The final provisions of the National Credit Act, 2005 (NCA) came into operation on 1 June 2007. The NCA serves to promote a fair and non-discriminatory marketplace for access to consumer credit and related matters.
This article highlights the registration provisions of the NCA in relation to an immovable property transaction where payment of an amount owed by the purchaser to the seller is deferred and any charge, fee or interest is payable to the seller in respect of the agreement or the amount that has been deferred. A sale of immovable property structured in this manner constitutes a credit transaction for the purposes of the NCA.
This may also be the case where a "kustingsbrief" is registered simultaneously with the transfer of the property or where the parties have agreed that payment of the purchase price, or a portion of that will be deferred and the purchaser held liable for interest and/or fees and charges in respect of the deferral.
Section 40(1) of the NCA provides that a person must apply to be registered as a credit provider if that person, alone or in conjunction with any associated persons, is the credit provider under at least 100 credit agreements, other than incidental agreements; or the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds R500,000.
The penalty provisions for non-compliance are severe, providing that a credit agreement entered into by a credit provider who is required to be registered but who is not registered, is an unlawful agreement and void to the extent prescribed by the NCA. In terms of section 89(5) if a credit agreement is unlawful, in terms of the NCA, a court must order that –
1) the credit agreement is void as from the date the agreement was entered into;
2) the credit provider must refund to the consumer any money paid by the consumer under that credit agreement to the credit provider, together with interest; and
3) all the purported rights of the credit provider under the credit agreement to recover any money paid or goods delivered to, or on behalf of, the consumer in terms of that agreement are either canceled or forfeited to the State.
It is therefore important to consider the financial aspects of a transaction carefully before an agreement is concluded as a sale agreement could be held to constitute a credit agreement for the purposes of the NCA and depending on the amount deferred, the seller or financier may be required to register as a credit provider. It should be noted that the principles set out above apply equally to certain other forms of credit agreement contemplated in the NCA.
Where any doubt or uncertainty exists, professional advice should be sought.
Hugh Jackson, director and Quintin du Plessis, associate, Cliffe Dekker Inc.