The National Credit Act (NCA) was introduced and signed into law by the President on 15 March 2005. In general terms, it was introduced to hold all consumer credit providers to a standard and require them to comply with the Act. It guarantees every consumer’s right to access to credit while preventing over-indebtedness. 

 

What does the NCA do?

 

  • Promotes the social and economic welfare of South African citizens.

Credit and debt can have a negative impact on the livelihoods of working-class citizens. The NCA ensures that the credit process is not taken lightly, by credit providers and borrowers alike. 

 

  • Promotes a fair and transparent credit market.

Overall regulation and monitoring of the credit market keeps track of all parties involved and minimizes fraud. 

 

  • Protect credit market consumer rights.

Fair and open access to the credit market is important to uphold, one that is non-discriminatory, controlled, and responsible.

 

  • Regulates credit providers, including debt counselors and the credit bureau by acting as the National Credit Regulator.

Credit providers have to register with the NCR to operate legally. Consumers can also complain directly to this authority about disputes with their credit provider or the credit bureau. 

 

  • Limits credit costs.

The NCA monitors the cost of credit across all credit providers according to consumer circumstances. 

 

  • Standardizes how and which credit is granted by credit providers.

All credit providers have to treat and handle credit products in the same way.

 

  • Simplifies the information in credit agreements.

This information has to be in simple language to allow consumers to easily compare agreements from different credit providers, encouraging informed decision making. 

 

  • Assists over-indebted consumers by restructuring their debt.

The Act provides consumers who are unable to manage their monthly repayments with assistance from debt counselors. This aims to prevent over-indebtedness and encourages responsible lending. 

 

  • Establishes the National Consumer Tribunal for matters relating to the Act.

The NCT is an independent consumer court tasked with handling hearing cases relating to consumer complaints and disputes with credit providers.

 

Which products fall under the NCA

 

Credit products are regulated by the NCA, in terms of how they are issued and to whom. These products include;

 

  • Personal loans
  • Home loans
  • Business loans (depending on threshold values applicable to the consumer)
  • Overdrafts
  • Credit cards
  • Asset-based finance:
  • Installment sale agreements
  • Lease agreements

How does the NCA affect you?

 

The main purpose of the NCA is to protect consumer rights in the credit market. These fundamental rights are;

 

  1. The right to a reason for your credit being refused or discontinued, in writing. 
  2. The right to information in plain and understandable language.
  3. The right to have access to and to challenge credit records and information held by the credit bureau and to be given notification if negative information is reported to them.

 

Along with these rights; the right to apply, to confidentiality, and to non-discriminatory process is standard. The NCA also protects you against aggressive advertising. Negative-option marketing is strictly prohibited, i.e. services or goods offered to you with the condition that after a certain period if you don’t refuse the service, you have bought it. Another form of aggressive advertising is the marketing of credit at your home or place of work unless you have arranged it. You must also be given the option to decline or be excluded from marketing campaigns or customer lists. 

 

The NCA protects against over-indebtedness, by making it necessary for credit providers to properly assess your ability to meet credit obligations. This is done through evaluating your;

 

  • Understanding the risks, costs, and obligations of the proposed agreement
  • Ability to make monthly repayments on time in the context of your financial status and credit history. 

 

It is up to you as the consumer to ensure that you understand what is asked during this evaluation period. Doing so will also prevent you from signing a reckless credit agreement that does not benefit your situation. 

 

When applying for credit products that fall under the NCA, your credit provider will draw up a pre-agreement detailing all the main features of the credit agreement and a quotation of the proposed costs. These pre-agreements are binding to the credit provider for 5 days to allow you to search and shop for the best credit arrangement with other providers during this period. 

 

Be sure to fully understand your consumer rights before entering into a credit agreement and find the best deal that will help you reach your financial goals, responsibly.