BER 210- Ch 12: CREDIT AGREEMENTS:

National Credit Act (NCA)

12.01 + 12.02; 12.10; 12.12 + 12.13 12.15; 12.17 (examples are NB); 12.18; 12.19(a), (b), (c) (only
the example of incidental credit), (d), (e) and (g) (in respect of the lease subject to the NCA it is
important to realise that the lessee must become the owner of the leased goods upon expiration
of the lease) and 12.20 (first 2 sentences only) 12.21; 12.24;

12.25 introductory sentence + (b) and (c); 12.26 (know only that “juristic person” ito the NCA
also includes partnerships, clubs and certain trusts and that the NCA applies only to smaller
juristic persons concluding smaller credit agreements), 12.28; 12.36 (first 2 sentences only)
 INTRO TO CREDIT
• Credit is important in the economy Enables consumers who can’t or choose not to
pay cash- use product prior to having paid for it
• Contracts Money is borrowed, goods purchased or hired or obtained on instalments
• These may easily be misused to exploit the consumer
• Very high finance charges, lack of proper disclosure of the cons obligations ito the contract, misuse
of remedies
• Extending of credit itself may create problems for the consumer (over-indebtness)
• Cons neds to be protected against bad credit grantors and own bad judgement- need statutory
protection= consumer credit legislation
• Therefore, the National Credit ACT 34 of 2005 (“the Act”) came into operation and
replaced the Credit Agreements Act and Usury Act.
• It address the contractual and financial aspects to which the agreement applies
• Contracts for purchase of land on instalments primarily regulated by the Alienation of
Land Act
• Parties= credit provider (supplies goods/services/advances money) & the consumer
 FIELD OF APPLICATION OF THE ACT
General rule the Act applies to: Agreement constitutes as a Credit
agreement if:
• every credit agreement
• between parties dealing at arm’s length • credit facility
• made within / having effect in Republic • credit transaction
• unless exception applies • credit guarantee
• Credit facility:
• Entail revolving credit- payments affected by the cons create new credit
• Def: credit facility provides for contracts of purchase of sale of movable goods on revolving credit
(buying goods with an in-store card)
• Difference between credit facility and instalments agreement lies in the transfer of ownership and
instalment agreement requires fixed-sum credit (payments affected by the cons do not create new
credit)
• Def of instalment agreement requires parties to address issue of transfer of ownership unlike a credit
facility
• Common-law rules apply- cons become the owner immediately upon delivery
• Def of credit facility include rendering servces on revolving credit (all transactions by which money is
borrowed with a credit card)
• Agreements which constitutes as Credit transactions
a) Pawn transaction party advances money/grants credit to another, and takes
possession of the goods as security. Estimated resale value is either more than
money granted or a fee, charge or interest is imposed. Once time has expired,
party can sell the goods and keep the money as settlement.
b) Discount transaction
• Goods/services provided to cons over a period of time. Lower/higher price is quoted
• Lower- if acc is settled on or before certain date
• Higher- payment after agreed date
c) Incidental credit agreement “overdue accs”
• Eg: auditor renders services and sends an acc to the client, should the acc specify
that interest/fee is payable only if acc is not settled before certain date, incidental cr
is granted 20 business days after the date that the auditor first charged interest or
date payment fee
d) Instalment agreement sale of movable property where price is paid by
periodic payments.
• Possession and use transferred immediately to consumer.
• Contract contains ownership reservation clause (credit provider can re-posess if
cons fails to pay (eg: cars)
e) Mortgage agreement credit agreement secured by pledge of immovable
property
f) Lease subject to the NCA it is important to realise that the lessee must
become the owner of the leased goods upon expiration of the lease
• Temporary possession of movable property and right to use property
• at end of term:
• Ownership passed to consumer absolutely; or
• upon satisfaction of conditions
g) Other credit agr (except a cr facility or cr guarantee)
• catch-all provision
• payment deferred and a fee/charge or interest is payable to credit provider
• Credit guarantee:
• person undertakes/promises to satisfy upon demand any obligation of another consumer
in terms of credit facility/credit transaction.
• Eg: suretyship agreements
• Act does not apply to the lease of immovable goods (because Act doesn’t apply to the
lease)
• Main features of credit agreements:
• deferral of payment/repayment or
• prepayment of debt (discount transaction) and
• fee, charge, interest payable

CONSUMER CREDIT INSTITUTIONS

• National Credit Regulator (“NCR”)
• National Consumer Tribunal (“Tribunal”)
• Primary function to enforce the Act and to regulate the consumer credit industry
 Transactions specifically or indirectly excluded
• Dealing at arm’s length: NCA only applicable if at arm’s length:
• When not dealing at arms length= NCA not applicable. Eg:
Natural persons in familial relationship who are co dependent on each other or one
dependant on the other
Each party not independent of other and doesn't not strive to obtain the utmost possible
adv out of the transaction. Eg: employer who extends a loan to an employee against a
nominal interest rate
• Exclusions:
• NCA only applies to smaller consumer juristic concluding smaller credit agreements
• “Juristic person” (annual turnover equals or exceed R1mil) ito the NCA also includes
partnerships, clubs and certain trusts
• Following aren’t credit agreements and Act does NOT apply:
• Insurance policies
• Lease of immovable property
• Stokvel transactions