All South African credit providers will have to register under the National Credit Act, regardless of loan amount

Lloyd Chater, partner in Bowman Gilfillan Africa Group's corporate department.

Before 11 May this year, a person was required to register as a credit provider under the National Credit Act 34 of 2005 (the Act), if the total principal debt owed to that party under all outstanding credit agreements exceeded R 500 000 (or if they are the credit provider under at least 100 credit agreements). That threshold has been reduced to zero in the latest Government Gazette. This means that all credit providers are now required to register as credit providers if they fall within the definitions of providing credit under the Act.

According to Lloyd Chater, partner in Bowman Gilfillan Africa Group's corporate department, "Although, up until now, all credit providers who provided credit to a consumer were required to comply with certain provisions of the Act by virtue of the fact that they were providing credit, not all such credit providers were required to register as credit providers. Under the new prescription by the Minister, even if a loan of R 1 is given on credit (in that more than R 1 is repaid), the credit provider must register.

"Failure to register will mean that the credit provider may only be able to recover the capital amount granted to the consumer, but not any interest or other fees charged to the consumer (which is the result of a 2012 Constitutional Court ruling in National Credit Regulator v Opperman and Others )," he explains.

Chater says that all arms’ length credit agreements, including loans given by companies to their employees where a fee or interest is levied for such loan, will require the credit provider to register. Registration encompasses the need to comply with a number of onerous provisions under the Act, and to pay the registration fee (or annual renewal fee, as the case may be) to the National Credit Regulator.

He notes that section 42(2) of the Act states that the threshold takes effect six months after the date of publication in the Gazette. This means that the new threshold will take effect on 11 November 2016. Applications to register will need to be made in sufficient time before that date in order to ensure that they are fully compliant by 11 November 2016.

"The administrative effect of this change can’t be understated as it has ramifications (subject to certain express exclusions) for any party granting credit to any individual; and/or corporate entity (unless such corporate entity has a turnover or asset value of over R 1m, or, if not, the credit agreement is for an amount of over R250 000)," he adds.