in June last year and has begun to take effect in stages since then and during the course of this year.
Maria Ganhao, general manager of AA Finance, said the Act places increased onus on credit providers to ensure consumers are fit for the credit they've requested.
Ganhao said credit would also become available to a much larger portion of the population because the system would also provide valuable data from all credit providers, not just the major banks. She said this would be implemented with the creation of the National Loans Register.
"Credit offered by various types of stores and lenders in the informal sector has been largely unmonitored, but the information gathered and published by the National Credit Regulator (NCR) will provide a substantially more realistic picture of the credit in the market," said Ganhao.
She said the impact would not only be felt by the major commercial banks, but also by independent vehicle financing operations, no matter how large or small.
The act will have its greatest impact on the motor industry.
"Until now, the responsibility of settling outstanding loans has rested squarely with the borrower.
"Going forward, the onus will be more on the lender to ensure the borrower is financially fit to sustain the load of the loan.
"Effectively, it means that in the event of a financial agreement going bad, we would have to prove the borrower appeared to be financially strong and secure enough to service the loan requirements.
"The confusing and lengthy documentation usually associated with loan agreements will, in future, have to be made clearer to the lender under the new act," she said.
Ganhao said consumers would be warned of all the costs involved and any hidden fees and commissions would have to be disclosed.
The act should drastically reduce "reckless" lending by creditors in that consumers legally have the right to be best informed before entering into an agreement.
"AA Finance has been compliant from inception and the principles of the new act form the basis of how we like to do business," said Ganhao.
To help educate consumers, AA Finance has taken a transparent approach.