The NCA (National Credit Act)
The National Credit Act (NCA) which came into effect on 1 June 2007 aims to protect the consumer from undue risk and create a fair and non-discriminatory lending market.
Why is the NCA being implemented?
The NCA aims to:
• Ensure credit providers lend in a responsible manner
• Prevent consumers from borrowing more than they can repay
• Protect you through the creation of a National Credit Regulator, a National Consumer Tribunal, and a debit counselling service
• Educate and help consumers make informed choices
Which transactions are covered by the NCA?
The NCA covers most credit products where payment is deferred and a charge, interest or fee is payable, these include:
• Overdrafts, credit cards, mortgages, instalment agreements, leases, secured loans and credit guarantees
Consumers (borrowers) get more rights
With the introduction of the NCA, consumers can expect the following rights:
• Reasons for credit being refused or discontinued
• Credit agreement information will become available in languages other than English
• Information in plain and understandable language
• Access to credit records and information held by credit bureaux
Advertising and marketing gets leashed
The Act aims to stop misleading advertising:
• Negative option marketing is not allowed
• Deceptive words like “no credit checks”, “free credit”, and “guaranteed loans” cannot be used
• Marketing of credit at the consumer’s home or workplace is prohibited without the consumer’s consent
Protection from too much debt
The NCA requires credit providers to conduct a proper assessment of each consumer’s ability to meet obligations. The onus is also on the consumer to provide accurate information to the credit provider during the completion of this assessment.
Applying for credit under the NCA?
Some of the things that will change include:
• Quotations must disclose the full costs of the credit applied for including all fees.
• The quotation is binding on the credit provider for 5 days, allowing you to shop around for the best deal.
• The consumer needs to provide detailed information (e.g. statement of income and costs, household budget) to the lender for a credit assessment to be done.
• Records of credit agreements need to be sent to a credit bureau, and credit providers also need to keep records of all credit applications for a prescribed period.
• For marriages in community of property the NCA requires the written consent of the spouse, when one spouse applies for credit.
