The National Credit Amendment Act has been assented to by the President on 19 May 2014. The Amendment Act will come into force on a date to be announced in the Government Gazette.  Draft regulations of affordability have been published in the Government Gazette of 1 August 2014 and is now open for comment.

Herewith a few highlights of some of the amendments:

1. Reckless Credit

Section 134 of the NCA deals with alternative dispute resolution. Currently section 134 reads: "As an alternative to filing a complaint with the National Credit Regulator in terms of section 136 a person may refer a matter that could be subject of such a complaint as follows..." This section continues by listing the bodies to which a complaint can be filed i.e Financial Services Ombud, consumer court or alternative dispute resolution agent.

Section 134 of the Amendment Act reads:  “As an alternative to filing a complaint with the National Credit Regulator in terms of section 136 a person may refer a matter or dispute following an allegation of reckless credit agreement”. The Amendment Act has in effect reverted the reckless credit defence to a “cause of action”. When a consumer suspects that the agreement is a reckless credit agreement, the consumer can file the matter or dispute with one of the mentioned bodies. If a complaint is pending in front of one of the bodies any enforcement of the agreement is suspended until the complaint has been resolved.

2. Section129

This section was the source of numerous court cases regarding how notice should be given/ sent to the consumer. The Amended act now included new subsections which state that the notice in terms of this section must be delivered to the consumer by registered mail or to an adult person at the location designated by the consumer. The consumer must also in writing indicate the preferred manner of delivery of the notice. The Amendment Act further stipulated that proof of delivery is satisfied by written confirmation by the postal service of delivery to the relevant post office or agency or by signing or identifying mark of the recipient when personal delivery is made. This amendment is a welcome addition as this is in line with the most recent court decision regarding delivery of the notice.

3. Prescription

The Amendment Act introduces a new Section 126B with regards to prescription of debt. This section states that:
“ (1) (a) No person may sell a debt under a credit agreement to which this Act applies and that has been extinguished by prescription under the Prescription Act,1969 (Act No. 68 of 1969).(b) No person may continue the collection of, or re-activate a debt under a credit agreement to which this Act applies—
(i) which debt has been extinguished by prescription under the Prescription Act,
1969 (Act No. 68 of 1969); and
(ii) (ii)  where the consumer raises the defence of prescription, or would reasonably have raised the defence of prescription had the consumer been aware of such a defence, in response to a demand, whether as part of legal proceedings or otherwise.”

This amended section will in all likelihood be the cause of numerous court cases to clarify it. Currently prescription is a defence which can be raised by a consumer when the credit provider attempts to enforce the agreement, whereas this section pre-empts this defence. According to this section a debt may not be collected or re-activated if it has prescribed. Thus prescription is no longer a defence, but more a requirement which will have to be performed/checked by whoever wished to collect/sell the debt.  Perhaps if section (b)(i) and (ii) were interchanged this section would legally make more sense. This section also implies that consumers will in future have to be notified of prescription and whether it is applicable to their credit agreement. This section is however not as simple as checking the dates and determining prescription as there are numerous factors that can interrupt prescription.

4. Registration requirements

The NCA stipulated that a credit provider must register as a credit provider if the credit provide if the credit provider under at least 100 credit agreements (except incidental credit agreements) or if the total principal debt owner to the credit provide under all outstanding credit agreements exceeds the threshold determined by the Minister as published in the Government Gazette. This threshold is currently R500 000.00. There are strong rumours in the credit industry that the new threshold will be R0 and this could have an impact on who needs to register. This will however only be clarified when the new threshold is published.

Conclusion

The National Credit Act is certainly one of the most important pieces of legislation in South Africa, not only to protect vulnerable consumers, but also credit providers. Any amendments to streamline the implementation of the Act is welcome. Contact one of the attorneys at Schoeman Tshaka to assist you in making sense of the new amendments and how it will affect your current credit agreements.

Written by Anye Jansen van Rensburg, Schoeman Tshaka Attorneys