Credit agreement must be regulated

2019-01-23 06:00
Candice Reynders

Candice Reynders

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Question:

I run a small crafts shop in town.

From time to time I allow some of my regular customers to pay me back over time.

It is usually not big amounts and I only do it to help them because I know times are tough.

A friend warned me, though, that I should be careful, as I may be required to register as a credit provider. Is this true?

Answer:

The credit industry is governed by the National Credit Act 34 of 2005 (“Credit Act”).

A regulatory requirement of the Credit Act is that a person must register as a credit provider with the National Credit Regulator (“NCR”) if the total principal debt arising from the credit agreement exceeds the threshold prescribed by the minister of Trade and Industry from time to time.

In other words, if the amount owed by the consumer to a credit provider is above the threshold, that credit provider must register as a credit provider with the NCR, irrespective of whether the credit provider is involved in the credit industry or if it is a once-off transaction.

Currently the threshold has been set at R0 (nil), which effectively then includes any credit agreement no matter how small the amount is.

Failure to register as a credit provider may result in unlawful credit agreements that are void.

Notwithstanding the aforesaid, there are exemptions afforded in the Credit Act, as not every credit provider is obliged to register with the NCR.

These for example relate to exemptions from registering as a credit provider, being considered a credit provider, as well as the types of credit agreements or transactions that fall within the ambit of the Credit Act.

It is important for each person or business to assess whether its transactions fall within the ambit of the Credit Act and then further whether they may be exempted or would be required to register.

My advice is to approach your attorney to discuss your type of transactions and whether such fall within the ambit of the Credit Act and, if so, whether you should register or not.

– Candice Reynders, senior associate, Phatshoane Henney Attorneys

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