Let the credit provider beware

The National Credit Bill came under the spotlight yesterday at legal firm 
Bowman Gilfillan in Sandton with the news that any institutions that have not yet registered themselves as credit providers by the deadline in June 2006, would have to wait until they had been issued their certificates before they could legally begin trading again.

Those businesses that had registered before the deadline were allowed to continue trading even though they didn't have their certificates.

And while portions of the Act came into being there is one glaring loophole that has yet to be patched up. It appears that the new Act has repealed all other related Acts, including the Usury Act, which essentially is centered on the interest rates that institutions can charge.

The national credit regulator says that in his mind it's very simple: the new Act will determine the point of departure and all credit agreements, and interest rates to be charged - including incidental credit agreements fall under the jurisdiction of the new Act, effective June 2006.

The problem is that the portion of the Act covered by the Usury Act only comes into effect in July next year (2007).

So in theory the registered institutions can charge any interest rate they like. In practice however it appears that there is another piece of legislation that has co-incidentally closed that loophole - in theory at least.

As one source put it - it will need a test case to determine who is right - the regulator or the legal professionals working for these credit providing institutions.

And while the 'newish' Act does protect the consumer it has by implication meant that businesses have had to change they way they do business. The business terms and conditions have to be modified, and disclosure of all costs and fees and penalties must be made.

Debt collection becomes a huge issue as it appears that there is now a regulated process in place and institutions need to comply.

In essence the consumer has to be notified in writing that the debt is due, he or she is given 20 days in which to meet a debt counselor and resolve the matter, either by restructuring the debt or appealing to the court for assistance. They then have a further 10 days in which to reach agreement.

In terms of repossessing goods, the consumer can no longer be forced to sign any document at the beginning of the commercial relationship, giving the institution the right to enter the property to reclaim the products. Permission must be gained from the consumer once due process has been followed.

It also appears that it products are repossessed they become property of the state?

And there's more. All credit agreements must be reported to the national credit regulator, so as of 1 July 2007 the regulator is going to need one very big room to house all this documentation.

And there's more. Consumers can demand that all credit agreements are produced in an official language of their choice.

And in order to protect the consumer even further no more credit selling to people in their homes or at least away from their place of work.

Editor's thoughts:
* Disclosure is the name of the game and consumers are now well-protected from unscrupulous institutions, in terms of credit. Let the seller beware