Summary IURI413- Specific contracts Su 2

SU 2- CREDIT AGREEMENTS
Credit agreement is a wide concept- includes granting credit in a variety of forms
 Different enactments regulate different forms of credit
 Necessary to establish to which type of contracts and goods a particular act applies
 If a particular contract does not fall under specific legislation- not mean that contract
is invalid
o Means that the relationship between the parties will be determined by the
common law

NECESSITY OF STATUTORY PROTECTION
MONEYLENDING CONTRACTS
 Protect borrowers
 Prohibition on usurious interest
 Prevent exploitation of debtors
 Limitation on the maximum interest rate which moneylenders allowed to charge
HIRE-PURCHASE CONTRACTS (Instalment sales)
 Unknown in common law
 Instalment sale with reservation of ownership
o Ownership usually passes according to the agreement against payment of the
final instalment
OTHER CREDIT AGREEMENTS
 Exploitation continued
o Lease of consumer goods
o Provision of service on credit
o Letting and hiring of work
o Lay-byes
o Sale of residential land on instalments

CONSUMER LEGISLATION
 Consumer exploited
 Cannot do anything on own
 Debt trap
 Intervention by legislator in public interest

HISTORICAL BACKGROUND TO LEGISLATION
CREDIT AGREEMENTS ACT 1980
 Hire-Purchase Act passed in 1942
o To protect hire-purchasers
o It covered only a small number of transactions

,  Credit Agreements Act 1980 replaced Hire-Purchase Act 1942
USURY ACT 1968
 Found its origin in Usury Act 1926
 Regulated the financial aspects of credit agreements
 Credit Agreements Act which regulated the contractual aspects of credit agreements
and the Usury Act together regulated the credit industry
 They were replaced with the Credit Act
NATIONAL CREDIT ACT
 National Credit Act 34 of 2005- 1 June 2007
o Replaced Credit Agreements Act and Usury Act
 Amended materially by the National Credit Amendment Act 19 of 2014- 13 March
2015
 19 August 2019- President assented to the National Credit Amendment Act 7 of 2019
o Will come into operation on date fixed by President by proclamation

OTHER CONSUMER CREDIT LEGISLATION
 CPA- regulates lay-byes
 Alienation of Land Act- protects purchasers of residential land on instalments,
particularly against insolvency of the owner of the land

NATIONAL CREDIT ACT
Protects credit receivers- natural and juristic persons
 Protection excluded for juristic persons if they conclude large transactions or are
large juristic persons
Credit providers must register with the National Credit Regulator before they may enter into
credit agreements
 Regulator must police the Act and ensure compliance therewith
National Consumer Tribunal is established by the Act
 Functions are comparable to that of a court
AIMS OF THE ACT
 Attempts to prevent over-indebtedness of consumers and assist them should they
run into trouble
 Credit providers obliged to evaluate a prospective debtor’s creditworthiness before
credit is extended
o Debtor who becomes over-committed may apply for debt review
o And a rescheduling of his debts in order to enable him to pay them over an
extended period of time

,  Credit bureaux provides credit providers with information on consumers to enable
them to consider the consumer’s ability to repay the credit applied for
Act confers upon consumers typical consumer rights that are common
 Cooling-off right
o Certain contracts concluded outside the business place may be cancelled
within a certain period
 Right to surrender the goods and have them sold by the credit provider in order to
settle the outstanding debt
 Right to accelerate payments ito the agreement
Control over maximum interest rates, charges and fees
 Act puts limitations on the amounts and items that a credit provider may stipulate
for, and recover from a consumer
Credit provider’s right to enforce the agreement should the consumer fail in arrears is
limited by the Act
 Consumer must first be notified of his default
 And advised to seek advice
 Certain period must lapse before the credit provider may take legal steps
Dispute settlement and solving problems through-
 Dispute resolution agents
 National Credit Regulator
 Ombuds
 Debt counsellors




APPLICATION OF THE ACT