Key Questions & Answers

KEY QUESTIONS & ANSWERS

During the workshops key questions and answers emerged which were recorded. The undertaking was provided to capture these on the BANKSETA and IOB websites, serving to provide follow up support to the delegates.

The legislation and its impact is still emerging, as are the regulations, and it is important to continue to provide input and information to affected companies and individuals in order to assist with the understanding and implementation of the National Credit Act.

The table below contains most of the frequently asked questions and some of the more infrequent that were considered to be general useful.

Table 1: Key Questions and Answers

Question Answer General Does this supplement or replace the The NCA should be seen as supplementary, The Debt Collection Act? regulations relating to Debt Collection fees, for example, are not affected by the NCA. Whose responsibility is it to inform The National Credit Regulator has a consumer education the public of their rights? responsibility How is “plain” language defined? Legal terms and those in Latin should be avoided Will the regulator regulate all All credit providers, regardless of sector will fall under the providers including retailers? new legislation If a provider does not have to Although a provider may be small enough not to register, register is he only excluded from the he will still be governed by all the provisions of the Act – interest rate restrictions? except registration and reporting to the NCR

Individual vs legal entity Do you lose individual protection if Correct. If an individual stands surety for a bond registered you stand surety for your company? in the name of the juristic entity, they cannot, for example, insist that the interest rate falls within the regulations set out in the NCA regulations Is the juristic person excluded There is limited application of the Act to juristic persons, in completely? particular, credit marketing practices, reckless lending, unlawful agreements and provisions and the cost of credit are excluded.

Reckless lending, Credit Assessments and Quotes Reckless lending – what if the A provider can only be held responsible for what can be consumer applies for a number of reasonably expected to be known – which excludes loans/ credit on the same day? As circumstances where the consumer deliberately chose to the provider you may not know this mislead him or her. Are there thresholds for reckless Nothing explicit. The NCA associates reckless lending with lending? over-indebtedness - which will rely on the assessment of providers Interest rate hikes could cause a It is possible that a change in individual circumstance or an consumer to become over-indebted, unexpected hike in interest rates could cause a consumer however, the last loan could have to become over-indebted and distressed. In this case, no been responsible lending- what provider may be deemed to have been reckless, but they happens in this situation? are still likely to be affected by debt-rescheduling Is the 5-day quote period the same No. It refers only to the validity of the quote. If a consumer as a ‘cooling off’ period? decides on the basis of the quote to accept the credit immediately, there is no compulsory cooling-off period How does one show products which Insurance charges must be explicitly disclosed have imbedded insurance? Question Answer How often must the provider The provider must assess every credit application, with the evaluate - on every credit application understanding that this assessment applies to the term of or at the beginning of the term the loan. An extension will require a re-assessment. agreement

Caps & Fees Does the monthly fee include Yes. It includes all monthly fees associated with servicing statements and mailing and other the loan transaction fees, e.g. debit order fee? Is the consequence of the Act that Remember these are ceilings. Ideally, providers will be able providers will increase their prices to to operate below them up to the upper limit of the caps? i.e. what happens to providers who charge initiation fees lower than the proposed limits Will the mortgage evaluation fee be Yes. It includes all fees associated with initiating the loan included in the initiation fee? How does credit life insurance work? This may be charged on a monthly basis or annual basis – but may not be amortized across the entire loan term. Will VAT be charged? On fees, yes.

Is the provider entitled to change Yes, the Act allows for this, although, clearly this needs to interest rates – as in, say, a variable be disclosed to the consumer before the agreement is interest rate mortgage? signed informed. Do the service fees include debt No. These are separate - and not set by the NCA collection costs? regulations

Registers & Record keeping

Can the consumer dispute Yes. information with the credit bureaux directly? Does the ‘on-seller of information’ Yes. have to be registered as a credit bureaux? Who provides the information to the Credit providers credit register?

Debt counseling & debt counsellors Will there be a register of people who Yes. All debt counselors must be registered are debt counselors? Does debt counseling take over from The NCA does not address admin orders directly, but administration orders? section 130 (3) of the Act has relevance. Debt counseling may be seen as a parallel - and hopefully over time - better route than admin orders Who pays the debt counselor? How The consumer being assessed will pay a fee (currently set can debt counselors be deemed at R20). Debt counselors may not be "outsourced" by neutral if they are outsourced by the providers - but they can be "outsourced" by employers provider? willing to help their employees Do the regulations imply that a It is not a compulsory stage, although it is possible a person must go through debt magistrate may refer a case to a debt counselor counseling before they go the magistrate? Tribunal & Legal Issues Question Answer Will the Tribunal automatically The Tribunal will hear representation and will evaluate the enforce the counselor’s recommendations of the debt counselor recommendations? Is there a right to representation?

Scope of Application of legislation Does this apply to motor leases? Yes. Only leases of fixed property are excluded.

Does this apply to staff loans? Yes. Could still be seen as reckless, for example, if make no assessment of borrower (employee) Does the Act apply to incidental There is limited application of the Act to incidental credit - credit such as cellphone, electricity see section 5 of the Act interest? With development finance does one At the time of application. have to assess the creditworthiness of the consumer at the time of application or the time that the site is complete, i.e. a building takes 18 months to complete?

Transitional arrangements What are the transitional The Usury Act, its exemption and the Credit Agreements arrangements? act will continue to apply Will there be retrospective action No. The only matter relates to disclosure in the case of long after the Act is signed? term loans that are still in force at the effective date and entered into between now and then. In this case a provider would have to provide the prescribed disclosure to clients within six months of the effective date of the regulations (Schedule 3).