Some of you might have already heard about the National Credit Act in the media and attended conferences. Parts of the Act became effective on the 1 st of June 2006.  Many of our clients have already approached us to advise them regarding the impact of the Act to discuss the actual impact on their businesses.

However, if one is not in the micro-lending, car or household finance businesses, or in any other industries which provide finance to the public, the impact of the Act upon you will be limited.

Whilst the Act does have an impact on almost all businesses is that it provides for special procedures where a fee, charge or interest is payable by a consumer as a result of the late payment of an outstanding account, which it defines as "incidental credit" .   Most companies charge interest or some other penalty to their clients who make late payment of their accounts, it is this aspect of the Act that will directly affect you and most businesses in South Africa.

If one wishes to avoid the impact o f the Act on the debt collection procedure, the solution is simply not to charge any interest or any penalty for late payment of accounts by debtors.  By not charging interest or late payment fee s one avoids falling within the definition of “incidental credit” in the Act but if one does charge interest or l ate payment fee s one must comply with the debt collection procedures of the Act which are contained in section 130 of the Act.

Section 130, provides that:-

Where a debtor is in default, the creditor must draw the debtor ’ s attention in writing to the default and propose that the debtor refer the debt to alternative dispute resolution;

If ten business days lapse after the above notice and the debtor has not responded to the notice or responded by rejecting the proposal to refer the dispute to alternative dispute resolution;  and

At least 20 (twenty) business days have elapsed since the debtor has been in default

The creditor may however approach the court for an order to enforce the debt.

In addition to the aforegoing the National Credit Act contains (at Section 90) a list of unlawful provisions which may not be included in credit agreements and furthermore contains stringent penalties for creditors who extend credit to individuals, should such credit place them in a situation in which they are unable to pay their debts.

Should you require us to assess your current credit application form to ensure that it complies with the provisions of the National Credit Act, kindly contact us.  The provisions of Section 130 only bec o me effective from the 1 st of June 2007 but it is important that one is prepared for its impact.

Should you require the full provisions of the Act relating to incidental credit, or any other section(s) of the Act, please feel free to contact us

Regards,

Kobus Nel