The National Credit Act (“NCA”) entered into effect on 1 June 2007. The NCA serves to codify a comprehensive set of basic rights and protections for consumers (as defined) in credit arrangements.
Prior to the NCA, credit agreements were complex and the average South African could not understand the salient terms and had no right to demand that the credit providers explain or clarify these terms. Further, as most South Africans are low income earners who relied heavily on credit in order to meet their basic needs, they needed credit more than the credit providers needed debtors.
Credit providers were therefore in a better bargaining position than consumers and those consumers had to accept the terms of the complex agreements. This resulted in a large number of over-indebted consumers who were unable to pay their monthly debt instalments.
The stated purpose of the NCA is “to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect Consumers.”
The NCA set out to achieve these aims through the introduction of various legislative measures, in order to fill the lacuna that previously existed in the law in relation to consumer protection in the credit space.
By ensuring transparency in the dealings between credit providers and the consumer, the NCA seeks to simplify the numerous grey areas that could exist in credit arrangements.