The time for procrastination is over for entities that provide credit to consumers, the National Credit Regulator (NCR) said on Thursday.
Speaking at a presentation on Wednesday, Gabriel Davel, CEO of the NCR, explained that credit providers such as banks, retailers and pawn shops have until Friday July 28 2006 to register with the industry watchdog in order for them to continue operating their businesses.
Davel added that the current situation — which is fraught with undesirable practices at the expense of consumers — is not sustainable. “We can’t continue like this … changes had to be effected,” charged Davel.
He gave an example of a situation where some credit providers were charging interest of up to 90% on term loans and of consumers who end up with up to 21 credit agreements. Davel also lamented the fact that low-income earners often bore the brunt of these “undesirable practices” from credit providers.
According to Davel, there are approximately 80Â 000 debt judgements that have been going through the courts on a monthly basis, and it is assumed that this figure has been escalating over the years. He reiterated that this situation is intolerable.
Davel mentioned that transactions that fall under the Act include loans and other credit from banks, including mortgages, overdrafts, credit cards, vehicle finance and any other personal finance.
He added that furniture finance, clothing accounts and any other type of credit from retailers are transactions that also fall under the Act.
Davel further pointed out that micro loans, pawn transactions and any other type of creditor loan provided to a consumer fall under the Act. Reckless lending is prohibited and interest and fees are regulated on all agreements.
Advertising and marketing must contain prescribed information on the cost of credit and automatic increases in credit limits are regulated.
Nomsa Motshegare, manager of registration at the NCR, said it was crucial that credit providers should register because the unregistered ones would not be able to conduct their businesses without hindrance.
“The implications of not registering when you should have registered are severe,” charged Motshegare. She also cautioned that credit agreements signed by unregistered credit providers will be declared “unlawful and unenforceable” as from June 1 2007.
According to Motshegare, the main criteria for the registration of credit providers are: a credit provider must have signed at least 100 credit agreements or have a loan book of at least R500Â 000.
She explained that whilst the Credit Agreements Act, Usury Act and Usury Exemption Notice had been repealed by the National Credit Act (NCA), the provisions of the repealed Acts remained enforceable until the relevant provisions in the NCA are implemented.
Motshegare also expounded that entities that provide incidental credit do not have to register with the NCR.
“This means entities such as doctors, dentists or anyone who provides goods or services on account, with the possibility for the client to pay at the end of the month ‘without charging interest’,” she explained.
Significantly, Motshegare points out that it should be noted that financial products such as student loans, staff loans and a facility for the consumer to pay on account over time, with interest, and other credit providers need to register. — I-Net Bridge