On the 1st of June 2007 the National Credit Act came into effect with its main focus on creating a fair market place for the provision of credit to debtors, but at the same time preventing the risk of debtor becoming over indebted.
This Act is applicable to all credit agreements between parties within the Republic subject to five exceptions namely:
- The debtor is a legal (juristic) entity whose asset value or annual turnover at the time of the entering the agreement equals or exceeds R1m;
- The debtor is the State or an organ of the State;
- if the agreement is for a value above R250 000.00 and the debtor is a legal entity whose asset value or annual turnover does not exceed R1m at the time of entering the agreement ;
- The credit provider is the SA Reserve Bank;
- The credit provider is situated outside the Republic.
In terms of the Act a Credit Provider may no longer merely instruct its attorney to issue summons against the defaulting debtor.
The Credit Provider, or their attorneys, are now required to furnish the consumer with a formal written notice as to the consumer’s default, and to propose to the debtor that the credit agreement be referred to a Debt Counselor or Consumer Court or ombud with jurisdiction, in an attempt to resolve the dispute.
Further to the above a Credit Provider’s attorneys may only issue summons against the debtor if the following requirements have been met:
- 10 business days have past after the notice referred to above has been delivered to the debtor, and the debtor has either failed to respond thereto, or has rejected the recommendations contained therein;and
- 20 business days have past from the date payment became due
The Court, when considering whether to grant judgement against the consumer now requires that the attorneys prove to the Court that at the time the credit agreement was entered into the Credit Provider investigated the consumer’s ability to pay back that which was being borrowed, and that further the consumer fully understood the risks and obligations involved therewith.