New Rules Proposed For SA Loan Providers

According to the latest Government Gazette, all South African loan providers will have to register under the Nsaflag3ational Credit Act, regardless of the loan amount.

Before the 11th of May this year, a person was required to register as a credit provider under the National Credit Act if the total principal debt owed to that party under all outstanding credit agreements exceeded R500,000 or if they are the loan provider under at least 100 credit agreements.

Legal firm Browman Gilfillan noted that in the latest Government Gazette, the threshold has been reduced to zero. In other words all loan providers are now required to register as loan providers if they fall within the definitios of providing credit under the Act.

Although all loan providers who provided credit to a consumer were required to comply with the certain provisions of the Act by virtue of the fact that they were providing credit, not all such credit providers were required to register as credit providers according to Lloyd Chater, a partner in Bowman Gifillan.

Under the new prescription by the Minister, even if a loan of R1 is given on credit (in that more than R1 is repaid), the credit provider must register. As a result of a 2012 Consitutional Court ruling in National Credit Regulator vs Opperman & others, failure to register will mean that the credit provider may only be able to recover the capital amount granted to the consumer, but not any interest or other fees charged to the consumer.loapproved2

Chater went on to say that all arms’ length credit agreements, including loans given by companies to their employees where a fee or interest is levied for such loan, will require the credit provider to register. Registration encompasses the need to comply with a number of onerous provisions under the Act, and to pay the registration fee (or annual renewal fee, as the case may be) to the National Credit Regulator.

The new threshold will take effect on 11 November 2016. Applications to register will need to be made in sufficient time before that date in order to ensure that they are fully compliant by 11 November 2016.

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