ATTORNEY'S & THE NCAInformation provided by "The Law Society of South Africa "
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You may have thought the Act applies only to credit providers, but its application is far wider.
It applies to credit bureaus, debt counsellors, consumers, insurers, pawn brokers, financial intermediaries, debt collectors, attorneys, magistrates and other professionals. All these professions and many other businesses, such as estate agencies, are affected.
Indeed, the Act has an impact on all aspects of the consumer credit lifecycle, from beginning to end. This means that the role attorneys play in drafting credit agreements, enforcing credit agreements, in debt collection procedures and litigation in general are affected to a large degree.
As most practitioners are aware, the NCA dramatically changes the debt-collection process.
In summary, legal action cannot commence to enforce a credit agreement until a section 129 notice is properly served. An agreement will be a credit agreement for the purposes of the Act if two elements are present, namely there is a fee, charge, or interest imposed for a deferred payment, or a discount is given when prepayments are made. Law firms are exempt from the provisions of the Act (and a section 129 notice is not required as a precursor to legal action for recovery of unpaid fees) where your firm’s asset value or annual turnover equals or exceeds R1 million at the time a fee agreement is entered into. If you fall below that threshold you would still not have to give such notice if you provide legal services and bill your client against monies you retain in trust or if you do not charge interest on unpaid fees.
See “Exclusions” for agreements that are excluded from the ambit of the NCA, If you charge interest on arrears, have more than 100 clients that you invoice (or the value of your book is equal to or greater than R500 000) you are obliged under section 40, read with section 42 of the Act, to register as a credit provider.
As interest charges are incidental to your practice it may be worthwhile waiving interest payable so you are not obliged to register. In terms of the notice, a debtor may approach a debt counsellor, or the other third parties provided for, to obtain assistance and legal action is curtailed during this debt review and rearrangement process. Even where legal action has commenced the court may refer the matter to a debt counsellor.
A debt counsellor may apply to court to have a credit agreement declared reckless and the NCA introduces several new remedies and options for debtors. Legal and other collection costs are dramatically limited and many standard provisions are unlawful and could render the credit agreement unenforceable.
The sale of attached assets is strictly regulated and the delay in such a sale or the sale of the attached assets for less than their market value will result in the debtor being able to claim damages. The Act has given consumers many new rights. These rights can be seen as a “bill of rights” for consumers, which are now easily capable of enforcement.
Consumer law has been dramatically enhanced and legal practitioners will be able to seek redress in the courts for wrongs that were previously regarded as incapable of meaningful or inexpensive remedy. Good examples are the right to a statement of account, which previously required legal action to be commenced in the Magistrate’s Court and can now be implemented by applying directly to the National Consumer Tribunal or the NCR. Simply lodging a complaint with the NCR may result in a compliance notice being issued in terms of section 55 of the Act and many credit providers and credit bureaus will seek to avoid censure and the draconian penalties that can be imposed.
It is true that Consumers had rights prior to the promulgation of the Act. A key difference, post the NCA, is that the onus has largely shifted from the consumer having to prove noncompliance, to the credit providers and others, attorneys included, having to prove compliance, in order to avoid the penalties of the NCA. Credit bureaus which were largely unregulated prior to the Act, must now comply with a myriad of provisions which aim to ensure that credit information is accurate and can be easily disputed, corrected or removed, where appropriate. That is not to say that consumers can do as they like.
The NCA is careful to balance these new rights with responsible behaviour from the consumer. Full and honest disclosure is a requirement placed on all consumers and credit bureaus, and others are able to argue a lack of disclosure or honesty in their defence. The growing body of consumerminded legislation offers exciting new opportunities to practitioners in explaining, implementing and otherwise assisting affected service providers, whether pawn brokers, credit providers or credit bureaus, to comply with the Act and this is interesting work. Most companies are affected by the Act. That means your existing clients need you to apply your mind to considering how this Act affects them. Do they need to change their processes, redraft their agreements (such as applications for credit), stop offering interest bearing staff loans, change their collection practices or 7 educate consumers about how to go about enforcing their new rights?
TOP CREDIT ACT LINKS
What the credit bureaus say about the credit act?
Is the national credit act affecting me?
National Credit Regulators - Ncr.org.za