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THE NATIONAL CREDIT ACT AND RECKLESS LENDING

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Article by listed attorney Fawzia Khan 

As we continue to be tempted by a myriad of promotions or advertisements offering to sell us anything from the latest set of wheels, or trendiest “must-have”  jewellery or in fact any other goods or services, where we may need a credit facility, it’s worth knowing what the law says about credit agreements or credit facilities. The National Credit Act “NCA” applies to all consumers who want credit and whose annual turn over is below a certain threshold, which currently set at R1 million.

Before any credit agreement is signed, the credit provider is required to provide the consumer with a quote, either electronically or in a hard copy. The quote must set out the value of the goods or services, plus the details of all other costs associated with that credit transaction. Credit providers are required to perform a thorough assessment of a consumer’s affordability before approving any credit facility. The credit provider is warned against reckless lending, so as to protect the consumer against over- indebtedness. If a credit provider is found to have extended credit recklessly, the consequences for him are dire. When it comes to advertising any credit, be it in the print, audio, visual or electronic media, the law says that the advert may not be misleading in any way. All information relating to the credit transaction has to be fully disclosed. The rate of credit, how many instalments, the fees to be charged, etc. have to be spelt out in the advert. Recovering bad debts via Emolument Attachment Orders has also been re-worded.

The Act prescribes that the font sizes relating to the information, cannot be smaller or less visible than the rest of the advert, for example, the interest rate and number of months in which the instalments will be payable. Negative marketing is prohibited both in the NCA and the Consumer Protection Act. [This is the marketing strategy where a consumer is offered a product or service and is required to actively decline it, otherwise he is considered to have accepted the offer]. The NCA also prohibits door- to- door selling of credit, unless off course the consumer has specifically invited the credit provider into his home or workplace.

Know your rights! Email fawzia@thelawdesk.co.za or call 031-5025670. Fawzia Khan & Associates. We know! We care! We deliver!