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Why South Africa’s draft revised material transfer agreement is not fit for purpose

Forcing a square into a circle: why South Africa’s draft revised material transfer agreement is not fit for purpose

PAIA manual

View the PAIA manual HERE 20230626_PAIA_Manual_Esselaar Attorneys_PGE

Paul Esselaar

Paul Esselaar completed his BA, LLB at Rhodes University in Grahamstown in 1997. Thereafter he attended the School for Legal Practice at the University of Cape Town in 2000 and went on to complete his articles at Kessler De Jager Inc. During his articles he focussed...

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The Esselaar Attorneys Web Site is subject to copyright by Esselaar Attorneys or is licenced under copyright from third party owners. You may reproduce any web page - subject to the disclaimer below - for personal use only. Any comments and statements contained within...

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Financial Services Laws General Amendment Bill tabled in Parliament

According to the South African Government News Agency (SANews) the Financial Services Laws General Amendment Bill was tabled in Parliament last week. In short, 'the Bill, which was released for public comment in March, addresses urgent issues in eleven financial...

Is the Financial Services Industry pulling wool over consumers’ eyes?

The Financial Services industry is in a state of flux. The Financial Services Laws General Amendment Bill (FSLGAB) was tabled in parliament on 25 September 2012. The aim of the Bill is to ensure that ‘South Africa has a sounder and better regulated financial services...

Credit Law: Section 89(5)(c) of the NCA declared unconstitutional

In the May/June edition of CLR Paul Esselaar wrote about a decision by the Western Cape High Court in which s 89(5)(c) of the National Credit Act was declared unconstitutional for being inconsistent with the right to property in s 25(1). In other words it was found...

Draft NCA Regulations on Affordability Assessments published

The Department of Trade and Industry has published draft regulations on, "Affordability Assessment for the Amendment of Regulations for matters relating to the functions of the National Consumer Tribunal and Rules for the Conduct of matters before the National...

The National Credit Act update

Date: Monday, 17 May 2021 - 09:00 to Wednesday, 19 May 2021 - 11:00 The National Credit Act Amendment Act 7 of 2019 has real consequences for credit providers and debt counsellors in particular. This course focuses on the likely impact that the changes will have in...

NEW

Why South Africa’s draft revised material transfer agreement is not fit for purpose

Forcing a square into a circle: why South Africa’s draft revised material transfer agreement is not fit for purpose

PAIA manual

View the PAIA manual HERE 20230626_PAIA_Manual_Esselaar Attorneys_PGE

Paul Esselaar

Paul Esselaar completed his BA, LLB at Rhodes University in Grahamstown in 1997. Thereafter he attended the School for Legal Practice at the University of Cape Town in 2000 and went on to complete his articles at Kessler De Jager Inc. During his articles he focussed...

Web Site Terms and Conditions

The Esselaar Attorneys Web Site is subject to copyright by Esselaar Attorneys or is licenced under copyright from third party owners. You may reproduce any web page - subject to the disclaimer below - for personal use only. Any comments and statements contained within...

Email Disclaimer

This message and any accompanying attachment(s) may contain confidential and copyrighted information. If you are not the addressee(s) indicated in this message or responsible for delivery of the message to the addressee(s), do not copy or deliver this message or the...

Financial Services Laws General Amendment Bill tabled in Parliament

According to the South African Government News Agency (SANews) the Financial Services Laws General Amendment Bill was tabled in Parliament last week. In short, 'the Bill, which was released for public comment in March, addresses urgent issues in eleven financial...

Is the Financial Services Industry pulling wool over consumers’ eyes?

The Financial Services industry is in a state of flux. The Financial Services Laws General Amendment Bill (FSLGAB) was tabled in parliament on 25 September 2012. The aim of the Bill is to ensure that ‘South Africa has a sounder and better regulated financial services...

Credit Law: Section 89(5)(c) of the NCA declared unconstitutional

In the May/June edition of CLR Paul Esselaar wrote about a decision by the Western Cape High Court in which s 89(5)(c) of the National Credit Act was declared unconstitutional for being inconsistent with the right to property in s 25(1). In other words it was found...

Draft NCA Regulations on Affordability Assessments published

The Department of Trade and Industry has published draft regulations on, "Affordability Assessment for the Amendment of Regulations for matters relating to the functions of the National Consumer Tribunal and Rules for the Conduct of matters before the National...

The National Credit Act update

Date: Monday, 17 May 2021 - 09:00 to Wednesday, 19 May 2021 - 11:00 The National Credit Act Amendment Act 7 of 2019 has real consequences for credit providers and debt counsellors in particular. This course focuses on the likely impact that the changes will have in...

With all the pieces of legislation that are constantly being updated it is easy to miss changes to legislation that are really important – especially if that change comes in the form of a Regulation (something typically drafted by a ministry such as the Department of Trade and Industry(DTI)) instead of an amendment to an Act (which requires parliamentary approval). One such game-changer came into force with little (if any) fanfare in the form of Government Gazette notice 513 which was signed by Minister of Trade and Industry Rob Davies on the 14th April 2016 and comes into effect on the 11th November 2016 (see s42(2) as to why it is delayed by 6 months).

The notice is only 7 lines long and all it does is change the threshold ‘required by section 42(1)’ to ‘nil (R0)’. So far that seems pretty innocuous stuff – until you realise what this means…

Section 42 of the National Credit Act is the part of that Act that deals with the requirement to register as a Credit Provider. Before this notice that threshold was at R500 000. Essentially what this meant is that – before 11 May 2016 – if you loaned R499 999 to a person and received 1% interest on this per month you still needed to comply with several of the provisions of the National Credit Act (you are still considered to be a ‘Credit Provider’) but you did not need to register as a Credit Provider with the National Credit Regulator. This is vitally important as (in the past) the failure to register as Credit Provider when you needed to should have resulted in you forfeiting the entire loan amount to the state (in terms of section 89(5)).

Section 89(5)(c) has now changed (thanks to the Constitutional Court judgment of National Credit Regulator v Opperman and Others (CCT 34/12) [2012] ZACC 29) so that a credit provider who is unregistered will be able to recover the capital amount loaned but not any additional fees or interest.

So what does this all mean for you? Well, to take an extreme example this means that if I loan R10 to Joe Soap and we agree that he will repay an amount of R15 to me then I need to register with the National Credit Regulator as a Credit Provider.

Seriously.

If I don’t register as a Credit Provider then I will not be able to recover the R5 in interest / fees that I charged Joe Soap but I can recover the R10 capital amount.

So let’s take this a little further. The reduction of the threshold to register to R0 means that:

  • Any company providing an employee loan (of any amount) where they charge interest and/or a fee must register as a credit provider; and
  • Small loans between people who know each other but still act at arm’s length will effectively become impractical (as there will be no incentive to loan the money).

While I recognise that the National Credit Regulator has had to deal with schemes where companies use elaborate structures to avoid crossing the threshold (and so avoid having to register as a credit provider) it is amazing that this fundamental change to the way smaller loans are granted (especially by small businesses and people who know each other) has not received greater publicity. Until it does it seems very likely that a great number of people trying to provide small loans on terms generally more favourable than commercial credit providers will suddenly find themselves rueing their kindly nature when they realise that they:

  • cannot legally recover interest or fees for those credit agreements before they are registered, and
  • they still need to register as a credit provider.

Once again this action by the DTI begs the question as to whether they really thought this through?

– Paul Esselaar, May 2016

Paul Esselaar and Elizabeth de Stadler will be presenting an update on the National Credit Act at the University of Cape Town on the 30th May 2016. For more information on this please click here.