Lending and borrowing can be a complicated business and because money is involved, there are always risks. The National Credit Act (NCA) was created to protect consumers and credit providers by setting out the rules that govern the credit industry.
Let’s take a closer look.
In short, the National Credit Act is there to protect consumers against ruthless credit providers and to make it possible for them to complain and take action if they have been treated unfairly. It achieves this by giving you, the consumer, the following rights:
Application for credit The Act says every person has the right to apply for credit. However, that doesn’t mean that you have the right to receive credit.
Discrimination
A credit provider can refuse to give you credit for business reasons, but it may not discriminate against you on the grounds of race, gender, religion, age, and so on. Everybody must be treated equally and their applications must be assessed in the same way.
Credit assessment
Credit providers must take reasonable steps to prevent reckless lending and over-indebtedness by first making sure that you can afford the loan you’ve applied for. However, the Act only protects you when you answer the questions on the application form honestly and fully.
Decline of credit
You have the right to be given a reason, in writing, why your credit application was refused.
Language Credit agreements must be easy to understand, written in plain language. The credit provider must also explain the document to you and answer all your questions. If you do not understand the terms and conditions of the document, you should not sign it.
Documents
The NCA states that you must receive a pre-agreement statement and quotation (which is valid for five days so that you have enough time to think about your decision). It also specifies what information can and cannot be written into the final agreement, and states how often the credit provider must send you a statement.
Fees and charges
The NCA states what fees credit providers may charge, and how much those fees can be.
Credit information
Credit providers must report new credit agreements, or changes to existing agreements, to all credit bureaus in South Africa. You have the right to one free credit report a year, and you can query or challenge any information about you that is kept by credit bureaus. The credit bureau or National Consumer Regulator (NCR) must investigate this at no charge to you, and correct any mistakes.
Confidentiality
Credit bureaus and credit providers must protect the confidentiality of the information they have about you. They may only use your information for the purpose you gave it to them.
Marketing of credit
Credit providers may not harass you or be untruthful in their marketing. This means an agent may not come to your house or place of work unless you have invited them or they have a financial wellness agreement with your employer.
Termination and settlement
You have the right to settle your loan at any time and end the credit agreement.
Debt enforcement
The NCA explains how a credit provider can go about collecting outstanding debt from you, for example, the letters they have to send you, and how long you must be in default before they can take legal action against you.
Debt counselling
When you cannot repay your debts, you have the right to ask for help from a debt counsellor.
The credit provider’s rights
Under the NCA, credit providers have the right to:
- Access your credit records – with your permission – when you apply for credit.
- Decline credit, but they must tell you why.
- Receive regular repayments from you, as agreed in the credit agreement.
- Take steps to collect the debt you owe, as per the credit agreement.
- Ask that a court orders you to pay any costs they have incurred in collecting debt from you.
The credit provider’s duties
In terms of the NCA, credit providers have to:
- Do a credit assessment.
- Take all reasonable steps to prevent you from becoming over-indebted.
- Supply you with a statement of account.
- Give you a pre-agreement statement and quotation.
- Give you a copy of the credit agreement.
- Tell you about all the costs involved in the agreement.
- Report regularly to all registered credit bureaus and the NCR.
- Advise you to seek help when you are in default.
- Keep records of all applications, agreements and accounts for a specific time.
An informed consumer is an empowered consumer. Make sure you know and understand your rights and duties before you even start talking to a credit provider about a loan.
