On the 11th of May 2016, in Government Gazette 39981, the Department of Trade and Industry announced- and it has been widely reported that the new credit provider registration threshold will be Nil (R0) and that all credit providers should now register as such with the National Credit Regulator (the “NCR”). Failure to register as a credit provider could result, amongst others, in the credit agreement between the credit provider and its debtor being declared null and void as an unlawful agreement.
In terms of Section 40 of the National Credit Act 34 of 2005 (the “NCR”), one is required to register as a credit provider if the total principal debt owed to that credit provider under all the outstanding credit agreements exceed the threshold as determined by the Minister of Trade and Industry. This, however, excludes incidental credit agreements.
Prior to the announcement made on the 11th of May 2016, a credit provider was only to register if the total amount of principal debt owed under all its credit agreements exceeded the amount of R500 000, which was the previous threshold as determined by Section 42(1) of the NCA.
Section 42(2) of the NCA states that the threshold takes effect six months after the date on which it is published in the Gazette. This means that the new threshold will only take effect on 11 November 2016.
This does not, however, mean, that every single person or business that lends money must register as a credit provider.
In the High Court Matter of Friend v Siendal 2015 1 SA 395 (GP) the court determined that an acknowledgment of debt falls within the NCA and is indeed a credit agreement, however, Section 40(1)(b) does not refer to a single lending transaction; therefore, a credit provider who only enters into one such credit agreement does not have to register with at NCR as a credit provider, even if the principal debt exceeds the amount of R500 000,00 or in the case of the new threshold, exceeds nil (R0).
The following must be kept in mind:
- The NCA does not apply to consumers that are juristic persons with an asset value turnover of R1 million where the juristic person concludes a large agreement, with a principal debt of R250 000 or more;
- If you provide credit in more than one loan, bearing interest charged at a commercial rate, you must register as a credit provider;
- The credit provider must follow the registration process set out in the NCA. See below article regarding this.
- If the credit provider is not registered, when it should have been registered, the court may declare the credit provider’s credit agreements are null and void from the date of conclusion of such credit agreements, which will, unfortunately, mean that the credit provider may only be able to recover the capital amount granted to the consumer, but no interest or other fees charged to the consumer under those credit agreements will be recoverable.
If an existing credit provider must register due to the new threshold, it must apply for registration before the 11th of November 2016. The credit provider may then still proceed to enter into credit agreements until such time as a decision with regards to the application has been taken.
It seems however that the new threshold has been cast too wide and therefore might be irrational and unreasonable. If the threshold is not rational, credit providers whose credit agreements are to be declared null and void may be able to challenge the threshold.
Herein below, we provide more information, as obtained from the National Credit Regulator’s Website. For more information, visit https://www.ncr.org.za/
Who needs to register?
Requirements for registering as a credit provider as per Section 40, 41, and regulation 4 of the National Credit Amendment Act, 19 of 2014:
- A person must apply for registration as a credit provider if that person is-
- The party who supplies goods or services under a discount transaction or instalment sale agreement;
- The party who advances money or credit under a pawn transaction;
- The party who extends credit under a credit facility;
- The mortgagee under a mortgage agreement;
- The lender under a secured loan;
- The lessor under a lease;
- The party to whom an assurance or promise is made under a credit guarantee;
- The party who advances money or credit to another under any other credit agreement; or
- Any other person who acquires the rights of a credit provider under a credit agreement after it has been entered into.
- A juristic person or a natural person may apply for registration as a credit provider.
- A person who is required to be registered as a credit provider, but who is not so registered, must not offer, make available or extend credit, enter into a credit agreement or agree to do any of those things.
- Although basic registration of credit providers is under this Act –
- The Regulator may impose conditions to address matters relating to the purpose of the Act generally;
- The Regulator will further consider the application relating to BBBEE and combating over-indebtedness concerns specifically; and
- A credit provider who intends to enter into developmental credit agreements must apply for supplementary registration and satisfy the requirements for such registration.
- For further information, refer to the relevant sections of the Act.
How do I register?
Documents and information required for the application for Registration as a Credit Provider in terms of Section 40 and 41 of the National Credit Amendment Act, 19 of 2014:
Please note that your application will not be processed and/or considered without the following:
- Completed and signed application form (form 2);
- Companies and Intellectual Property Commission (CIPC) registration document or other official legal registration document
- Copy of the share certificate/s if applicant is company
- Certified copies of ID/Passports of all members/directors/shareholders/ trustees/partners/sole proprietors
- Resolution, if applicant is a juristic person (see attached specimen)
- A Policy Clearance Certificate for all the all the members/directors/ shareholders/trustees/partners or sole proprietors issued by the South African Police Services (SAPS) or other service providers, listed in the NCR website.
- Proof of payment of the registration fees, being:
- Non-refundable application fee of R550;
- Branch fee of R250 per location or premises at or from which the applicant conducts registered activities;
- Initial registration fee as indicated in the table below for each sub-category of registrant.
- A letter from the bank confirming the applicant’s banking details or a copy of a cancelled blank cheque.
- Proof of registration with the South African Revenue Services (SARS).
Providers of developmental credit (Section 41)
A registered credit provider, or a credit provider who has applied to be registered in terms of section 40, may apply for supplementary registration as a credit provider in respect of developmental credit agreements if the credit provider-
- Is a close corporation, company, credit co-operative, trust, statutory entity, mutual bank or bank.
The National credit Regulator may grant supplementary registration to a credit provider only if it concludes that the credit provider has-
- Sufficient human, financial and operational resources to enable it to function efficiently and to effectively carry out its function in terms of the Act, or presents to the National Credit regulator a credible plan to acquire or develop those resources, and
- Adequate administrative procedures and safeguard to justify the application of statutory exceptions from the Act, or presents to the National Credit Regulator a credible plan to credible plan to develop those procedures and safeguards before entering into any developmental credit agreement.
Over and above the requirements set out in Section 41 of the Act, providers of developmental credit are required to submit a motivation outlining the applicant’s ability to provide developmental credit.