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Credit Act

Even small credit providers must now register with the National Credit Regulator

“I have a small informal money lending business. A friend told me that she has read that even small credit providers lending money must now register with the National Credit Regulator. I hardly lend more than R200,000 per year, and have not had to register in the past. Is this true?”

Your friend is correct in principle, although there are certain exclusions. The Department of Trade and Industry on 11 May 2016 published a notice determining that the threshold for registering as a credit provider with the National Credit Regulator (NCR) is now R0, for all the applicable credit providers involved in lending money. Prior to this notice, the National Credit Act (NCA), required you to register as a credit provider if the total principal debt owed in terms of all current credit agreements exceeded R500,000, but this has now been reduced to R0. Consequently credit providers who lend money in terms of the Act, irrespective of the principal debt, must now apply to be registered with the NCR. 

It is however important to remember that the Act does not apply to certain juristic persons specifically excluded in the NCA, as well as persons who are not “at arm’s length”. Furthermore any loan which does not include interest or a fee for late or deferred payment will not fall under the definition of a “credit agreement” in the NCA and registration as a credit provider will not be required. 

The Act provides that the threshold will take effect six months after the date on which it is published in the Gazette, namely 11 November 2016. Accordingly if you are required to register for the first time due to the new threshold, you must apply for registration before 11 November 2016.

In order to register as a credit provider, you must submit an application to the NCR. If the application complies with the NCA and the applicant meets the criteria as set out in the NCA for registration, the NCR will register the applicant. Your application will have to be accompanied by an application fee and a prescribed registration fee in accordance with the credit provider category you fall in. 

Further take note that once you are registered with the NCR as a credit provider, the interest that you charge your clients will also be affected as it will have to comply with the interest rate prescribed by the Minister from time to time by a notice in the Government Gazette.

August 11, 2016
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