What is the purpose of the National Credit Act?
The National Credit Act, which came into effect on 1 June 2007 which aims to ensure the regulation of credit granting practices. The Act will promote a credit market that is fair, accessible and responsible, transparent, and setting a framework for various types of credit transactions.
The Act is enforced by the National Credit Regulator which purposes to educate and protect consumers from reckless lending, high interest rates and unfair lending practices. A database of credit transactions is being implemented by the National Credit Regulator, including information about credit agreements, which are provided by lenders and credit bureaus.
This database can be checked by credit providers to determine whether a consumer can afford additional debt. The Act imposes greater demands on lenders to ensure that consumers understand the nature of their credit agreements.
Which agreements are regulated by the Act?
- Micro-loans and pawn transactions
- Home loans (Mortgages)
- Personal loans
- Vehicle finance
- Credit Cards
- Furniture Credit
- Retail Credit
- Any other type of credit or loan
Which Acts are replaced?
The National Credit Act replaces the Credit Agreements Act (which regulated installment sale agreements), the Usury Act (which regulates money lending) and the Exemption Notice to the Usury Act, which exempted micro lenders from the interest rate cap imposed on banks.
These rights include:
- To apply for credit
- You will be protected against discrimination in the granting of credit
- You will be informed why credit has not been granted, should you ask
- You will receive a free copy of your credit agreement
- You will receive a credit agreement in plain and simple language
- You have the right that your personal and financial information are being treated confidential.
- You should understand all fees, costs, interest rates, the total installment and any other details
- You can say no to increases on your credit limit and
- You decide whether or not you want to be informed about products or services via telephone, SMS, mail or e-mail campaigns.
- You can apply for debt counseling should you be overwhelmed by debt.
What does this mean?
Reckless granting of credit is prohibited under the Act. Reckless credit is when a credit provider gives you a loan without determining whether you can repay the loan. The Act reminds you that you have both the right and responsibility to understand and question how your credit agreements are structured; what payments you will be required to make, and what the terms and conditions involve.
You must be given a written quotation which discloses all costs before you sign a credit agreement. Credit providers often try to reduce your common law rights through complex clauses, but this cannot happen anymore due to standard credit agreements.
Furthermore, a court can set aside all or a part of a debtor’s obligations if the granting of credit is deemed to have been reckless. The Credit Act also makes provision to settle credit agreements without penalties or notice.
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