By SHAUN BERGOVER, Attorney at the Rhodes University Law Clinic
The National Credit Act (NCA) and the Consumer Protection Act protect consumers by detailing the rights to which a consumer is entitled. Both these pieces of legislation aim “to promote and advance the social and economic welfare of the South Africans…” and to “promote a fair, accessible and sustainable marketplace for consumer products and services.” In this article, we will be discussing some of the rights to which consumers are entitled under the NCA.
The right to apply for credit
In terms of section 60 of the NCA, every natural person and juristic person has the right to apply for credit from any credit provider. This, however, does not impose a duty on the credit provider to grant the credit. In terms of section 62 of the Act, a consumer is entitled to request reasons for the refusal of credit, which the credit provider is obliged to furnish in writing. Should the credit provider refuse the credit application, the reasons must be business-related, in line with their normal credit risk evaluation processes, and may not be based on arbitrary reasons that would unfairly discriminate against the consumer.
Examples of these reasons would include any reason based on, amongst others, race, religion, pregnancy, marital status, ethnic origin, gender or sexual orientation. Any consumer who believes that a credit provider has discriminated against them may approach either the Equality Court or the National Credit Regulator for assistance. This is very similar to the position in the Consumer Protection Act.
The Act’s regulations require that a credit provider take practical steps to assess the individual or joint income to determine whether the consumer has the financial means to pay the proposed credit instalments. This is usually done by requesting copies of latest payslips or bank statements.
The consumer must accurately disclose to the credit provider all financial obligations and provide authentic documentation to enable the credit provider to conduct the affordability assessment.
The right to information in an official language
The consumer has the right to receive documents from a credit provider in an official language that the consumer understands. These documents include the credit agreements themselves and quotations and statements. Furthermore, these documents must be written in plain language, which the ordinary consumer will understand. The plain-language requirement is dependent on factors such as usage, practicality, expenses, geographical region, and the needs of the consumer being served by the credit provider.
In terms of the Act, a document is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the document is intended, with average literacy skills and minimal credit experience, could be expected to understand the content, significance, and importance of the document without undue effort.
The Act also contains detailed provisions regarding how statements of account must be provided. The Act’s regulations prescribe the form and content of statements in the case of small agreements. Credit providers must deliver to consumers periodic accounts of statements – usually once a month; or every two months in the case of an instalment agreement or loan; or every six months in respect of a mortgage agreement. Consumers may choose how often to receive statements, but the period between each statement should not be more than three months. A credit provider may not charge a fee for requesting the original copy of any document described above.
Protection against inappropriate marketing practices
The Act contains several rules in this regard:
- The advertising and marketing of credit must contain prescribed information on the cost of credit (e.g. interest and all other charges).
- Negative option marketing is not permitted (in terms of which an agreement will automatically come into existence unless the consumer declines an offer).
- Advertisements must not be misleading, fraudulent or deceptive.
- Credit providers may not harass anyone or try to coerce or persuade anyone to apply for credit.
- Credit sales at a person’s home are strictly prohibited unless: the sale of credit occurs during a pre-arranged visit for that purpose by the consumer; or the provision of credit is incidental to the sale of goods or services.
- A credit provider may require that a consumer have credit life insurance during a credit agreement but must ensure that suitable options for insurance cover are offered to the consumer.