The National Credit Act 34 of 2005 (“Act”) was enacted to promote responsible credit granting in South Africa. In terms of section 40(1) read with section 42(1) of the Act, a person will have to register as a credit provider with the National Credit Regulator (NCR) if the total principal debt arising from the credit agreement(s) issued by such person or entity exceeds the threshold as determined by the Minister from time to time in the Government Gazette.
In 2016, the Minister of Trade and Industry, by way of publication in the Government Gazette, changed the threshold for Credit Provider Registration from R500,000 to nil. This raised great confusion as the presumption was and still is, that when you provide credit of only R1.00 to another party, you should automatically register as a credit provider as section 40(1) of the Act is clear that a person must apply to register as a credit provider if the total principal debt owed to that person under all outstanding credit agreement exceeds the threshold prescribed by the Minister. This, however, excludes incidental credit agreements.
In the case of Du Bruyn NO and Others v Karsten 2019 (1) SA 403 (SCA) the court had to determine whether a credit provider providing a once-off credit transaction necessitates him/her registering as a credit provider in terms of the Act. The appellants and respondent concluded three respective sale agreements, which were deemed to constitute credit agreements. There was a debate as to whether the three agreements of sale amounted to a single credit facility, or whether they were three self-standing credit agreements. The court focused its attention on the question of whether the respondent was indeed obligated to register as a credit provider, as the respondent was not providing credit regularly during its ordinary course of business. The court found that the amount of credit provided was the sole determining factor to ascertain whether a credit provider is obliged to register as a credit provider. After the sale agreements, the section 42(1) threshold determined by the Minister was, however, still R500,000.00.
Considering the current threshold being nil Rand, it widens the scope of the application of the Act, as it can be deduced that every person or entity that provides credit in accordance with a credit agreement will be obligated to register as a credit provider, regardless of the amount. This would be the case unless there is a specific exemption detailing otherwise.
The application that an individual or entity must submit to the NCR for credit provider registration includes, amongst others a Code of Conduct, Combatting of Over-indebtedness Policy and a Language Policy to name a few together with relevant resolutions, ancillary forms and supporting documentation that must comply with the Act and the requirements prescribed by the Regulator. There are also cost implications and a certain prescribed format to be complied with when applying to the Regulator. However, with the current threshold of nil Rand, it appears that more and more individuals and entities are obligated to obtain credit provider status.
Should you provide credit, and you are not registered, it may be prudent to obtain legal advice to help you establish whether you are required to register.
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