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
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
