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Gauke, LN Buyl DO NOT DISTRIBUTEVBB 220 CONSUMER CREDIT LAW
STUDY THEME 2
Background & Introduction to credit agreements and the NCA
Theme 1 addresses the “nature and purpose of consumer credit legislation within the
current South African socio-economic context
Consumer Protection Law module divided into:
1. The national credit act 34 of 2005 (NCA): consumer credit law
2. The consumer protection act 68 of 2008: general consumer protection law
Theme content addressed:
Concept “credit” advantages and disadvantages
Is consumer credit legislation required?
Place of out subject in the SA legal system
History of SA consumer credit legislation
Is the NCA responsive to present socio-economic context in SA, in
accordance with the Act’s transformation objectives?
WHAT IS CREDIT:
money that’s lent & borrowed
as money and any part of purchase(lease) price of goods/services
not paid on the spot but DEFERRED for later settlement [buy something now
however pay later – NOT CASH – deferral of payment**]
FUNCTION OF CREDIT
enables consumer who cannot, or choose not to pay, for products/services, to
have use thereof prior to having paid it
,Gauke, LN Buyl DO NOT DISTRIBUTE
ROLE OF CREDIT IN THE ECONOMY
credit plays a HUGE role in the economy of any country
The size of SA credit market is 1.96 trillion rand
Credit keeps an economy alive, stimulates the economy
ADVANTAGES AND DISADVANTAGES OF CREDIT
ADVANTAGES DISADVANTAGES
Stimulates the economy As a result of credit, consumers can
become overindebted (feeling trapped
in debt)
It enables people to obtain things that Can’t pay credit instalments, loss their
they otherwise would not have been house and research shows that some
able to afford at the time may even commit suicide as a result of
credit
e.g. It enable people to obtain tertiary
education in some instances even food May lose assets through repossession
(basic consumable goods)
It is a dangerous instrument if not used
responsibly
How is credit obtained?
o You need to undergo a credit screening/credit assessment
o If successful, the bank will sign a contract with you
The above contract is credit agreements – agreement in terms of where
credit is obtained from the provider of a credit (credit provider)
Credit is a wide concept which includes credit granting in variety of forms
Regulated in terms of different enactments (NCA)
CREDIT AGREEMENT
Df. A credit agreement is a specific contract whereby the common law always be
applicable (general principles of our contract) e.g. how do the parties in a credit
agreement reach consensus in terms of the common law etc.
,Gauke, LN Buyl DO NOT DISTRIBUTE
Where does subject (VBB) fit into SA legal system?
o Deal with contracts – regulates the relationship between individuals
and therefore our subject falls under private law with no relation to the
state
o Is with reference to legal obligation
Contracts we will deal with in this module:
Moneylending
Sale & lease of goods & rendering of services
Is consumer credit legislation required to protect the user/consumer?
o No equal position as the bank is stronger – they will not disclose all
information therefore one needs to decide whether to accept the credit
loan
o The bank can charge excessive interest rates and if not prevent it from
doing that.
o They will use basic contract template where all terms and condition are
to their advantage where they stimulate forcing you to give away your
common law rights therefore the consumer protection legislation is
required as e.g. the purpose of the legislation is to equal the plane field
between the consumer and the credit provider.
LEGAL RULES REGULATING CREDIT AGREEMENTS
Common Law and NCA
Common Law only
Law of Law of
Private Law
Obligations Contracts
, Gauke, LN Buyl DO NOT DISTRIBUTE
HISTORY BACKGROUND TO THE NCA
The NCA regulates two aspects: contractual and financial implications of
credit agreements
Before the NCA used Hire-purchase Act → Credit agreements Act:
contractual aspects
(Credit Agreements Act REPEALED the Hire-Purchase Act)
1926 Usury Act → 1968 Usury Act: financial aspects
(1968 Act repealed the 1926 Act)
NCA: fully operative on 1 June 2007 – repealed the Usury Act and Credit
Agreements Act
NCA REPEALED 1968 USUARY ACT and CREDIT AGREEMENTS ACT therefore
NCA regulates both contractual and financial aspects arising from credit agreements
Date when the NCA became effective incrementally:
o 1 June 2006: 1st part of NCA came into effect (repealed the Usury act
and credit agreement act)
o 1 September 2006: 2nd part of NCA came into operation
o 1 June 2007: 3rd (and final) part of NCA came into operation
PURPOSE OF CONSUMER CREDIT LEGISLATION IN GENERAL - WORLDWIDE
[NB!]
1) Addresses consumer’s unequal bargaining position – consumer is not in an
equal position
2) Curb malpractices in commercial world – identify malpractices
3) Curb exercise of remedies
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