New credit act builds fairness

The new National Credit Act sets a framework for every type of credit transaction, from micro loans, home loans and overdrafts to furniture finance.

The new National Credit Act sets a framework for every type of credit transaction, from micro loans, home loans and overdrafts to furniture finance.

It introduces new rights for consumers as well as measures that help them make informed decisions before buying on credit. It also gives greater leeway to credit providers to refuse credit.

The way credit bureaus do business will now also be regulated.

The new law replaces the Usury Act which governed money-lending agreements, the Credit Agreements Act which governed hire-purchase agreements and the exemption notice to the Usury Act which had exempted micro-lenders from the interest rate cap imposed on banks.

It was introduced to help consumers borrow responsibly, to prevent them borrowing more than they can repay and to protect them through the creation of a national credit regulator, a national consumer tribunal and a debt counselling service.

It will educate consumers to make informed financial decisions, something they couldn't do in the past because lenders were seldom transparent in their dealings.

The NCA covers most credit products where interest is charged, including overdrafts, credit cards, mortgages, instalment agreements, leases, secured loans and credit guarantees.

Now consumers must be told why credit is being refused or discontinued.

Credit agreement information will become available in all South African languages and the information must be in plain and understandable language.

Every consumer has the right to a free credit report each year.

Advertising and marketing is also restricted and can no longer produce misleading advertising.

The law requires credit providers to conduct a proper assessment of each consumer's ability to meet obligations, but the onus is on the consumer to provide accurate information.

Quotations for credit must disclose the full costs of a loan, including all fees. Quotes are binding on lenders for five days, allowing consumers to shop around for the best deal.

Consumers must give detailed information to lenders for a credit assessment. Records of credit agreements must be sent to a credit bureau and lenders must keep records of all credit applications for a prescribed period.

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