A person must register as a credit provider in terms of the National Credit Act, 2005 (“the Act”) if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds the threshold prescribed by the Minister in terms of section 42(1) of the Act.
At present, the threshold prescribed by the Minister is R500 000. This means that a person who provides credit to another must register as a credit provider only if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds R500 000. This is about to change.
With effect from 11 November 2016 the Minister has prescribed the new threshold as nil (R0). In other words, every person who provides credit to another is required to register as a credit provider, no matter how much credit he or she has provided.
Registration as a credit provider is crucial because a credit agreement which is concluded by a credit provider who is not registered as such, but is required to be so registered, is an unlawful agreement, with two limited exceptions. The agreement would be lawful if either (1) at the time the credit agreement was concluded, or within 30 days after that time, the credit provider had applied for registration and was awaiting a determination of that application; or (2) at the time the credit agreement was concluded, the credit provider held a valid clearance certificate issued by the National Credit Regulator.
If the credit agreement is unlawful, then, despite any other legislation or any provision in an agreement to the contrary, a court is required to make a just and equitable order including a directive that the credit agreement is void as from the date on which the agreement was concluded.
This article has been written by Janine Will, a Senior Associate in the Commercial Department of Garlicke & Bousfield Inc
For more information regarding assistance with your registration as a credit provider or advice with regard to how the Act affects you, please contact Lizette Martins (details below).
NOTE: This information should not be regarded as legal advice and is merely provided for information purposes on various aspects of commercial law.