REGISTRATION OF CREDIT PROVIDERS – WHEN ARE YOU AS CREDIT PROVIDER OBLIGED TO REGISTER AS SUCH / WHEN DOES A PERSON HAVE TO REGISTER AS A CREDIT PROVIDER / NO MORE UNCERTAINTY IN RESPECT OF THE REGISTRATION OF CREDIT PROVIDERS/ REGISTRATION AS A CREDIT PROVIDER UNDER THE NCA: BEWARE
The National Credit Act 34 of 2005 (hereinafter referred to as “the Act”) was enacted to provide better protection for consumers and to provide consumers with numerous rights, they previously did not have. One of the most prominent ways in which the Act endeavour to protect consumers is by requiring credit providers to register as such, but with the enactment of the National Credit Amendment Act of 19 of 2014 (hereinafter referred to as “the National Credit Amendment Act”) on 13 March 2015, there has been much uncertainty in respect of the registration of credit providers, such as when to register and which credit providers are obliged to register.
Any person can register as a credit provider out of his or her own volition, if the person complies with the Act. In this regard the Act states in sections 40, 41 and 42, which deals with registration of credit providers that a person must be fit to register as a credit provider. The Act is silent as to what constitutes a “fitness” to register as a credit provider, but the Act however lists certain grounds which disqualifies natural and juristic persons to register as credit providers.
Before the question with regards to the registration of credit providers can be asked, one must first determine whether the Act is applicable to you as credit provider, or to
your specific credit agreement, because one is only obliged to register as a credit provider if the Act is applicable.
With this article I hope to remove some of the uncertainty credit providers might have regarding the aspect of registration, by illustrating the position prior and after the enactment of the National Credit Amendment Act.
The position prior to the enactment of the National Credit Amendment Act
Section 40 contained two categories and if a credit provider fell within one of those categories, the credit provider was obliged to register as such. The categories in terms of section 40 were the following:
- If a person alone or in conjunction with an associated person is a credit provider under at least a 100 credit agreements, which does not include incidental credit agreements, then that person was obliged to register as a credit provider; and
- Where the total or aggregate principal debt due to a credit provider under all his or her credit agreements exceeds the threshold of R 500 000-00, than that person was also obliged to register as a credit provider.
Thus if a person whether natural or juristic, fell in one of the aforesaid categories as contained in section 40, said person was obliged to register as a credit provider. Each of the aforesaid categories will be briefly discussed below.
Credit provider under at least a 100 credit agreements
If a person either alone or in conjunction with an associated person is a credit provider under at least 100 credit agreements, which fall within the ambit and scope of the Act and which does not include incidental credit agreements, then that person was obliged to register as a credit provider under the Act. This however did not provide the necessary protection to consumers as initially envisaged by the Act, since a credit provider would only be required to register once the 100agreement threshold in section 40(1)(a) takes effect. Technically a credit provider would be compliant with the provisions of the section 40(1)(a) and the 99 credit agreements entered into before registration would not be unlawful, provided that the total principal debt owed in terms of the outstanding credit agreements does not exceed R500 000-00, if the credit provider waits until conclusion of the 100th agreement before registering.
Therefore the consumers of the 99 credit agreements entered into prior to the registration of the credit provider, do not enjoy the added or extra protection provided by the registration process of the credit provider.
The total or aggregate principal debt owed under all the credit agreements of a specific credit provider exceeds the threshold of R500 000-00
In terms of this category a credit provider, whose total or aggregate principal debt exceeds the threshold amount of R500 000-00, was forced required to register as a credit provider, irrespective of the amount of credit agreements, provided that no incidental credit agreements are included. Section 42 of the Act required the Minister of Trade and Industry to determine a threshold of at least R500 000-00. In the threshold regulations the Minister announced the threshold of R500 000-00.
The position after the enactment of the National Credit Amendment Act
The enactment of the National Credit Amendment Act on the 13th of March 2015 had a drastic effect on the aspect of the registration of credit providers. The National Credit Amendment Act inter alia deleted the 100 credit agreements category as contained in section 40(1)(a) of the Act. The National Credit Amendment Act amended section 42 which read that the Minister was to determine a threshold of at least R500 000-00 to read as follows: “The Minister, by notice in the Government Gazette, must determine a threshold for the purpose of determining whether a credit provider is required to register in terms of section 40(1)”.
The Minister of Trade and Industry proposed in February 2016 a threshold of R0, which was made official three months later in May 2016, and which took effect on the 11th of November 2016.
The question now arises as to what are the effects of the R0 threshold? The effect thereof is that all credit providers have to register as such, irrespective of the number of credit agreements they have entered into and irrespective of the total or aggregate amount of the principal debt due to them. The R0 threshold however still does not apply in respect of incidental credit agreements, thus a credit provider who only concludes and enters into incidental credit agreements cannot be compelled to register as a credit provider.