The National Credit Act, 34 of 2005 (“the Act”) has always been scrutinized as being poorly drafted and lacking clarity leaving much of the Act open for speculation and conjecture, often to the detriment of the consumer.
On 11 May 2016 it was published in the government gazette that the threshold for persons to be registered as a credit provider when lending money would be reduced to NIL. The practical effect of this is that any person who lends money, even a single Rand, would need to be registered as a credit provider.
We often don’t give a second thought when lending money to friends and family who are in need, or employers wanting to assist long standing employees.
Although this position may change as recent case law has left a bitter taste in the mouth of one friend, when the Western Cape High Court ruled that a loan between two friends was to be declared unlawful. This meant that the friend who had borrowed a significant amount of money and had previously made payments towards the loan, did not have to repay the balance of the loan which amounted to approximately R1.5 million.
Our offices have recently had to deal with several matters relating to the interpretation and applicability of the Act, specifically where the consumer is a juristic person, as there grows more and more concern and uncertainty as to when the Act is applicable and what unforeseen implications the reduction in the threshold has had.
Our offices noted that as the Act presently stands there is no protection afforded to small businesses who may need micro loans but are forced into taking larger loans, over the threshold of R250 000, as a result of greater scrutiny and costs incurred by lenders in having to register as a credit provider for loans to companies under the value of R250 000.
Should you be uncertain whether your loan to a friend, family or company is valid, our offices can assist before you may find yourself in hot water.
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