The National Credit Act – Tips for Practitioners
Providing credit to customers has practice owners in a bit of a panic. And rightfully so, for those who actually provide credit as defined in the National Credit Act of 2005 (“the NCA”).
The first and most important question to ask is whether you are a credit provider as provided for in the NCA. The questions to ask are not only if you defer payment for services or products rendered, but whether you charge interest for allowing the customer to pay you over a period after he/she has received your goods or services. If the answer is yes to both, then you more than likely fall within the ambit of the NCA if your customers are individuals. If you allow your customers to pay off their purchases, but you don’t charge them for that privilege, you probably do not fall within the ambit of the NCA.
Responsibilities of credit providers include ensuring that your customer agreements meet the requirements of the NCA, that you do a pre-assessment of your customer’s ability to pay you for your goods and services, and that on default of payment, additional procedural steps are followed to collect your debt.
Although the NCA distinguishes between credit agreements by their value (small being less than R15 000, medium being 15 000-R250 000, and large being greater than R250 000) and not by their period, the Act does recognise a short-term credit transaction as being a deferred amount of less than R8 000 which is repayable within less than six months. Each of these categories and types has different requirements and consequences. For instance, in respect of short term credit transactions, the calculation of the maximum prescribed interest rate is calculated at 5% per month, whereas other types of credit agreements are calculated differently.
The NCA in fact dedicates an entire chapter in the regulations to interest and fees. What is important to note though is that the maximum prescribed rate permitted in terms of the NCA is calculated yearly by taking the ruling of the South African Reserve Bank Repurchase Rate times 2.2 and adding 10% in the case of credit facilities and other credit agreements (excluding short term credit transactions discussed above).
Just because your customers are granted protection under the NCA though doesn’t necessarily mean that you have to be formally registered as a credit provider. You are only required to be registered as a credit provider if the number of your credit agreements total 100 (one hundred) or more or the total value of your credit agreements equal R500 000 or more.
The consequences of not meeting your responsibilities under the NCA could result in your agreement being set aside and you having to refund your customer (without necessarily being entitled to the return of your products). The bottom line? Make sure you know whether you are a credit provider under the NCA and whether you need to register with the Credit Regulator. You can’t afford to adopt the ostrich approach and bury your head in the sand.
Understanding the ins and outs of being a credit provider
If you’d like to learn more about the NCA or wish to understand more about the responsibilities and prerequisites of being a credit provider, get in touch with Alison Maytham, Founder and Director of Vizibiliti Management Services today.
BY ALISON MAYTHAM
“There are many different factors that determine the success of your practice – but, as a busy healthcare professional focusing on the needs of your patients, you may not always have the time to focus on the many demanding, and often complex, facets of managing your business. Vizibiliti provides you with easy access to insightful, comprehensive practice and business management solutions and advice across all stages of your business journey – from establishing, growing or closing your practice.”