LPL4801 Assignment 1
(COMPLETE ANSWERS)
Semester 2 2025 - DUE 29
August 2025
For assistance contact
Email:
, (a) Applicability of the National Credit Act (NCA)
Yes, the National Credit Act (NCA) is applicable to the agreement between Patricia and
Luxury Pools (Pty) Ltd. This is a credit agreement because it is a credit transaction
(specifically, an instalment agreement) where payment of the purchase price is deferred and
a fee, charge, or interest (18% per annum) is payable to the credit provider. Patricia, as a
natural person, is a consumer, and Luxury Pools (Pty) Ltd is the credit provider. The NCA
regulates such credit agreements.
(b) Registration of Luxury Pools (Pty) Ltd
No, Luxury Pools (Pty) Ltd does not have to register as a credit provider for this specific
agreement. A person must register as a credit provider if they are a party to at least one credit
agreement and the total value of all their outstanding credit agreements exceeds
R500,000. The value of this single transaction is R52,000, which is well below the threshold.
Therefore, registration is not required based on the information provided.
(c) Legality of the Stated Interest Rate
The stated interest rate of 18% per annum is likely allowed under the NCA, provided it does
not exceed the maximum prescribed rate. For instalment agreements, the maximum interest
rate is calculated as repo rate x 2.2 + 10%. At the time of the agreement, the repo rate was
7%. Therefore, the maximum allowable interest rate would be:
(7%×2.2)+10%=15.4%+10%=25.4%
Since 18% is less than 25.4%, the interest rate is permissible.
(d) Patricia's Remedies
Patricia has a right to terminate the agreement within five business days of signing it. This
is a cooling-off right provided for in section 121 of the NCA for certain agreements,
including those concluded by a consumer at a location other than the credit provider's
business premises (e.g., at home). Since she concluded the agreement on June 1 at her home
and is seeking advice on June 10, she is unfortunately outside of this five-day window.
However, given that Luxury Pools (Pty) Ltd may not have performed a proper credit
assessment, Patricia may have a remedy. The NCA requires a credit provider to conduct a
proper assessment of a consumer’s ability to pay before entering into a credit agreement.
Failure to do so may result in the agreement being declared reckless credit. If a court
declares the agreement to be reckless, it may set aside all or some of Patricia's obligations
under the agreement, including the payment of the purchase price and interest. Additionally,
Patricia would be able to claim back her first instalment.
(COMPLETE ANSWERS)
Semester 2 2025 - DUE 29
August 2025
For assistance contact
Email:
, (a) Applicability of the National Credit Act (NCA)
Yes, the National Credit Act (NCA) is applicable to the agreement between Patricia and
Luxury Pools (Pty) Ltd. This is a credit agreement because it is a credit transaction
(specifically, an instalment agreement) where payment of the purchase price is deferred and
a fee, charge, or interest (18% per annum) is payable to the credit provider. Patricia, as a
natural person, is a consumer, and Luxury Pools (Pty) Ltd is the credit provider. The NCA
regulates such credit agreements.
(b) Registration of Luxury Pools (Pty) Ltd
No, Luxury Pools (Pty) Ltd does not have to register as a credit provider for this specific
agreement. A person must register as a credit provider if they are a party to at least one credit
agreement and the total value of all their outstanding credit agreements exceeds
R500,000. The value of this single transaction is R52,000, which is well below the threshold.
Therefore, registration is not required based on the information provided.
(c) Legality of the Stated Interest Rate
The stated interest rate of 18% per annum is likely allowed under the NCA, provided it does
not exceed the maximum prescribed rate. For instalment agreements, the maximum interest
rate is calculated as repo rate x 2.2 + 10%. At the time of the agreement, the repo rate was
7%. Therefore, the maximum allowable interest rate would be:
(7%×2.2)+10%=15.4%+10%=25.4%
Since 18% is less than 25.4%, the interest rate is permissible.
(d) Patricia's Remedies
Patricia has a right to terminate the agreement within five business days of signing it. This
is a cooling-off right provided for in section 121 of the NCA for certain agreements,
including those concluded by a consumer at a location other than the credit provider's
business premises (e.g., at home). Since she concluded the agreement on June 1 at her home
and is seeking advice on June 10, she is unfortunately outside of this five-day window.
However, given that Luxury Pools (Pty) Ltd may not have performed a proper credit
assessment, Patricia may have a remedy. The NCA requires a credit provider to conduct a
proper assessment of a consumer’s ability to pay before entering into a credit agreement.
Failure to do so may result in the agreement being declared reckless credit. If a court
declares the agreement to be reckless, it may set aside all or some of Patricia's obligations
under the agreement, including the payment of the purchase price and interest. Additionally,
Patricia would be able to claim back her first instalment.
