1
Section 2: Credit Agreements
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Introduction
National Credit Act 34 of 2005 (NCA)
What it does
• Regulates credit agreements
Purpose
To promote & advance welfare
Social & economic
Of South African people
To create a better credit market & industry
By making it more
o Fair
o Transparent
o Competitive
o Sustainable
o Responsible
o Efficien
o Effective
o Accessible
To protect consumers from
The imbalance of bargaining power
Greed
Ignorance
Exploitative practices
Etc.
What is a credit agreement?
Credit extended either by
One party advancing money either
o To another party
o At the direction of another party
Parties agree that payment
o Of money owed by one party to the other
o Will be deferred to future date
Cost to debtor for advancement of money/deferral of payment either
In the form of
o Interest
o Charges
o Fees
o Combination of these
In the form of
o A lesser amount being payable
o This is in case of early payment
o Called a discount transaction
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Consumers & Credit Providers
Credit providers
Definition
Party who
o Advances money/extends credit to another
o In terms of a credit agreement
Types of Credit providers
The Party who
o Supplies goods or services under a
Discount transaction
Incidental credit agreement
Installment agreement
o Advances money
Under a pawn transaction
o Extends credit either
Under a credit agreement
Under a any other credit agreement
The mortgagee
o Under a mortgage agreement
The lender
o Under a secured loan
The lessor
o Under a lease
The party to whom
o An assurance or promise is made
o Under a credit agreement
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Consumers
Definition
Party to whom
o Credit is extended
In terms of a credit agreement
o Money is advanced
In terms of a credit agreement
Types of Credit providers
The party to whom
o Goods or services are sold
Under a
Discount transaction
Incidental credit agreement
Installment agreement
o Money is lent
Under a pawn transaction
o Credit is granted
Under a credit facility
The mortgager
o Under a mortgage agreement
The borrower
o Under a secured loan
The lessee
o Under a lease
The grantor
o Under any other credit agreement
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Scope of application of NCA
General application
Applies to credit agreements
But only certain credit agreements
Depends on
o Type of contract
o Size of contract
o Place of conclusion and effect
Must take place in SA
o Parties to contract
o Purpose of contract
Only sometimes
What is a credit agreement?
Credit extended either by
One party advancing money either
o To another party
o At the direction of another party
Parties agree that payment
o Of money owed by one party to the other
o Will be deferred to future date
Cost to debtor for advancement of money/deferral of payment either
In the form of
o Interest
o Charges
o Fees
o Combination of these
In the form of
o A lesser amount being payable
o This is in case of early payment
o Called a discount transaction
, 6
Types of Credit Agreements
General
NCA applies to
Credit facilities
o Example = credit card
Credit transactions
o Example = instalment sale agreement
Credit guarantees
Combination of the above
How it applies
Applicable in different ways
Applicable to varying degrees to each of the above
Credit facilities
Agreement in terms of which
A credit provider (CP) undertakes to either
o Supply goods/services
o Pays amount
To a Consumer
Provides an assurance that
o The credit provider will pay
o If the consumer chooses to buy
Method of repayment
Defers payment to future date
o All or part of money owed
Bills consumer periodically for repayment
Charges consumer interest and fees
o For deferred payment/amounts not paid
Examples
Credit cards
Bank loans
Store accounts
, 7
Credit transactions
Pawn transactions
Credit Povider (CP) gives money
In exchange for goods
o Goods act as security
Discount transactions
Goods/services provided over period of time
Discounted price payable
o If debt repaid early
Incidental credit agreements
Account rendered for goods/services
o Bill sent
o States when payment must be made
If not paid by stated date either
o Interest/charges becomes payable
o 2 prices depending on date of payment
Different amount due depending on when the bill is paid
Example
R100 in august
R200 in september
Instalment agreements
Deals with sale of moveable property
o Therfore not a house
Delivery takes place
Price then payable in instalments
o With interest/fees charged
Ownership
o Remains vested in cp until paid in full
o Reverts to cp in case of default
Example
o Buy a car on higher purchase agreement
o The dealership retains ownership until the amount is paid in full
o Failure to pay
Ownership reverts to the cp
You lose ownership to the party that is giving you the
money
Leases
Movable goods lent to consumer
o rent payable either
in instalments
at later date
o interest and/or fees also payable
Ownership
o passes to consumer on settlement of debt
, 8
Overlaps with instalment sale agreements
Section 2: Credit Agreements
, 2
Introduction
National Credit Act 34 of 2005 (NCA)
What it does
• Regulates credit agreements
Purpose
To promote & advance welfare
Social & economic
Of South African people
To create a better credit market & industry
By making it more
o Fair
o Transparent
o Competitive
o Sustainable
o Responsible
o Efficien
o Effective
o Accessible
To protect consumers from
The imbalance of bargaining power
Greed
Ignorance
Exploitative practices
Etc.
What is a credit agreement?
Credit extended either by
One party advancing money either
o To another party
o At the direction of another party
Parties agree that payment
o Of money owed by one party to the other
o Will be deferred to future date
Cost to debtor for advancement of money/deferral of payment either
In the form of
o Interest
o Charges
o Fees
o Combination of these
In the form of
o A lesser amount being payable
o This is in case of early payment
o Called a discount transaction
, 3
Consumers & Credit Providers
Credit providers
Definition
Party who
o Advances money/extends credit to another
o In terms of a credit agreement
Types of Credit providers
The Party who
o Supplies goods or services under a
Discount transaction
Incidental credit agreement
Installment agreement
o Advances money
Under a pawn transaction
o Extends credit either
Under a credit agreement
Under a any other credit agreement
The mortgagee
o Under a mortgage agreement
The lender
o Under a secured loan
The lessor
o Under a lease
The party to whom
o An assurance or promise is made
o Under a credit agreement
, 4
Consumers
Definition
Party to whom
o Credit is extended
In terms of a credit agreement
o Money is advanced
In terms of a credit agreement
Types of Credit providers
The party to whom
o Goods or services are sold
Under a
Discount transaction
Incidental credit agreement
Installment agreement
o Money is lent
Under a pawn transaction
o Credit is granted
Under a credit facility
The mortgager
o Under a mortgage agreement
The borrower
o Under a secured loan
The lessee
o Under a lease
The grantor
o Under any other credit agreement
, 5
Scope of application of NCA
General application
Applies to credit agreements
But only certain credit agreements
Depends on
o Type of contract
o Size of contract
o Place of conclusion and effect
Must take place in SA
o Parties to contract
o Purpose of contract
Only sometimes
What is a credit agreement?
Credit extended either by
One party advancing money either
o To another party
o At the direction of another party
Parties agree that payment
o Of money owed by one party to the other
o Will be deferred to future date
Cost to debtor for advancement of money/deferral of payment either
In the form of
o Interest
o Charges
o Fees
o Combination of these
In the form of
o A lesser amount being payable
o This is in case of early payment
o Called a discount transaction
, 6
Types of Credit Agreements
General
NCA applies to
Credit facilities
o Example = credit card
Credit transactions
o Example = instalment sale agreement
Credit guarantees
Combination of the above
How it applies
Applicable in different ways
Applicable to varying degrees to each of the above
Credit facilities
Agreement in terms of which
A credit provider (CP) undertakes to either
o Supply goods/services
o Pays amount
To a Consumer
Provides an assurance that
o The credit provider will pay
o If the consumer chooses to buy
Method of repayment
Defers payment to future date
o All or part of money owed
Bills consumer periodically for repayment
Charges consumer interest and fees
o For deferred payment/amounts not paid
Examples
Credit cards
Bank loans
Store accounts
, 7
Credit transactions
Pawn transactions
Credit Povider (CP) gives money
In exchange for goods
o Goods act as security
Discount transactions
Goods/services provided over period of time
Discounted price payable
o If debt repaid early
Incidental credit agreements
Account rendered for goods/services
o Bill sent
o States when payment must be made
If not paid by stated date either
o Interest/charges becomes payable
o 2 prices depending on date of payment
Different amount due depending on when the bill is paid
Example
R100 in august
R200 in september
Instalment agreements
Deals with sale of moveable property
o Therfore not a house
Delivery takes place
Price then payable in instalments
o With interest/fees charged
Ownership
o Remains vested in cp until paid in full
o Reverts to cp in case of default
Example
o Buy a car on higher purchase agreement
o The dealership retains ownership until the amount is paid in full
o Failure to pay
Ownership reverts to the cp
You lose ownership to the party that is giving you the
money
Leases
Movable goods lent to consumer
o rent payable either
in instalments
at later date
o interest and/or fees also payable
Ownership
o passes to consumer on settlement of debt
, 8
Overlaps with instalment sale agreements
