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The National Credit Act, Act 34 of 2005 ("the NCA")
The NCA became fully operational in South Africa on 1 June 2007.
The NCA replaces the Usury Act, 73 of 1968, the Credit Agreements Act, Act 75 of 1980 and the Integration of Usury Laws Act, 57 of 1996, which was the primary legislation governing the granting of credit within the financial services industry since 1968.
In essence, the NCA is designed to promote a fair and non-discriminatory marketplace in South Africa. As such, Nedbank fully supports the NCA and is doing everything in its power to ensure that the manner in which it grants credit always upholds the intentions and requirements of the legislation, while still meeting the varied lending requirements of all its clients in a responsible manner.
The NCA in brief
The main purposes of the National Credit Act can be summarised as follows:
- To promote a fair, competitive, accessible, equitable and sustainable credit market.
- To educate consumers so that they are empowered to make informed choices, borrow responsibly and within their means.
- To enforce affordability assessments within the lending process to prevent reckless lending and/or borrowing.
- To protect consumers who feel they have been unfairly treated in a credit agreement by giving them access to a National Credit Regulator and the National Consumer Tribunal.
- To provide a debt counselling process for consumers who are not able to find a solution for their inability to repay their debts, in conjunction with their credit providers.
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Nedbank’s view regarding the NCA
Nedbank has always considered itself to be a responsible lender and welcomes the NCA, which supports our credit policy and our strategy to become the most respected bank in Southern Africa by, among others, our clients and the communities we work in. We believe we can meet the financial services requirements of our clients and the communities in which we operate and uphold the principles of the NCA.
Despite being largely aligned with the requirements of the Act already, Nedbank has invested significant time and resources to making the necessary changes to the procedures and charges within its credit processes. In addition, Nedbank staff members have undergone robust training in terms of the Act and the bank is communicating extensively with its clients regarding the impact of the NCA. All documentation concerning the Act has been reviewed to ensure it is compliant.
Committed to educating our clients
As a responsible lender, Nedbank embarked on an extensive programme in consumer education regarding the Act. Using various communication tools, information and educational messages were made available to clients through all the major media channels. Consumer education road shows were undertaken and NCA related information is available at Nedbank branches. |
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Nedbank’s approach to the NCA
The bank uses a detailed credit scorecard to assess the level of indebtedness of each applicant. This approach takes into account the income and other debt commitments, as well as repayment history, to ensure that the applicant will not be overburdened.
All Nedbank lending products are priced in accordance with the requirements in terms of the Act and pre-existing credit clients will be migrated to the new pricing model upon revision of their credit agreements.
A major requirement of the NCA is that clients understand all agreements, their rights and obligations, and Nedbank, as a responsible lender, will continue to ensure that all our clients’ rights are protected in this regard.
Note: Certain sections of the National Credit Act do not apply to juristic persons under certain circumstances, for example those whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold value which at present is R1 million. Nedbank will advise clients who are classified as juristic persons in terms of the Act, when creating a new relationship or modifying an old relationship, whether they or the product they require, is subject to the provisions of the Act.
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Introduction
Section 63(1) of the National Credit Act ("the Act") states that “a consumer has a right to receive any document that is required in terms of the Act in an official language that the consumer reads or understands, to the extent that is reasonable having regard to usage, practicality, expense, regional circumstances and the balance of the needs and preferences of the population ordinarily served by the person required to deliver that document”.
Nedbank Limited, registration number 1951/000009/06 (“Nedbank”), as a registered credit provider (NCRCP16), was required, as a condition of its registration requirements, to submit its language proposal taking cognisance of the criteria as set out in section 63(1) above.
Nedbank’s Language Set
The bank proposes to provide support to the customer and documentation that is required to be delivered to the customer in terms of the Act, be made available for the products normally available to the public in five languages, viz. English, Afrikaans, isiZulu, isiXhosa and Sesotho.
Support and documentation for specialist banking services, such as private banking facilities and business banking products will generally only be available in English and Afrikaans.
Certain niche products will be made available in English only, as a consequence of market segmentation and product complexity, for example, structured finance deals.
A phased implementation approach will be adopted in the delivery of support to the customer and documentation in respect of the various product sets we offer to the public as follows:
Sales Process
- The pre-agreement disclosure documentation (pre-agreement statement and quotation) and credit agreement are available in respect of the following product offerings in five languages:
- Personal Loans
- Card
- Current Accounts
- Vehicle Asset Finance
- Home Loans
- Credit related Insurance
- With respect to Personal Loans we are extending our product offering to two additional official languages. Our roll-out of the pre-agreement disclosure documentation in five languages is complete;
- With respect to Card our roll-out of the pre-agreement disclosure documentation in five languages is complete;
- With respect to small agreements direct translations will be available on request, with a clause in the direct translation to the effect that the English version will be the only legally enforceable agreement;
- The remaining Sales Process documentation will follow a phased implementation approach.
Collection Process and Debt Enforcement
- Support to the customer and documentation will be made available in all five proposed languages in a phased implementation approach commencing in 2009.
Account Maintenance
- Support and documentation in the five proposed languages will commence during 2010 and be complete by 2011.
Delivery Channels:
- ATMs
- Currently there are six languages available at our ATMs;
- Language offerings at ATMs are dependent on their geographical standing;
- Internet
- Access is available in English and this will be the case for the foreseeable future;
- Advertising and Brochures
- This is currently available in various official languages, as required by the various marketing campaigns;
- Call Centres
- The five proposed languages will be available for all general and technical enquiries by the end of 2009 in respect of the six specific product offerings, although we will try to assist customers in all the official languages;
- Where, however FAIS certification is required, our offering at Call Centres will be limited to the five proposed languages.
- Telephone banking
- Access is available only in respect of transactional banking products and only in English or Afrikaans, and this will be the case for the foreseeable future.
We have experienced problems in the translation of specialised financial terminology and legal terminology into languages other than English and Afrikaans, resulting in concerns that these documents will currently not have the necessary legal standing in South African law courts or be standardised across all languages. This has resulted in Nedbank having to adopt the stance that any documentation requiring clients’ signatures must be obtained on the English and/or Afrikaans versions only.
Nedgroup Life Assurance
Our credit protection solutions are brought to you by Nedgroup Life Assurance, a registered credit provider in terms of the National Credit Act, 34 of 2005 (NCR Reg No NCRCP61).
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Helping Nedbank clients
The inability of a customer to repay a debt is in no way beneficial to Nedbank, nor does it support the bank’s objective of being a responsible lender. In an effort to educate credit clients and help them avoid over-indebtedness, a series of tips are provided, which formed the basis of an extensive awareness campaign during the period in which the NCA became operational:
- Avoid making purchases on impulse – the instant gratification may not be so nice when the bills arrive.
- Missing a payment will affect your credit history. Always contact your creditors first to make a payment arrangement.
- Put any spare cash into paying off your debt early and try to contribute monthly to a savings or investment account.
- Reduce the balance owing on the loan with the highest interest rate as a first priority. You will save on interest in the long run.
- Do not convert short-term debt (e.g. credit card) into long-term debt (e.g. home loan) to increase your monthly cash flow as you will pay more interest in the long-term.
- Never apply for debt in your name on someone else’s behalf, or stand surety for someone else. That person may not be able to repay the debt, which could leave you with a bad credit history.
- Live within your means to ensure you do not over-commit yourself financially.
- Know your credit rating and update any incorrect information at the credit bureaus.
Nedbank supports the National Credit Act, which is there to ensure clients understand their credit agreements and their rights and obligations in terms thereof. Nedbank, as a responsible lender, will continue to ensure that all our clients’ rights are protected in this regard.
If you want to know more about managing your debt and getting finance that you can afford, call the Nedbank Contact Centre on 0860 555 111.
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What is the NCA?
The National Credit Act was signed into law by the President on 15 March 2005, and governs the assessment, application and maintenance of credit granted by a credit provider to a consumer within the Republic of South Africa.
The NCA must be read in conjunction with the Regulations passed in terms of the Act.
The NCA has updated areas of the law that were contained in the Credit Agreements Act, the Usury Act and other legislation that were cumbersome, ineffective and subject to abuse or obsolete.
It replaced three pieces of legislation:
- the Usury Act, 1968;
- the Integration of Usury Laws Act, 1996 (i.e. the Exemption Notice to the Usury Act exempts microloans (loans of less than R10,000) from the Usury Act and allows microloans to operate outside of certain requirements of the Usury Act); and
- the Credit Agreements Act 1980.
The Usury Act governed leasing, credit and money lending transactions.
The NCA also makes amendments to other legislation.
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What is the purpose of the NCA?
Some of the main purposes of this Act are to:
- Promote and advance the social and economic welfare of South Africans;
- Promote a fair, non-discriminatory, controlled, competent, sustainable, responsible, efficient and accessible credit marketplace ; and
- Simplify and standardise the manner in which information is disclosed in credit agreements;
- To regulate credit bureaux and the information they keep on record about consumers;
- To ensure that all credit products are handled in the same way by different credit providers;
- To assist over-indebted consumers to restrict their debt;
- To have a regulator to regulate the entire credit market, being the National Credit Regulator;
- To establish the National Consumer Tribunal to adjudicate matters relating to the Act.
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Which persons fall within the scope of the NCA?
- Credit providers offering credit in excess of a prescribed threshold / volume;
- Consumers – all individuals, trust, juristic persons [e.g. companies, close corporations partnerships and an association of persons], however not all sections apply to juristic persons.
Nedbank will assess the applicability of the Act to the juristic person each time a new credit agreement is entered into.
- Credit providers include:
- Banks;
- Micro lenders;
- Retailers such as furniture and clothing stores;
- All businesses, companies, close corporations, partnerships and individuals who do business on credit, provide loans or charge interest on overdue accounts; and
- Who offer credit within the prescribed threshold values in terms of the Act.
- Consumers include:
- Natural person (individuals)
- Certain juristic persons [e.g. companies, close corporations, trusts (with more than three individual trustees), partnerships and an association of persons] whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold as determined by the Minister in terms of section 7(1) of the Act, which threshold value is currently R1 million.
- Debt Counsellors
- Credit Bureaux
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What were the drivers behind the NCA?
The NCA was introduced to:
- Promote and advance the economic and social welfare of all South Africans;
- Promote a fair and transparent credit market;
- Promote consumers and their rights in the credit market;
- Regulate all credit providers, debt counsellors and credit bureau;
- Limit the cost of credit;
- Create a standard in the way in which credit is granted by credit providers in order for consumers to compare what is being offered.
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What is reckless credit?
Reckless credit means credit granted to a consumer under a credit agreement where the credit provider:
- Failed to carry out a proper credit risk assessment to ensure that the consumer can afford the loan;
- Proceeds to grant a loan to the consumer despite the consumer not being able to afford the loan based on the assessment conducted; and
- The consumer does not understand his/her rights and obligations in a credit agreement as well as the costs involved in taking the loan.
Only a court can declare an agreement reckless on the request of either the debt counsellor or the consumer. The Court can suspend the credit agreement that has been declared reckless or change the terms and conditions of the agreement.
If a credit agreement is found to be reckless, the credit provider cannot enforce the agreement and the obligations of the consumer are set aside.
The reckless credit provisions in the NCA are dealt with in Chapter 3 – Part D and are only applicable to consumers who are not juristic persons.
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What is over-indebtedness?
A consumer is over-indebted when he/she does not have the means to meet all his/her debt repayments and his/her expenditure exceeds his/her income.
Consumer education to make informed choices and be able to manage their debt will assist consumers to avoid over-indebtedness.
Nedbank believes in a fair and equitable lending environment in order for consumers to avoid over-indebtedness.
If any Nedbank client is experiencing financial difficulty, he/she is encouraged to contact the bank in order to make an arrangement with the bank to pay off his/her debt in a mutually beneficial way.
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What are the most common causes of over-indebtedness?
There are various reasons for over-indebtedness, including the following:
- Over-committing oneself financially;
- Poor monthly budgeting;
- Purchasing on impulse when he/she has already incurred other debt;
- Change in personal circumstances or life stages such as having a child or going through a divorce;
- Purchasing essentials such as food on one’s credit card;
- Conversion of short-term debt (e.g. credit card debt) to long-term debt (e.g. home loan) to increase your monthly cash flow, but increases your interest debt in the long term;
- Making application for credit in your name on behalf of a third party;
- Standing surety for a third party who may default on his/her repayments resulting in you being responsible for the third party’s debt.
If you need to apply for credit, ensure you approach a registered and reputable credit provider such as Nedbank.
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What is a credit agreement?
A credit agreement is an agreement entered into between a credit provider and a consumer in which the credit provider supplies goods or services or lends money to the consumers.
The NCA requires that, before a credit agreement is entered into, the bank must provide the consumer with a pre-agreement statement and quotation.
A pre-agreement statement is a document that details the terms and conditions of the credit agreement that the credit provider intends entering into with the consumer.
A quotation is a document which discloses the principal debt, the interest rate, the total amount payable under the agreement, the instalments and all fees, charges and interest i.e. the costs of credit.
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Which of Nedbank’s products fall under the NCA?
- Personal loans
- Home loans
- Business loans depending on threshold values applicable to the consumer, i.e. juristic persons
- Overdrafts
- Credit cards
- Asset-based finance:
- Instalment sale agreements
- Lease agreements
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Does the NCA, in any way, have an impact on commercial property lending and the insurance on these properties being done by Nedbank?
The NCA does not apply to a large agreement entered into between the bank and a consumer that is a juristic person whose asset value or annual turnover at the time of the agreement equals or exceeds a threshold value of R1m.
For the purposes of this question, a credit agreement is a large agreement if it is a mortgage agreement.
Therefore, the NCA will not apply to commercial property lending, unless the consumer is a natural person.
If the lending is not subject to the NCA, the credit insurance on the property will also not be subject to the NCA.
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What is an affordability assessment and how will Nedbank determine affordability for credit?
An affordability assessment is an evaluation process conducted by a credit provider on a consumer to determine whether or not credit will be granted to the consumer. The affordability assessment will determine whether or not the consumer will be able to afford his/her obligations under a credit agreement.
The consumer must answer any requests for information made by the credit provider as part of the credit assessment fully and truthfully.
If the consumer is married in community of property, the affordability assessment will be conducted on both the consumer and his/her spouse.
The affordability assessment includes as assessment of the consumer’s income, expenses, debt repayments, history of debt repayment and credit information via access to the credit bureau record of the consumer,
Credit information retained by the Credit Bureau in terms of the Act includes the following:
- Credit history of the consumer, including details of:
- Credit agreements signed;
- Repayment history; and
- If the consumer is/was under debt review
- A consumer’s financial history
- Past and current income
- Assets and liabilities
- Payment information regarding continuous services
- Any information that is need to identify credit fraud
- Information on payments made by a consumer whether the debt was ceded
- Any other information provided the consumer has given his permission for this information to be sent to the credit bureau and provided the credit provider has informed the consumer what the information will be used for.
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What additional information must a client provide on his or her credit application form?
It is important that the client provides complete and accurate information regarding his/her income and expenditure when completing his/her application form.
The following information must be provided:
- Monthly income with proof thereof
- Monthly expenses (such as groceries, rent, travel costs and school fees)
- Monthly financial responsibilities (home loan payments, study loans, vehicle finance, etc)
The following additional information must be provided:
- Age of applicant
- Solvency status
- Whether applicant is under, or has applied for, debt review, judicial management, curatorship
- Whether applicant is party to any other credit agreements
- Whether applicant has a commercial purpose for applying for the loan
- Whether applicant requests an annual limit increases (where applicable)
- Marketing options
Completion of specific declarations regarding the information supplied (e.g. client warrants that all questions are answered truthfully and honestly), and consent to Nedbank to access the consumer’s credit bureau records for purposes where such consent is required in terms of the Act.
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How will existing credit limits be affected?
Existing clients, who entered into credit agreements prior to the enactment of the NCA will be impacted by the NCA by a change in service fees. Certain fees that were standard practice (such as early-settlement or administration fees) cannot be charged within the ambit of the NCA. Where an existing client amends a contract or requests further credit, he/she will be subject to the NCA and an affordability assessment will be conducted in respect of the further credit application.
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Can a client still request a temporary limit increase?
Yes, subject to the requirements as contained in section 119(2) the NCA.
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What steps will Nedbank take to ensure that clients are able to repay their loans an avoid over-indebtedness?
Nedbank is deeply committed to the spirit and purpose of the NCA.
By use of a credit scorecard we assess the level of indebtedness of an applicant for credit. The use of the credit scorecard takes also into account the applicant’s debt repayment history and his/her income and expenses to determine whether or not the applicant will be able to afford to make payment towards a new credit agreement and will not be over-indebted if credit is granted.
When clients do however, fall on hard times (e.g. loss of employment, death of a breadwinner, medical bills, etc), Nedbank will assist the client by the offer of informal debt counselling to the client to try and rearrange the debt of the client, where possible. Where there is seen to be no resolution, the client will be referred to a registered debt counsellor.
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What is debt counselling and how can I apply for it?
Debt counselling is a process intended those who are over-indebted find a solution.
If you, as a Nedbank client, think you are financially overcommitted, please contact your branch or the Nedbank Contact Centre on 0860 555 111 for an informal debt review.
Clients who are unable to meet their financial commitments may apply to a registered debt counsellor for a proposed resolution. A debt counsellor must be registered with the National Credit Regulator.
The debt counsellor will assist in the client to re-arrange/restructure his debt obligations in negotiation with his/her credit providers, based on how much the consumer can afford to pay towards his/her debt each month.
If the debt counselling process is unsuccessful, the credit provider will have no alternative but to institute debt enforcement proceedings in terms of the NCA.
If a debt counsellor finds that a client is indeed over-indebted, a proposal can be recommended to the client and his or her credit providers for repayment of the debt. If there is any disagreement with the proposal, the matter will be heard by the magistrate’s court, which in turn may restructure the client’s debt by:
- extending the term of any agreement;
- postponing payments;
- extending the period of the agreement and postpone during a specific period the dates on which payments are due under the agreement
- recalculating the consumer’s obligations as a result of unlawful provisions in the credit agreements or unlawful fees and charges debited to the consumer’s account.
A list of registered debt counsellors is available from the National Credit Regulator’s office on 0860 627 627 or www.ncr.org.za.
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Debt is not a bad thing if managed wisely and if one does not overcommit oneself financially.
Nedbank supports the National Credit Act, which is there to ensure clients understand their agreements, rights and obligations. Nedbank, as a responsible lender, will continue to make sure that all our clients' rights are protected in this regard.
If you want to know more about managing your debt and getting finance that you can afford, call us on 0860 555 111.
If you have a question about the NCA, please email Grouprisk@nedbank.co.za to submit it.
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Forex
