A Guide For Credit Providers.
The National Credit Regulator (NCR) was established under Section 12 of the National Credit Act, Act 34 of 2005 (NCA) to oversee the South African credit industry. It operates with jurisdiction across the Republic of South Africa, maintaining independence. The NCR’s primary role is to regulate credit activities, ensuring compliance with the NCA while addressing the diverse needs of South Africans in the credit market.
Promoting Accessible Credit Markets
The NCA mandates the NCR to foster an accessible credit market, with an emphasis on supporting historically disadvantaged individuals, low-income earners, and communities in remote or sparsely populated areas. This function is critical in bridging the economic divide and ensuring equitable access to financial resources.
Core Functions And Duties Of The NCR
Under the NCA, the NCR’s responsibilities extend to:
- 1. Registration: Registering credit providers, credit bureaus, and debt counsellors to ensure compliance with the NCA.
- 2. Complaint Investigation: Addressing complaints from consumers about credit providers or related entities, which may involve initiating investigations.
- 3. Enforcement: Ensuring adherence to the NCA by taking enforcement actions when necessary to uphold consumer rights.
- 4. Regulation and Oversight: Supervising credit providers, credit bureaus, and debt counsellors to promote fair and responsible credit practices.
- 5. Education and Research: Conducting public education initiatives and researching credit-related topics to enhance awareness and improve industry practices.
- 6. Policy Development: Formulating policies aimed at promoting accessible and fair credit markets.
Why NCR Credit Registration Is Essential For Credit Providers
Section 40 of the NCA requires all individuals or entities to apply for NCR credit registration as a credit provider if the combined principal debt across all outstanding credit agreements, excluding incidental credit agreements, is above the threshold established under section 42(1) of the NCA.
Section 40(3) of the NCA provides further clarity in stating that an individual or entity required to register and who is not registered “must not offer, make available or extend credit, enter into a credit agreement or agree to do any of those things.”
What the legislature attempts to convey in section 40 of the NCA is that any individual or entity acting as a credit provider is required to register with the NCR as a credit provider, if they are providing credit to an amount above the threshold specified in section 42 of the NCA.
What Is The Threshold Under Section 42 Of The National Credit Act?
Section 42(1) of the NCA empowers the Minister to set the threshold by publishing it in the Government Gazette. This threshold guides whether a credit provider must be registered:
The Current Threshold: Zero (R0)
The latest threshold, as set by the Minister, is nil (R0). This means that any individual or entity acting as a credit provider is obligated to apply for NCR registration, as there is effectively no minimum threshold exempting them from this requirement. This requirement underscores the NCR’s commitment to maintaining regulatory oversight over all credit providers, thereby enhancing consumer protection across the credit industry.
How To Register With The NCR?
In terms of Section 40 and 41 of the NCA, individuals or juristic entities wishing to commence with NCR registration must submit specific documentation and information to the NCR.
The application will not be processed without the following:
Required Documents:
1.Completed Application Form (Form 2): Ensure the form is fully completed and signed.
2. Registration Documents if the Credit Provider is a legal entity other than individuals:
- – A CIPC registration document or similar legal proof;
- – Provide share certificate(s);
- – Certified copy of ID/ Passport document of each and every member/ director/ shareholder/ trustee/ or partner;
- – Signed NCR resolution;
- – Bank letter confirming bank account details;
- – Proof of Directorship, Member, or Shareholder of a company or cc if applicable;
- – Criminal clearance certificate (not older than 6 months);
- – Company letterhead; and
- – Proof of registration with the South African Revenue Services (SARS).
3. Registration Documents if the Credit Provider is for an Individual/s:
- – Certified ID/ Passport document;
- – IT34 (Income Tax Return for Individuals) or Provisional Tax Certificate for Sole Proprietors;
- – Proof of residence;
- – Bank letter confirming bank account details;
- – Letterhead; and
- – Criminal clearance certificate (not older than 6 months).
4. Payment of Fees
- – Non-refundable application fee: R550.
- – Branch fee: R250 per location.
- – Registration fees based on total principal debt extended.
Registration Fees:
The NCR credit registration fees are broken down into 9 categories and are based on the principal debt, or the credit extended under a credit agreement.
The principal debt is exclusive of any initiation fees, service fees, interest, credit insurance, administration charges, or collection costs charged in terms of the credit agreement. The categories are listed as below:
- Category 1: R330,000 (principal debt ≥ R15 billion)
- Category 2: R190,000 + 0.001% of principal debt over R5 billion
- Category 3: R70,000 + 0.003% of principal debt over R1 billion
- Category 4: R16,000 + 0.005% of principal debt over R100 million
- Category 5: R7,000 + 0.01% of principal debt over R5 million
- Category 6: R2,500 + 0.1% of principal debt over R1 million
- Category 7: R2,000 (principal debt between R500,000 and R1 million)
- Category 8: R1,500 (principal debt between R250,000 and R500,000)
- Category 9: R1,000 (principal debt < R250,000)
Annual Registration Renewal Fee
Additionally, under section 51(1)(c), registered NCR credit providers are also obligated to pay an annual renewal fee in order to remain a registered credit provider. This fee is due by 31 July each year, regardless of when the initial registration was completed.
Consequences Of Failing to Register With The National Credit Regulator
Unlawful Credit Agreement
Section 89(2)(d) of the NCA specifies that a credit agreement is considered unlawful if the credit provider was required to be registered as a credit provider with the NCR at the time the agreement was made but was not registered as such. This means that any agreement entered into under these circumstances is invalid and cannot be enforced.
Court Orders on Unlawful Agreements
Section 89(5) of the NCA further provides that if a court determines that a credit agreement is unlawful, it has the authority to declare the agreement void from the date it was originally entered into. This means that any debt or obligation arising from that agreement is considered null and void from its inception, and no agreement ever existed. The result of which is that the credit provider cannot enforce the terms of the credit agreement.
These provisions ensure that only registered NCR credit providers can lawfully enter into credit agreements, safeguarding consumers from unregistered and potentially predatory lenders.
Credit Agreements Which Would Not Require Registration
Registering with the NCR as a credit provider is a requirement in terms of the NCA, however the NCA provides a number of exclusions under section 4. Credit providers who fall under the exclusions mentioned in the NCA would not be bound by the NCA and accordingly would not be required to register as a credit provider.
These credit providers can then, as phrased in section 40(3) of the NCA, “make available or extend credit, enter into a credit agreement or agree to do any of those things.” without registering with the NCR as a credit provider.
Under Section 4(1)(b) of the NCA, it is stated that the NCA does not apply to large credit agreements as described in section 9(4), in terms of which the consumer is a juristic person, and the principal debt of the agreement exceeds the threshold amount determined by the Minister as outlined in section 7(1) of the NCA.
The threshold in terms of section 7(1) as determined by the Minister is currently R250 000.00.
This allows an individual or an entity to enter into a credit agreement with a juristic person where the principal debt exceeds R250.000, without needing to register with the NCR as a credit provider.
Similarly, section 4(1)(a) of the NCA provides that a credit agreement entered into with a juristic person as a consumer, where the juristic person’s asset or annual turnover value exceeds R1000 000.00 would also not require NCR registration.
Conclusion
For credit providers, understanding the specific requirements of NCR registration, including the submission of required documents, adherence to fee structures, and the annual renewal obligation, is key to maintaining compliance. Furthermore, failure to register has serious consequences, as any credit agreement with an unregistered provider may be deemed unlawful and unenforceable, leading to substantial financial and legal repercussions.
Although there are exclusions to the registration requirement, such as agreements involving juristic persons or large transactions, these exemptions are carefully delineated under Section 4 of the NCA. Credit providers seeking to navigate this process can benefit from legal guidance, ensuring that they meet all compliance standards and contribute to a secure credit market that supports consumers and NCR credit providers alike.
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By Nerishka Pillay | Junior Associate & Xander Schoeman | Candidate Attorney
