With over 22 million credit-active consumers in South Africa, the credit industry is large and continually growing. As more financial institutions offer credit solutions to consumers, the industry requires tighter regulations. As a measure of protecting consumers and also ensuring fair credit practices, the National Credit Act was put into place.
This Act guides credit providers on fair credit practices and how to protect themselves as well as consumers.
As changes continue to affect how credit is issued in the country, with the National Credit Regulator introducing tighter controls to reduce reckless lending, new rules for credit providers have been introduced.
The National Credit Amendment Act came into effect in March 2016, making it a requirement for all South African credit providers to register under the National Credit Act, regardless of the loan amount.
This means that all credit providers are now required to register as credit providers if they fall within the definitions of providing credit under the Act.
When registered as a credit provider, a company will be required to comply with a number of provisions under the Act and pay the registration fee to the National Credit Regulator (NCR).
The new changes were announced by Minister of Trade and Industry Rob Davies, who reported on the amended act, which has set a standard of maximum calculated amounts which credit providers, will not be allowed to exceed or abuse.
Where an unregistered provider is required to register, the Regulator will issue a compliance notice, forcing the provider to either discontinue providing credit or register in terms of the Act.
Another of the new rules for credit providers introduced by the Act is aimed at reducing reckless lending practices.
A credit provider is required to make a calculation of the consumer’s existing financial means, prospects and obligations before granting them credit.
The credit provider must validate gross income by means of the latest 3 written proof of income or latest 3 months’ bank statements.
With these new rules, it’s hoped that consumer over-indebtedness will be reduced significantly and that consumers won’t turn to loan sharks.