4 DTI “Policy Framework”.
6.1.2 Purpose of the Act
The purpose of the National Credit Act is contained in section 3, the full text of which is quoted below. Some brief discussion regarding certain aspects of the Act which are related but not directly relevant to this study is contained in the footnotes to section 3.
“Purpose of Act
3. The purposes of this Act are to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers, by –
(a) promoting the development of a credit market that is accessible to all South Africans and in particular to those who have historically been unable to access credit under sustainable market conditions;
(b) ensuring consistent treatment of different credit products and different credit providers;15
(c) promoting responsibility in the credit market by –
(i) encouraging responsible borrowing, avoidance of over-indebtedness and fulfillment of financial obligations by consumers; and
(ii) discouraging reckless credit granting by credit providers and contractual default by consumers;16
(d) promoting equity in the credit market by balancing the respective rights and responsibilities of credit providers and consumers;17
(e) addressing and correcting imbalances in negotiating power between consumers and credit providers by –
(i) providing consumers with education about credit and consumer rights;18
15 One of the overriding objectives of the Act is to provide a single law that treats all credit transactions
and credit providers “equivalently” (DTI “Policy Framework” para 4.7–4.8). The Act, when fully operative, will repeal the Usury Act 73 of 1968 and the Credit Agreements Act 75 of 1980, and will have a far wider field of application than its predecessors. It will apply to all credit, with no limit on the amount of credit involved, unlike its predecessors.
16 Over-indebtedness and reckless credit are discussed in 6.1.4 below.
17 Numerous rights of consumers are emphasised in the Act (with corresponding duties on the part of
credit providers according to law), but very few rights of credit providers appear in the Act. The Act has been criticised for its pre-occupation with consumer rights at the expense of the rights of credit providers. Consumer rights include: the right to apply for credit (s60); protection against discrimination in respect of credit (s61); the right to reasons for credit being refused (s62); the right to information in official language (s63); the right to information in plain and understandable language (s64); the right to receive documents (s65); protection of consumer credit rights (s66). Other rights include: rights regarding information held by credit bureaux (ss70–72); protection against certain marketing practices (ss74–76); the right to confidentiality and privacy (s68); the right to early settlement (s125) and pre- payments (s126).
18 The National Credit Regulator is responsible for implementing education and information measures to
(ii) providing consumers with adequate disclosure19 of standardised information20
in order to make informed choices;21 and
(iii) providing consumers with protection from deception, and from unfair or fraudulent conduct by credit providers22 and credit bureaux;
(f) improving consumer credit information and reporting and regulation of credit bureaux;23
(g) addressing and preventing over-indebtedness of consumers, and providing mechanisms for resolving over-indebtedness based on the principle of satisfaction by the consumer of all responsible financial obligations;24
(h) providing for a consistent and accessible system of consensual resolution of disputes arising from credit agreements; and
(i) providing for a consistent and harmonised system of debt restructuring, enforcement and judgment which places priority on the eventual satisfaction of all responsible consumer obligations under credit agreements.”
The Act therefore has the ambitious and extremely difficult objective of promoting a competitive, efficient and effective credit industry and market which is at the same time fair, transparent, responsible and accessible. The overriding theme of the Act is consumer protection, evident in many of the nine objectives making up the remainder of section 3. There is no direct reference in section 3 to the intention to place limits on the cost of credit, although this is one of the most important practical results of the Act in regard to consumer protection. Indirect references to this objective can be found in paragraphs (a), (b), (d) and (g) of section 3, but the specific measures regarding the cost of credit are introduced elsewhere in the Act and the Regulations.
19 Section 92(1) provides that a credit provider must give to a consumer a pre-agreement statement and
quotation in the prescribed form prior to entering into a “small” credit agreement, namely a credit agreement of no more than R15 000 [s9 as read with National Credit Act (34/2005): Determination of Thresholds, GN713, 2006, Government Gazette 28893, 1 June 2006]. The quotation is binding upon the credit grantor for five business days, being in the nature of an option created by statute with the prospective consumer as the option holder. (Otto The National Credit Act Explained 40).
20 Section 93(1) provides that a credit provider must deliver to a consumer, without charge, a copy of a
document that records their credit agreement which, in the case of a small credit agreement, must be in the prescribed form. Notably, the Act does not provide that a credit agreement not reduced to writing will be void, neither is this an offence – this appears to be an omission in the Act.
21 The DTI “Policy Framework”, Chapter 5, identified the need to help consumers to make informed
choices: “Due to weak disclosure of the full cost of credit and the financial complexities of some products, it is difficult for consumers to understand the risks and make informed choices. Standard information in a simple, comparable form is essential if consumers are to make informed choices.”
22 Section 90(2)(a) provides that a provision of a credit agreement is unlawful if its general purpose or
effect is to, inter alia, deceive the consumer or subject the consumer to fraudulent conduct.
23 Part B of Chapter 4 of the Act contains detailed provisions in regard to the management of consumer
credit information via a national register of credit agreements and the regulation of credit bureaux. Importantly, s73 empowers the Minister to prescribe requirements for the verification, review and removal of consumer credit information by registered credit bureaux. The Minister did so by way of Draft National Credit Regulations, GN1388, 2006 Government Gazette 29246, 21 September 2006, for public comment by 27 October 2006, and the final prescribed requirements are currently awaited. The detailed and exacting management and control of consumer credit information is an example of the exhaustive regulation of the industry in the name of consumer protection.