New proposed amendments to the National Credit Act

The National Credit Act protects consumers, as well as small juristic persons, in that a single system to regulate credit was created which promotes a fair and non-discriminatory marketplace for access to consumer credit as well as promotes responsible credit granting and use.
 
In terms of the Act, consumers should not be granted credit recklessly. Before granting credit, credit providers must do an affordability assessment, but this does not apply to situations where credit is provided for reasons of emergency, for school or study loans, pawn transactions, temporary increases in a credit limit and so on.
 
In providing credit to consumers who cannot afford it (in other words, providing reckless credit), the credit provider makes a defence available to the consumer who can then get out of the agreement by having it suspended, having certain obligations set aside or having the debt restructured. To prevent this, the credit provider must do an assessment or test whether a consumer can afford the credit, failure of which is reckless in itself. It must also be clear to the credit provider that the consumer actually understands the costs and obligations of entering into the credit agreement, and the credit provider may not grant credit if the consumer is already over-indebted or the new credit will result in him being over-indebted.
 
The new proposed amendments to the National Credit Act provides that when conducting the affordability assessment, a credit provider must calculate the consumer's allocatable and discretionary income, take into account all debts, including monthly debt repayment obligations in terms of credit agreements as reflected on the consumer's credit profile held by a registered credit bureau as well as take into account maintenance obligations arising from statutory deductions or necessary expense.
 
Considering a person’s maintenance payment history is a new factor is the assessment and has far reaching effects. Essentially, this means that if a parent is in arrears with maintenance payments, he will be unable to get credit as a result of the outstanding maintenance payments which will be used for the credit-scoring. The period that credit will not be extended is proposed to be up to five years, unless the court rescinds the default judgment against the defaulting consumer.
 
Maintenance defaulting is common, especially in the Western Cape and Gauteng, and according to Mthunzi Mhaga, the spokesman for the Justice Department, these new regulations may help strengthen the government’s position in cracking down on maintenance defaulters and prosecutors would be obliged to submit the names of maintenance defaulters to the credit bureaux.

Bisset Boehmke McBlain Attorneys

25 August 2014