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1 of 1 DOCUMENT: Competition & Consumer Law Journal/(2016) 24 CCLJ No 3/Articles/Curbing reckless and
predatory lending: A statutory analysis of South Africa's National Credit Act
(2016) 24 CCLJ 220
Curbing reckless and predatory lending: A statutory analysis of South Africa's
National Credit Act
Andrew D Schmulow*
This article provides a statement and an analysis of South Africa's statutory provisions aimed at curbing reckless
lending, and preventing predatory lending, to financial consumers. The focus of the article is on the statutory
mechanisms for combatting reckless and predatory lending, including a critique of the success or otherwise of the
implementation of the relevant legislation. The article aims to provide a comparative analysis of what is, overall, an
innovative and effective regime, the aim of which is to protect vulnerable financial consumers from reckless and
predatory lending practices. As such, it is hoped, that the article will provide useful techniques for the protection of
borrowers in other common law jurisdictions, such as Australia, Canada and the United States, or indeed wherever
vulnerable consumers of finance are liable to be exploited.
I Introduction
South Africa is a developing country,1with a population of approximately 55 million people,2of which 40 million are
regarded as economically-active, and fall between the ages of 15 and 64.3Of this, approximately 25 per cent are
unemployed,4and in excess of 2.5 million adults are classified as illiterate.5This presents opportunities for
unscrupulous financial service providers, and especially lenders, to take advantage of the large number of
unsophisticated financial consumers in South Africa. It is within this context that the South African legislation is
noteworthy.
amount of credit granted to consumers has increased substantially from R1.1 trillion in 2007 to R1.5 trillion in 2014. There were
21.7 million credit active consumers and out of these, 9.6 million (44.2%) had impaired records. This increase has also led to an
evolution of the problem of household over-indebtedness. Household debt to disposable income in South Africa is still high, even
though the overall household indebtedness is actually down from its early peaks: Q4 2008 -- 81.9% and this fell to 74.3% in Q4
2013. This is an indication that a large portion of household incomes still goes to servicing debt.6
As an expression of an overarching policy for the protection of financial consumers, South Africa's National Parliament
enacted the National Credit Act7in 2005. Its aim was to address the inadequacies of the previous legislative regime,8
which included an outdated and ineffective regulatory framework,9comprised of inadequate mechanisms to promote
the rehabilitation of consumers, or to assist already over-indebted consumers to deal with their debt.10
The objects and purport of this Act are, inter alia, to combat reckless lending11 (that is to say lending which is reckless
as regards a particular consumer's existing indebtedness), combat the problem of over-indebtedness generally,12 and
prohibit predatory lending.
There are many who criticize this legislation, arguing that this will overburden the economy and will lead to significant costs for
business ... despite the increased costs for business, the legislation is necessary in order to prevent the exploitation of consumers ...
many acknowledge that the introduction of the National Credit Act shielded South Africa from some of the worst excesses of the
global recession of 2008/2009.13
This is the first time in the history of South Africa's consumer-credit legislation that such provisions have been enacted.
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14 The legislative mechanisms employed are at once farsighted and straightforward, and serve as a useful comparative
model that other jurisdictions may wish to study in order, similarly, to discourage reckless and predatory lending.
Predatory lending creates overly indebted consumers, threatens livelihoods, and can trap people in a cycle of poverty.15
The Act provides, chiefly, 12 innovations. These are as follows:
(i) Credit agreements must be in plain language.16
(ii) All credit agreements must contain a quote as to costs, and the issuer is bound by the quote for 5 days.17
(iii) The Act prescribes information that must be included regarding the costs of credit, to be contained in all
advertising and marketing materials.18
(iv) Credit sales at a person's private dwelling or place of employment are strictly limited.19
(v) Reasons must be provided if a credit application is declined.20
(vi) Automatic increases in credit limits are prohibited,21 save for where the consumer has agreed in writing
to such increases,22 subject to strict conditions.
(vii) Reckless lending is prohibited.23
(viii) Interest, fees and charges are regulated on all agreements, including microloans.24
(ix) Credit Bureau is regulated25 and consumers have the right to a free credit bureau record.26
(x) Debt counselling is introduced, to enable restructuring of debts for over-indebted consumers.27
(xi) The Act promotes the development of a 'fair, transparent, competitive, sustainable, responsible, efficient,
effective and accessible credit market and industry',28 by, inter alia, monitoring the 'levels of consumer
indebtedness and the incidence and social effects of over-indebtedness',29 by conducting research and
developing policies and proposing legislative amendments.30
(xii) The Act establishes a National Credit Tribunal.31
First this article will provide a definition of reckless and predatory lending, followed by an analysis of how consumer
protection policy is expressed by the National Credit Act. Third, an analysis of key provisions of the Act, and then
fourth, a discussion of enforcement mechanisms. Finally, concluding observations are provided.
Throughout this article consumers will be taken to mean individual consumers who are natural persons. Issues in the
protection of sophisticated consumers, or corporations as consumers, are not canvassed.
II Reckless and predatory lending defined
A Reckless lending
Reckless lending is a category of malpractice undoubtedly more egregious than irresponsible lending.32 Where
irresponsible lending refers to credit extended despite being unsuitable to a consumer's needs, reckless lending is
understood in English common-law as more akin to gross negligence or a reckless disregard for serious harm.33
Wilson34 is of the view that the South African approach is, as a result, more restrictive than an approach which prohibits
irresponsible lending. She cites as evidence the consumer's obligation to answer truthfully all questions put to them by
the lender, where a failure to do so will afford the lender a complete defence35 against a claim of reckless lending. She
states therefore, that the 'consumer is therefore responsible for "reckless" borrowing'.36
Based upon a comprehensive review of the Act, however, this analysis does not take into account the Act's emphasis on
the responsibility of the lender to ask whatever questions are pertinent and to take reasonable steps to ensure that the
consumer understands and appreciates the risks and the costs of the loan;37 to assess the consumer's debt-repayment
history;38 and to assess the consumer's existing financial means and obligations.39 If after all of those enquiries have
been made, a consumer fails to answer fully and truthfully, that will nonetheless not be a complete defence, as Wilson
asserts. It will only become a complete defence if the lender can demonstrate that the consumer's failure to answer fully
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and truthfully had a material effect on the lender's ability to make a proper assessment.40
Consequently, a better understanding of the choice of the word 'reckless' in the Act may be one of semantics, and may
in fact in the case of the South African legislation be more akin to 'irresponsible'. To this end, Rapp states as follows:
falling somewhere between 'negligence' and 'intentional misconduct,' recklessness has evaded precise judicial interpretation for two
hundred years.41
In South Africa, reckless lending is defined by the Act42 by reference to processes and outcomes, specifically: as a
failure to take reasonable steps to assess whether the consumer understands their rights and obligations under a credit
agreement, along with a failure to assess the consumer's credit history, coupled with a failure to assess the consumer's
capacity to repay, taking account of their current obligations. If the consumer is applying for a loan for a commercial
purpose, the lender must take reasonable steps to assess the feasibility and the potential success of the venture. If the
outcomes of such assessments were against lending the consumer money, and in addition, lending to the consumer
would leave them over-indebted, but the lender extended the loan nonetheless, then that loan would be regarded as
'reckless'.
B Predatory lending
Predatory lending is more difficult to define. Engle and McCoy43 define predatory lending to include at least two of the
following: loans which result in serious harm to consumers; harmful rent seeking; loans involving fraud and deception;
other instances of a lack of transparency which are not actionable as fraud; and requiring consumers to surrender their
rights to legal redress.44
Goldstein45 defines predatory lending as containing three sets of essential characteristics, namely those relating to the
terms and consequences of the loan; the manner in which the consumer obtained the loan; and finally, the power
imbalance between the lender and the consumer, with particular reference to the consumer's experience and access to
information.
C Reckless as compared to predatory lending
Effectively, these are matters of degree. Put simply, reckless lending ignores a consumer's circumstances. Predatory
lending actively preys upon those circumstances. The Act specifically addresses 'reckless lending'46 but, because
predatory lending cannot be precisely defined, by addressing other malpractices that would typically enable predatory
lending,47 the Act seeks to address that phenomenon too. It must be acknowledged, however, that in South Africa this
has met with mixed results.
One, typical example of predatory lending often takes the form of so-called 'payday' loans,48 and there are examples of
these in South Africa. While payday loans are not in and of themselves predatory, they often have predatory
characteristics. Despite the legislative attempts to curb predatory lending in South Africa, there is evidence of predatory
practices, and often these have been concealed within payday loans. Indeed, there is evidence not only of predatory
payday lending practices in South Africa under the Act but, furthermore, that these practices were so egregious that they
triggered civil unrest, which precipitated the 'Marikana massacre'.49
III The National Credit Act as consumer policy
A Aims
The purpose of the National Credit Act is to:
promote a fair and non-discriminatory marketplace for access to consumer credit[50] and for that purpose to provide for the general
regulation of consumer credit ... and improved standards of consumer information; ... to prohibit certain unfair credit and
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credit-marketing practices; to promote responsible credit granting ... to prohibit reckless credit granting; ... to establish national
norms and standards relating to consumer credit; to promote a consistent enforcement framework ... establish the National Credit
Regulator and the National Consumer Tribunal ...51
The Act therefore seeks to do a number of things. These range from prohibiting reckless credit extension to creating a
fairer industry, serving, henceforth, better-informed consumers. The Act tackles predatory lending practices by
prohibiting misleading and unfair marketing and selling practices52 -- an important provision in a society with a large
number of financially unsophisticated consumers (see for example ss 90 (2)(a)(i)-(ii),53 which makes void any credit
contract that contains provisions which are deceptive or fraudulent), and includes outlawing negative option marketing
-- that is to say, an agreement whereby silence will be regarded as consent, to the creation of the agreement.54
This is a reflection of the concerns of the legislator: that in a country where many consumers are semi- or illiterate,
opportunities for unscrupulous lenders to prey upon the weakest and most vulnerable consumers are almost limitless.
Moreover, the provisions aimed at prohibiting misleading and unfair conduct are worded sufficiently broadly that a
court or tribunal can evaluate, on a case-by-case basis, whether a particular practice is unfair or misleading, having
regard to the circumstances of a particular consumer.
This is a feature that occurs throughout the Act: the onus is placed squarely upon lenders to both conduct themselves
appropriately, and to know their customers, while courts and tribunals are empowered to take account of the consumers
they have before them: consumers who are illiterate or semiliterate, and who represent the easiest prey to unscrupulous
lenders would be entitled, under the Act, to protection from courts or tribunals, commensurate with their vulnerability.
This acknowledgement in the Act of the different strata of consumers, and the different levels of protection that may be
afforded, by way of leeway granted to courts and tribunals, places consumer protection at the core of this Act, and is, it
is argued, from the standpoint of consumer policy, one of the most outstanding features of the South African legislation.
The Act prohibits unilateral changes to a credit agreement, notwithstanding any provision in the credit contract or at
common law to the contrary, (or where the agreement as a whole purports to deprive a common law right)55 -- in
particular changes to the interest or fees payable,56 or the period of repayment or the minimum amount payable;57 nor
may the credit provider unilaterally extend to the consumer increased credit facilities.58
These provisions are aimed at curbing both reckless and predatory lending, by preventing consumers from being
blind-sided by so-called loan interest 'reset' provisions (the practice by which consumers are enticed into entering into
loan contracts by virtue of low, fixed interest rates, which then later 'reset' to higher, floating rates, often at levels that
are unaffordable); prevent credit providers from being able to contract out of the provisions of the Act;59 and prevent
credit providers from continuing to extend credit to unsophisticated consumers, until those consumers are
over-indebted, and caught in a debt trap.
Both reset shock and poor risk assessment are specifically addressed by the National Credit Act, and so should be
viewed not just as a form of consumer protection, but also as a potential bulwark against systemic threats to the broader
economy.60
There are at least four factors that can be identified [as causing the sub-prime disaster, two of which were]: reset shock, [and] poor
assessment of the risks by the lending institution ...61
Moreover, these provisions -- namely prohibitions on unilateral changes to credit agreements -- act as a break on a
lender's ability to force upon consumers standard-form contracts, that may contain provisions which would enable the
lender to gain virtually unfettered power to change, vary or amend provisions in the contract, as they see fit. Compare
this with the position in, for example, Australia, where standard-form contracts for financial services are typical, and
where the only fetter upon the unscrupulous use of this power resides in the prohibitions on unfair contract terms
contained in the Australian Securities and Investments Commission Act 2001 (Cth),62 and then only in respect of
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contracts for the provision of financial services,63 where those contracts meet the definition of 'standard-form'.64
Consequently the emphasis in the South African legislation is quite different from that of, for example, Australia: in
South Africa changes cannot be made unilaterally. In Australia changes can be made unilaterally unless they can be
proven to be unfair, and only if they form part of a standard-form contract. Consequently consumer policy is once again
front and centre in the National Credit Act, with a clear emphasis on placing the onus on the credit provider to prove
they are in compliance, not on the consumer to prove the credit provider is in breach.
B Research
A further, noteworthy aspect of the Act, is the manner in which it seeks to shine a light onto debt practices in the
Republic. In extreme cases, industries have sought to outlaw research into the harmful effects of the products they
produce. One such example is the prohibition on the conduct of research into deaths by gun violence in the United
States.65 In contradistinction to such an approach, the National Credit Act66 specifically requires the National Credit
Regulator ('NCR')67 to conduct research into socio-economic trends in consumer credit in the Republic, especially as
regards over-indebtedness, and to make known its findings.68
These findings are contained in the NCR's Annual Reports, and in research commissioned by the NCR. They provide
insights into educational initiatives;69 trends in the credit market, such as increases in the use of unsecured credit;70
trends in the number of consumers with impaired credit records;71 trends in the costs of credit;72 trends in the
accessibility of credit;73 trends in alternative dispute resolution;74 trends in overall levels of debt;75 levels of household
debt;76 distribution of debt by province;77 breakdowns of indebtedness by income bracket;78 compliance trends;79
trends in respect of debt counselling;80 trends in respect of complaints, investigations and enforcement, including
significant court decisions;81 and a statistical report on the consumer credit market, tracking trends in consumer finance,
issued quarterly.82
Overall, research commissioned by the NCR has indicated various trends since the enactment of the Act. For example,
while there has been evidence of improvements in access to credit,83 overall, access to credit remains persistently
inadequate;84 anecdotal evidence suggesting that by capping interest rates and fees, loans to smaller and higher-risk
consumers may have been discouraged, inhibiting access to credit by those consumers;85 more expensive
credit-granting processes due to the provisions of the Act, (but potentially off-set against lower levels of bad debts);86 a
decline in the cost of credit across certain categories,87 particularly furniture finance;88 serious inefficiencies and
backlogs in debt counselling services;89 regulatory and legislative shortcomings leading to, for example, a low number
of those consumers in need of debt review enjoying adjudication by the courts;90 reductions in average household
debt,91 but persistent problems of financial vulnerability among consumers;92 trends in the granting of unsecured
credit;93 trends in respect of developmental credit;94 obstacles in practice surrounding proof of recklessness;95 and a
lack of transparency and price comparability for consumers wishing to compare loans.96
There is evidence that, as at the time of the compilation of the report,97 the increase in the number of consumers with
impaired credit records had increased by 426 000 year on year.98 Set against a total of 18,51 million consumers of
finance in the Republic, of which 8,61 million had impaired credit records (47 per cent of total), an increase of almost
half a million consumers with impaired records, year on year, might be regarded by some as evidence that there is
already too much access to credit. It may be argued, therefore, that greater access to credit, especially in respect of
high-risk microloans, facilitated by lower regulatory costs, would be to the overwhelming benefit of the lenders, not the
consumers.99 It seems intuitive that increased loans by higher-risk micro-lenders, would return a higher percentage of
impaired records than the overall level of impaired records for the entire consumer market. In light of the fact that the
overall level of impaired consumers is approaching 50 per cent, it would appear that the argument could be made that
current regulatory costs are not high enough, much less too low.
Finally, there is evidence that some consumers are using the protection of the Act to game the system, although
evidence of the need to protect illiterate and financially unsophisticated consumers, remains strong.100
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The most recent figures quarter-on-quarter, as at March 2016, indicate that the value of mortgages granted decreased by
16,45 per cent; secured credit granted decreased by 18,22 per cent; unsecured credit agreements decreased by 15, 97 per
cent; credit facilities (consisting mainly of credit cards, store cards and bank overdrafts) decreased by 4,72 per cent;
short-term credit decreased by 28,46 per cent; while developmental credit increased by 212,25 per cent.101
C Ambit
The National Credit Act previously regulated every type of entity that extended credit: banks, micro-lenders, pawn
brokers,102 furniture and clothing retailers, entities both foreign and domestic, and organs of state.103 The only
exception was credit granted not at arm's length, such as between family members.104 Entities that extend credit, and
which were captured by the provisions of the Act, were required to register with the NCR.105 Indeed, the only entities
that extended credit, but were not required to register with the NCR, were those with fewer than 100 loans in their
portfolio -- such as 'stokvels' -- or those whose portfolios were worth less than ZAR 500 000.106
In South Africa, traditionally, black communities have assisted one another through the provision of so-called 'stokvel'
finance. Stokvels operate as community savings clubs and are exempted from registration under the Act.107 Typically
they have approximately 12 members or more, with each member contributing to a central fund on a weekly, fortnightly
or monthly basis. Stokvels are virtually only utilised by low- or very low-income black South Africans -- and then
predominantly by older black South Africans. Members usually meet monthly at a party hosted by one of the members,
and in return for which the host may be expected to make a small profit. The central fund is then loaned to each
member, in turn, for anything from funeral expenses, the purchase of groceries, to home improvements.108 There are
currently approximately 800 000 stokvels in South Africa, worth an estimated ZAR 45 billion, and with somewhere
between 8, 6 and 9 million members. Most are represented by the National Stokvel Association of South Africa.109
Clearly the legislator did not intend to cover stokvels, as registration for these community savings clubs would be
unduly onerous.
While entities other than stokvels, but which were below the threshold of 100 loans or ZAR 500 000 were previously
not required to register with the Regulator, they were nonetheless subject to the provisions of the Act in every
particular.
This led to conduct problems with small, unregistered moneylenders, who argued that they were not subject to the
provisions of the Act. As a result the Act was amended,110 so that henceforth anyone who extends credit in an amount
in excess of the amount set by the Minister would have to register as a credit provider. The Minister set this amount at
nil ZAR,111 thereby capturing anyone who extends credit to another person, where the credit includes the repayment of
any fees or interest.112 The only exception being loans made not at arm's length,113 such as between family members.
every person or entity that trades as a credit provider, even the smallest, illegal and informal credit providers are encouraged to
register ... regulate and monitor all credit providers ... in order to promote responsible credit lending, to curb reckless credit lending
and reduce the over indebtedness of consumers ... registered credit providers are prohibited from engaging in unconscionable and
unscrupulous conduct, such as the outright criminal practices often used by illegal and informal credit providers ... This new
threshold is an innovation in the industry that will largely contribute to an equal playing field in the credit market. The threshold
will increase legal and responsible credit lending, which will in turn lead to broader financial inclusion ...114
A credit provider required to register in terms of the Act, but which does not register, must not offer credit, and if it does
so, any such credit agreements are void from the date upon which they were entered into.115 In so doing, the
responsibility is placed squarely upon the providers of credit, which if they fail to discharge, will leave them in a
position of having no recourse against the consumer.
D Enforcement of debts and contractual liability
The Act prohibits heavy-handed debt enforcement processes, no doubt aimed at preventing debt collectors from
frightening consumers into repayment. It is suggested that while this is not aimed at achieving anything more than
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addressing the 'how' of the debt-collection process, as opposed to the 'when' or the 'if', it is nonetheless an important
provision aimed at civilising the process and protecting consumers from intimidation. Put differently, if a consumer can
be forced to repay their debts, good and well, but they should not, in the process of being subjected to debt collection,
be terrorised.116
The Act ousts the parol evidence rule in favour of the consumer, by preventing credit providers from contractually
escaping from any representations made prior to the commencement of the contract, which may have induced the
contract.117 Moreover, the Act seeks to address inadequate consumer redress and dispute resolution, and even poor
customer service.118
E Access to credit
In terms of access to credit -- an important feature in a developing economy where a sizeable portion of the population
has historically not enjoyed equality of access to credit -- an applicant is, by law, assured that they will be granted any
credit they apply for, unless there are legitimate reasons for a refusal.119 The Act does this by granting every person the
right to apply for credit,120 and requires that credit only be refused on reasonable commercial grounds.121 The Act does
not establish a right to require a credit provider to enter into a credit agreement, but merely that no discrimination takes
place in the provision of credit.122 This prohibition on discrimination must, according to the Act, be read with the
objects and purport of the Constitution,123 (which prohibits discrimination based upon 'race, gender, sex, pregnancy,
marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture,
language and birth'), and with the provisions of the Promotion of Equality and Prevention of Unfair Discrimination Act.
The relevant provisions are contained in ch 2 of the Act,124 which deal with the 'Prevention, Prohibition and
Elimination of Unfair Discrimination, Hate Speech and Harassment', and within ch 2, by s 6, which is a 'Prevention and
general prohibition of unfair discrimination'; s 7, which is a 'Prohibition of unfair discrimination on ground of race'; s 8,
which is a 'Prohibition of unfair discrimination on ground of gender'; s 9, which is a 'Prohibition of unfair discrimination
on ground of disability'; s 11, which is a 'Prohibition of harassment'; and s 12, which is a 'Prohibition of dissemination
and publication of unfair discriminatory information that unfairly discriminates'.
These prohibitions against unfair and discriminatory treatment under s 61(1)125 extend to and include: assessing the
consumer's credit worthiness;126 acceding to an application for credit;127 any aspect of the costs involved;128 any of the
terms or conditions;129 assessing or requiring compliance with any aspect of a credit agreement;130 exercising any of
the credit provider's rights;131 'determining whether to continue, enforce, seek judgment in respect of, or terminate a
credit agreement';132 or reporting any consumer's record.133 Where an application does result in a refusal, the applicant
has a right to know the reasons.134 This is an important provision, because credit providers will need to be accurate and
circumspect in the reasons they provide. If the reasons are inadequate or unreasonable, then that would form the basis
for a review of the provider's decision. Put differently, the credit provider cannot provide generic reasons by way of a
form letter. The provider would need to demonstrate a reasonable measure of engagement with the applicant's
circumstances. Furthermore, the provider will not be able to rely on reasons, other than the reasons provided to the
applicant, and so will be compelled to provide reasons which are, to the best of the ability of the provider, complete and
comprehensive.
Credit granters are obligated to ensure, not only that consumers can afford the credit, but also that they understand the
costs and risks associated with that credit.135
F The 'Marikana' connection
Despite these provisions, however, the Act has failed to completely remove the scourge of unsecured, predatory loans.
Indeed, unsecured loans in South Africa have become the biggest growth market for the four major South African
banks.136 In at least one instance, the reckless provision of loans, in a manner that many have argued was predatory,
resulted in social conditions that ultimately gave rise to a massacre at the hands of the South African Police. As
Bateman states:
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we have perhaps just witnessed one of the most appalling microcredit-related disasters of all in South Africa. Extreme
over-indebtedness by workers apparently helped precipitate the Marikana massacre on August 16 [2012]. Miners employed at
Lonmin's mine were gradually seduced by local lending institutions into accessing far too much microcredit.137
With far too many miners apparently forced into spending more on interest payments each week ... no matter how hard they tried,
they simply could not prise themselves away from taking out a microcredit in advance of payday ... The miners' desperation and
anger was palpable, Lonmin refused to back down, and a massacre ensued [when South African Police Services members shot
striking miners].138
IV Specific provisions
This part provides an account and an analysis of specific provisions in the National Credit Act, which deserve particular
attention. Only those sections which, in this writer's view, deserve attention, and which demonstrate consumer
protection principles, are repeated here.
A Section 64: Right to information in plain and understandable language
South Africa has developed an admirable focus139 on plain language, concomitant with its progression to a democratic
political dispensation in 1994. Examples include both South Africa's Final Constitution,140 and the Interim
Constitution141 which preceded it, and the Consumer Protection Act.142 In a country with a large proportion of the
population ill-educated and in some instances illiterate, it serves to strengthen the position of vulnerable consumers, by
making legislation as accessible as possible. This is not only true for South Africa; it would be true for any country
where consumers, made vulnerable by, for example, their lack of language skills, are present.
Again, as is a general feature of this Act, the onus is upon the producer of the document or contract to ensure that it is in
plain language, and again, as is also a feature of this Act, a court or tribunal is given philosophical direction, in terms of
reaching a conclusion as to compliance with the Act, but is specifically mandated to inquire into the particular
circumstances of a consumer, upon whose behalf a complaint is brought.
In so doing the Act references 'consumer of the class of persons for whom the document is intended'.143 Set against that
must be the expected ability of a consumer with average literacy skills, but minimal credit experience, to understand
that document, without undue effort. In particular a court or tribunal must have regard to the vocabulary and sentence
structure used in the contract.144
It is not in dispute that this creates a large leeway for courts and tribunals. But in the context of heavily skewed power
relations between credit providers, and a potentially vulnerable consumer, the Act clearly aims to favour the latter. As a
corollary, it is incumbent upon credit providers to know their customers ('KYC'), and to err on the side of caution in the
formulation and provision of documentation.
B Section 66: Protection of consumer credit rights
This section serves to outlaw any attempts by a credit provider to punish a consumer for exercising their rights, or to
punish another party to the agreement (such as a guarantor). It prevents a credit provider from installing into a contract
any provisions which would allow some sort of sanction to be imposed upon a consumer who exercises their rights, or
complains about their treatment. This is a valuable provision, in that it prevents credit providers from bullying or
coercing consumers. It is also useful, as part of a wider effort, to combat predatory lending.
C Section 76: Advertising practices
The effect of this section is, principally, to outlaw advertisements or promotional materials that are designed to, or have
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the effect of misleading or deceiving consumers, or are fraudulent or illegal, and which fail to inform consumers of the
costs of a particular form of credit.
Such a provision is clearly aimed at curbing predatory lending. Where it can be shown that a credit provider breached
this section, the consumer may seek to have their indebtedness made void. This not only places the onus squarely on the
shoulders of the lender, but also the risk: if a lender can be shown to have extended credit to a class of persons in breach
of this or other sections, they may face a ruling from a court or tribunal which would render void the indebtedness of a
whole class of consumers. That in turn may cause the collapse of the lender.
D Section 80: Reckless credit
This section defines credit to be reckless where the granting of such credit would leave the consumer over-indebted.
It placed upon the credit provider an obligation to 'know their customer'. Moreover, the credit provider was to be judged
according to what information was available at the time the decision to grant credit was made. This was potentially
different from the information which the credit provider actually obtained. Thus a failure to make a reasonable
investigation of the potential consumer's position, and a concomitant lack of adequacy of information obtained would
not, it is suggested, have constituted a defence. The Act attempted therefore to provide an incentive for the credit
provider to make a thorough investigation.
Nonetheless, credit providers were attempting to evade responsibility for granting credit recklessly, by blaming the
consumer for the inadequate provision of information. The information that a credit provider is required to ascertain
has, therefore, now been specified in later regulatory amendments,145 and is compulsory.146 These 'Affordability
Assessments' require a credit provider to ascertain, at a minimum, and subject to certain exceptions (such as pawn
transactions, school or student loans, developmental credit, public interest credit agreements, emergency loans,
temporary increases under existing credit agreements, incidental credit and the like)147 the consumer's existing financial
means and prospects and existing financial obligations.148 It must do so by requiring from the consumer:
(i) three payslips or bank statements indicating three salary deposits;149 or
(ii) for consumers who do not receive a salary, three instances of documentary proof of income or three
months of bank statements;150 or
(iii) for consumers who are not formally employed, three months of bank statements or their latest financial
statement;151
(iv) where there is a material variance in pay, the provider must average out the gross income over the
preceding 3-pay periods;152
(v) the consumer must accurately disclose all of their obligations;153
(vi) the consumer must submit 'authentic' documentation;154
(vii) the provider must take into account other sources of income and, where appropriate, joint household
income,155 as well as 'existing financial means, prospects and obligations';156
(viii) the credit provider must utilise the expense norms table, contained in the regulations,157 which provide
as follows:158
(ix) the credit provider must utilise the following methodology: ascertain gross income; include statutory
deductions and minimum living expenses to arrive at net income, to be set against payment of debt
instalments; and calculate discretionary income to satisfy repayments of new debts after existing debts
are taken into account;159
(x) the credit provider must take into account the consumer's debt repayment history.160
Where what constitutes the reckless granting of credit has been the subject of litigation, courts and tribunals have
asserted that there is no hard and fast rule as to the provision of information to prove recklessness.161
Once again, in setting out a list of information that should have been provided, I do not wish to be prescriptive or to lay down a law
of the Medes and the Persians. It may be that a Defendant does not have to go as far as I have suggested in the previous paragraph.
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162
Instead, courts have stated that a party seeking a court to exercise its discretion -- and it is a discretion -- in terms of s
80, must place as much information before the court as possible, in order to persuade the court to exercise that
discretion.163
The mere submission or even proof of over-indebtedness does not place a mandatory duty on the court to make an order in favour
of the consumer and merely opens the door for the court to use its discretion.164
Wisely, however, a loan from a pawn broker is an exception. For example, these agreements are not subject to the
prohibitions on reckless lending.165 This provision is particularly insightful, because a loan from a pawn broker is
set-off against movable property, which the creditor 'pawns', on the understanding that if the loan is not repaid, the
property will be forfeited. Thus, collateral is provided, and if the consumer cannot repay, then the collateral is lost to the
consumer, but nothing more. Put differently, loans from a pawn broker, where the consumer provides collateral, will not
lead to a spiral of indebtedness. Moreover, individuals who pawn property are often in such a perilous financial position
that loans to them would often, if not almost always, be categorised as 'reckless'. The combination of financial
desperation and fixed collateral is thus rightly, in this writer's view, regarded as more important than the prohibition on
reckless lending, which if enforced would prevent the consumer from being able to pawn their property.
E Section 82: Assessment mechanisms and procedures
This section allowed the credit provider to develop its own evaluative mechanisms, models or procedures to enable it to
conduct the creditworthiness and suitability assessment, as was required above; provided the mechanisms that the credit
provider develops are fair and objective. A credit provider may submit its mechanisms, models or procedures to the
regulator, for pre-approval.
The National Consumer Tribunal ('NCT'), on the recommendation of the NCR, may impose mandatory guidelines on a
credit provider who is consistently found to use evaluative mechanisms or procedures that are unfair and subjective. Put
differently, this empowers a tribunal to punish and impose conditions upon credit providers who have a track record of
acting contrary to the spirit or the letter of the Act. Given time and sufficient opportunities for ventilation, this stricture
may have a civilising effect on the industry as a whole, and may contribute to the development of a culture that favours
prudent, ethical conduct towards consumers, by rendering contrary business practices unsustainable.
Subject to s 82(3), the NCR may publish guidelines for assessment mechanisms and procedures by credit companies.
While the guidelines which the NCR may publish are not binding, the fact that a tribunal may subsequently impose
them as binding, by way of an order, makes the guidelines highly persuasive. For one thing, following the guidelines as
published could later be used by a credit provider to convince a tribunal that it has a clean track record. This may prove
useful, because a determination by a tribunal that a credit provider does not have a clean track record opens up the
possibility that the tribunal may impose other processes as binding, in addition to the guidelines as promulgated by the
NCR.
F Section 83: Court may suspend reckless credit agreement166
This section effectively provides courts with unfettered discretion to apply the prohibitions on reckless lending. This
includes the power to set aside a loan contract, despite the prima facie validity thereof in terms of the common law or
statute, or a contractual provision. In making the determination the court need only have regard to what it determines to
be just and reasonable grounds, and with reference to the provisions prescribed by s 80(1) (see above).
This section has the effect of making reckless lending a precarious business for the credit provider: while the credit
provider may initially succeed in extending reckless loans, the credit provider is effectively denied of any certainty of
title. If at a later stage either the consumer or the NCR forms the view that the loan was reckless, it may then be
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challenged, and all of the consumer's obligations rendered void. This serves as a powerful disincentive to credit
providers to 'chance their luck'.
Put differently, if the court finds the loan reckless, it can set aside all or part of the consumer's obligations. In effect,
therefore, the court can punish a lender under this section, for making a reckless loan, by voiding all or part of the loan,
leaving the lender with no further recourse. The flexibility given to the court, by which it can suspend 'all or part' of the
obligations, according to whatever is 'just and reasonable', is particularly noteworthy.
G Section 85: Court may declare and relieve over-indebtedness (read with s 127: Surrender of goods and s 128:
Compensation for consumer)
Similar to s 83, this section allows a court to inquire into whether a consumer is over-indebted, notwithstanding a
provision in the loan contract, or at common law or statute, that purports to deprive the consumer of the right to be
relieved of their debt if they are found to be over-indebted.167 Clearly, therefore, the legislator has placed the onus to
'know your customer' on the credit provider, while at the same time firing a shot across credit providers' bows, to the
effect that if they engage in reckless lending, whereby a consumer is placed in an inescapable debt trap, then
responsibility will rest with the credit provider, as indeed will the consequences. In order for a consumer to convince a
court that they are over-indebted, the following requirements would have to be met, in terms of evidence of the
consumer's financial position:
an outline of each Defendant's assets and liabilities, income and expenditure sufficient to enable the Court to ascertain whether the
allegation of over-indebtedness is bona fide ...168
In the event that a court finds that credit has been extended in a manner that is reckless, it may rearrange the consumer's
obligations, including by recalculating those obligations,169 which may include holding that the credit agreement is void
ab initio;170 requiring the credit provider to refund the consumer, with interest;171 or it may cancel all of the creditor's
rights to recover monies or goods;172 or it may cause the creditor's rights to recover to be forfeited to the State.173
If the consumer has a valid complaint that, but for the recklessness of the credit provider, the consumer would never have become
involved in the credit transaction, it might be 'just and reasonable' to 'set aside' the agreement. In that event, the agreement would be
null and void and as if it had never been. As a consequence, the credit provider, who remains the owner of the vehicle, would be
entitled to restoration of the vehicle. On the other hand, the consumer, who no longer has any obligations under the agreement that
has been set aside would be relieved of any further indebtedness or deficiency claim under the agreement. In certain circumstances,
this would be a fair and symmetrical resolution.174
In determining an outcome under s 85, courts will examine whether the consumer has surrendered the goods under
127175 for sale, subject to the fair price provisions of s 128.176 A consumer is not required to surrender the goods
according to s 127, but where a consumer has retained the goods, it is less likely they will come under the protection of
s 85.177 Furthermore, courts will take a dim view of an application under s 85, where the consumer has failed to take
steps to resolve the dispute, after receiving notice under s 129(1)(a).178
In any event my view is that the NCA does not envisage that a consumer may claim to be over-indebted whilst at the same time
retaining possession of the goods which form the subject matter of the agreement. Such goods should be sold to reduce the
defendant's indebtedness.179
It seems unlikely that the legislature ever intended that the consumer could keep the 'money and the box'.180
One further consequence of s 127181 is that it gives the consumer an 'extraordinary right' to escape from a credit
agreement whenever there are goods involved, by unilaterally deciding to return the goods to the credit provider, so that
they can be sold.182 The consumer will, however, run the risk that the sale of the goods will not cover the debt, and
where that is so, the consumer will still be liable to the lender for the balance. Section 128183 provides a range of
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protections to the consumer, to ensure that the goods are sold at 'the best price reasonably attainable'.184 If the credit
provider fails in this regard, a tribunal may order that it pay an additional amount, exceeding the sale proceeds, to the
consumer.185 The better view is that 'goods' here refer to movable property.186
Because a creditor must demonstrate that it complied with the Act in terms of 'know your customer' at the time when
credit was extended, any credit extended after the point where the consumer would henceforth become over-indebted,
whether by one or multiple creditors, would be liable to be deemed reckless. Put differently, where a consumer has been
left over-indebted by multiple creditors, it would be open to the consumer to attack all or any of the creditors who
extended credit to the consumer in a manner that was reckless.
H Section 90: Unlawful provisions of credit agreement
This section contains some of the most far-reaching consumer protection provisions of the Act aimed at curbing
predatory lending, by declaring a variety of potential contractual terms unlawful. These include provisions, which in the
view of the court, attack the spirit of the Act, or subject the consumer to deceptive or fraudulent provisions. The section
extends to provisions in contracts that waive or exclude the consumer's rights or the provider's obligations.
Further, the section makes unlawful any provisions that exempt conduct on behalf of an agent of the provider, or
excludes liability for any representations that may have induced the contract. It prevents a provider from contractually
acquiring the right to repossess any goods, by entering the consumer's premises without, it is assumed, a court order.
Significantly, it also prevents a provider from nominating, as a forum, a Division of the High Court of South Africa,
when a Magistrate's Court will do. This, it is argued, is aimed at preventing a creditor from intimidating a consumer, by
selecting a court where the processes are more onerous, and the costs considerably higher. In addition, the creditor
cannot select a jurisdiction which is remote from where the consumer resides, in order to make attendance at court more
difficult or onerous for the consumer.
The section also prevents the creditor from forcing the consumer to agree to a garnishee order,187 that is to say, an order
in which the consumer agrees to give the creditor access to the consumer's salary before it is paid.188 Finally, the section
prohibits recourse by the creditor to punitive interest rates.
Where an agreement contains an unlawful provision, that provision will be void ab initio, and the court is empowered to
sever that provision from the agreement. If the provision cannot be severed, then the court may declare the contract void
from inception, and make any other orders that the court deems fair and reasonable under the circumstances.
V Enforcement
A Statutory enforcement bodies
Section 12189 establishes the NCR. Section 13190 invests the NCR with responsibility to create a 'fair, transparent,
competitive, sustainable, responsible, efficient, effective and accessible credit market and industry', specifically to serve
the needs of those consumers who were historically disadvantaged by racial discrimination under Apartheid; low
income consumers and low income communities; and consumers who reside in remote, isolated or low population
density regions.
Under s 15 of the Act,191 the NCR is given responsibility for enforcement by, inter alia, receiving complaints of alleged
contraventions;192 monitoring the consumer credit market with a view to preventing contraventions, or detecting and
prosecuting same;193 issuing and enforcing compliance notices;194 conducting investigations;195 referring
anti-competitive behaviour to the Competition Commission;196 referring matters to the tribunal;197 or accepting
referrals from the tribunal.198
Section 26199 establishes the NCT, which may adjudicate any application in terms of the Act, or make any order
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provided for in the Act. It may also adjudicate in relation to any allegations of prohibited conduct, and impose a remedy
provided for in the Act.200
The Act establishes jurisdiction for both courts and tribunals; the latter partly to expedite judicial review without relying
on over-burdened courts.201 Tribunals are tasked with tackling prohibited conduct,202 as defined by the Act, whereas
courts are tasked with punishing offences.203 Generally speaking, offences are more serious in nature,204 and involve
intention ('mens rea'), whereas prohibited conduct, or a failure to comply with required conduct, is covered by a penalty
regime involving administrative fines,205 and does not require the element of intention.206 These fines are capped at 10
per cent of the respondent's annual turnover during the previous financial year, or ZAR 100 000, whichever is
greater.207
In the event that an offence is committed, the Act sets out potential punishments.208 Where the offence involves a
failure to comply with an order from a Tribunal to remedy a form of prohibited conduct, the punishment may involve a
fine, or imprisonment of up to ten years, or both.209 For any other contravention that constitutes an offence, the
punishment may be a fine, or imprisonment not exceeding 12 months, or both.210
The South African penalty regime under the Act derives its concept of civil penalties for prohibited conduct from the
Australian model,211 and reserves criminal prosecutions only for the most serious contraventions.212
B Specific enforcement provisions and penalties
A judicial officer (judge or magistrate) may order that premises be searched213 where the commission of a breach is
suspected, and when searched, powers of search and seizure of both persons and evidence are comprehensive.214
Juxtaposed with this power is a requirement215 that persons being searched are entitled to their dignity (including that
they not be physically searched by an officer of a different gender),216 freedom, security and privacy;217 that the search
be conducted with regard to decency and order, and that persons present be advised of their right to legal
representation,218 which they may insist be present during the search.219 Items over which the persons being searched
assert privilege may not be searched,220 but can be seized, pending a court determination as to whether they should be
regarded as privileged.221 Throughout this process inspectors may use reasonable force against persons or property.222
The Act includes the power to summon witnesses,223 as well as the power to compel a witness to be sworn in,224 or
produce a book or document225 when ordered to do so. Similarly, the Act226 makes it an offence to refuse to answer a
question fully or to the best of the witness' ability,227 subject to the provisions of s 139(5), which states that a
self-incriminating answer provided under s 159(a) cannot be used in criminal proceedings against the witness, except on
a charge of perjury. In this writer's view this strikes a sensible balance: individuals who have, or who are connected with
entities that have engaged in reckless or predatory lending, cannot stymie a court from uncovering the truth, but at the
same time will not be forced to self-incriminate.
Section 160228 makes it an offence to ignore an order of a tribunal (punishable by a fine or up to ten years
imprisonment, or both),229 obstruct an investigation, engage in a personal attack on a member of a tribunal, provide
false information to a tribunal, or ignore a search warrant (punishable by a fine or up to 12 months' imprisonment, or
both).230 Under s 151231 a tribunal may impose administrative penalties that amount to up to 10 per cent of the
respondent's turnover during the preceding year,232 or ZAR 100 000,233 whichever is greater. In determining the
administrative penalty, the tribunal is authorised to take account of a broad range of factors that relate to the gravity,
extent and duration of the offence,234 the loss or damage caused by the offence,235 the behaviour of the respondent,236
the market circumstances surrounding the contravention,237 the profit earned through the contravention,238 the level of
co-operation which the respondent provided to the NCR,239 or whether the respondent has previous convictions for
contravening the Act.240 This allows courts to identify recidivist lenders, and to increase penalties where a pattern of
misconduct can be identified. Bad apples can, potentially therefore, be removed from the industry. However, as
identified below, this has met with mixed results.
Recently the NCR has taken steps against a number of lenders for reckless lending.241 In the aftermath of the fine levied
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against African Bank, and African Bank's subsequent collapse, other micro-lenders have, or are as at the time of writing,
being taken to task. These include Shoprite Holdings Ltd and Capitec Bank Holdings Ltd.242 This is commendable, but
at least in the case of African Bank, is a case of closing the stable door after the horse had bolted.
But there's a nasty taste to this rescue. Bloomberg reports that African Bank charged borrowers rates as high as 5% PER MONTH.
So not only was ABIL [African Bank Investment Ltd, which was the parent company to African Bank] able to keep its retailer alive
by providing loans to the poor so they could buy furniture they couldn't afford, it also fleeced them on interest rates. You would
think that such a bank should be allowed to fail, wouldn't you? Not a bit of it. According to Bloomberg, the central bank's reason
for rescuing it was to ensure that the poor could continue to borrow. The South African central bank and government between them
have bailed out a predatory lender.243
The lesson to be learned from this failure, by observers in other jurisdictions, is that while the South African legislation
is far-reaching, insightful, and consumer-centric, without being draconian, the legislation is merely the framework, and
framework alone is not enough. Implementation must be concerted and enforcement must be rigorous. Indeed, on the
available evidence, it appears that the NCR is late to a party in which microcredit institutions have operated virtually
unfettered; where consumer debt, especially among the most vulnerable is growing steeply, the NCR has, traditionally,
been overcautious.
There is no evidence of government bodies specifically regulating microcredit institutions so as to restrict their lending activities to
appropriate levels. The growing crisis of unsecured credit non-repayment is reflected in worsening ratings for the most risky of
local financial institutions. Consumer debt is reaching record levels, encouraged until recently as a short-term economic
stimulant.244
One of the most serious obstacles for the protection of consumers in South Africa, and one of the most serious practical
failings of the National Credit Act,245 has been the use of garnishee orders -- sometimes multiple garnishee orders --
against the poorest and most vulnerable, and while this issue is beyond the purview of this article, this aspect deserves
concerted and urgent further attention.246 If the allegations about widespread corruption of, and collusion with, court
officials in the creation of such orders is founded,247 then one potential solution may be the creation of statutory
provisions for both disgorgement and punitive damages.
VI Conclusion
Reckless lending is antithetical to the concept of consumer protection, and in a worst case scenario can contribute to, or
even precipitate financial contagion and crisis.248 Predatory lending is unconscionable and has no place in a modern
economy. In South Africa there is a credible argument to be made that unrestricted predatory lending precipitated a
massacre of citizens by armed agents of the State.249
What this article has been concerned with, however, is not solely the implementation of the National Credit Act, but
rather also its legislative mechanics, combined with an analysis of its philosophical underpinnings, its objects and its
purport. To that end the South African legislation provides a robust legislative framework250 which, if emulated and
adequately enforced would, in this writer's view, provide for both consumer protection and the prevention of practices
which are ethically indefensible and economically unsustainable.
If the National Credit Act were emulated elsewhere, the devil would surely reside in the details, and specifically the
successful protection of consumers would depend upon the details of implementation and enforcement. Put differently,
this car is well-made and thoughtfully designed. From here, passenger safety and comfort will depend upon the skill and
prudence of the driver.
* BA Honours LLB (Witwatersrand) PhD (Melbourne); Senior Lecturer in Law and Director designate, Business Law, School of Law, The
University of Western Australia; Advocate of the High Court of South Africa; Principal, Clarity Prudential Regulatory Consulting Pty Ltd;
Visiting Researcher, Oliver Schreiner School of Law, University of the Witwatersrand, Johannesburg; Visiting Researcher, Centre for
Page 14
International Trade, Sungkyunkwan University, Seoul. The author acknowledges with gratitude the helpful comments made by Professors
Camilla Baasch Andersen and Nolan Sharkey in the Law School at the University of Western Australia, and Professor Tanya Woker, in the
Law School at the University of Kwa-Zulu Natal, and a member of the National Consumer Tribunal of the Republic of South Africa; and the
generous assistance of various colleagues in South African Law Schools in the preparation of this research: Michelle Kelly-Low at the
University of South Africa; the Editor and staff of Obiter and De Jure; ongoing support from the Oliver Schreiner School of Law at
Witwatersrand University, and in particular Maggie Lediga in the library; the staff of the Law Society of the Northern Provinces; and the
ongoing support and encouragement from the Centre for International Finance and Regulation (CIFR), in Sydney, Australia. The author may
be contacted at Andy.Schmulow@uwa.edu.au.
1 United Nations New York, World Economic Situation and Prospects 2015, Statistical Annex (2015) 140.
2 Statistics South Africa, Mid-Year Population Estimates, Statistical Release No P0302 (23 July 2015) 2. Up from 52 million according to
the 2011 census. SouthAfrica.info, South Africa's Population (October 2015) <http://www.southafrica.info/about/people/population.
htm#.Vk1NgoSZgVw>.
3 Jami Solli-Hubbard (ed), Responsible Lending: An International Landscape (Consumers International, November 2013) 71.
4 United Nations, above n 1, 156.
5 Stephanie Pretorius, 'SA's Real Level of Literacy', The Citizen, 29 August 2013 <http://citizen.co.za/31407/literatez/>.
6 National Credit Regulator, Annual Report 2014 (2014) 12.
7National Credit Act 2005 (South Africa).
8 Megan Whittaker, 'South Africa's National Credit Act: A Possible Model for the Proper Role of Interest Rate Ceilings for Microfinance'
(2008) 28 Northwestern Journal of International Law & Business 561, 569ff; Stefan Renke, Melanie Roestoff and Franciscus Haupt, 'The
National Credit Act: New Parameters for the Granting of Credit in South Africa' (2007) 28 Obiter 229, 230ff.
9 Department of Trade and Industry, Republic of South Africa, Consumer Credit Law Reform: Policy Framework for Consumer Credit
(August 2004) 13.
10 Ibid 13 [2.9].
11 See definition below, 'Section 80: Reckless credit'. See also: CM Van Heerden and A Boraine, 'The Money or the Box: Perspectives on
Reckless Credit in Terms of the National Credit Act 34 of 2005' (2011) 44 De Jure 392.
12 National Credit Act s 3(g). See also ch 4 pt D ss 78-88 ('Over-indebtedness and reckless credit') See also: Department of Trade and
Industry, Republic of South Africa, above n 9, 30-2.
13 Tanya Woker, 'Why the Need for Consumer Protection Legislation? A Look at Some of the Reasons Behind the Promulgation of the
National Credit Act and the Consumer Protection Act' (2010) 31 Obiter 217, 217.
14 Renke, Roestoff and Haupt, above n 8, 244.
15 South Africa's Finance Minister, Pravin Gordhan, quoted in: Milford Bateman, 'Microcredit and Marikana: How They Are Linked', The
Star, 18 September 2012, 3 <http://sbeta. iol.co.za/the-star/microcredit-and-marikana-how-they-are-linked-1385126>.
16 National Credit Act s 64 (1)(b).
17 Ibid s 92(3).
18 Ibid ss 76(4)(d), (5), 92.
19 Ibid s 75.
20 Ibid s 62.
21 Ibid s 74(2).
22 Ibid s 119(4).
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23 Ibid s 80.
24 Ibid ss 102-3. Cf the position in the United States, see: AnnaMaria Andriotis, 'Payday Lenders' Move to Installment Loans Increases
Risks, Report Finds', The Wall Street Journal, 11 August 2016
<https://www.wsj.com/articles/payday-lenders-move-to-installment-loans-increases-risks-report-finds-1470927635>.
25 National Credit Act s 43.
26 Ibid s 70.
27 National Credit Act ss 14(a), 44, 46, 47(1), 48(2), 61(2)(c), 71, 83(3)(b)(ii), 85(a)-(b); 86-8; 129-30; 139(1)(b)(i), 152(1)(e).
28 Ibid s 13(a).
29 Ibid ss 13(c)(iv), 70(5).
30 Ibid s 13(d).
31 Ibid ss 26-7.
32 Therese Wilson, 'The Responsible Lending Response' in Therese Wilson (ed), International Responses to Issues of Credit and
over-Indebtedness in the Wake of Crisis (Ashgate, 2013) 84.
33 Ibid.
34 Ibid.
35 National Credit Act s 81(4).
36 Wilson, above n 32.
37 National Credit Act s 81(2)(a)(i).
38 Ibid s 81(2)(a)(ii).
39 Ibid s 81(2)(a)(iii).
40 Ibid s 81(4)(b).
41 Geoffrey Christopher Rapp, 'The Wreckage of Recklessness' (2008) 86 Washington University Law Review 111, 111.
42 National Credit Act s 80.
43 Kathleen C Engel and Patricia A McCoy, 'A Tale of Three Markets: The Law and Economics of Predatory Lending' (2002) 80 Texas Law
Review 1255.
44 Ibid 1260. See also Kathleen C Engel and Patricia A McCoy, 'Turning a Blind Eye: Wall Street Finance of Predatory Lending' (2007) 75
Fordham Law Review 2039, 2043.
45 Ira Goldstein, 'Why the Poor Pay More: How to Stop Predatory Lending' in Gregory D Squires (ed), Business & Economics (Greenwood
Publishing, 2004) 40.
46 See 'Section 80: Reckless credit' below.
47 See 'Section 90: Unlawful provisions of credit agreement' below.
48 See: Creola Johnson, 'Payday Loans: Shrewd Business or Predatory Lending?' (2002) 87 Minnesota Law Review 1, 2-4.
49 See further: 'F The "Marikana" connection' below.
50 For a definition of what constitutes a credit agreement under the Act, see: Renke, Roestoff and Haupt, above n 8, 235.
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51 National Credit Act Preamble.
52 Ibid s 76(4)(c)(ii).
53 Ibid.
54 National Credit Act s 74(1).
55 Ibid s 90(2)(c), as prescribed by the Minister under s 90(5).
56 Ibid ss 104 (1)(a)-(b).
57 Ibid ss 120 (1)(a)-(b).
58 Ibid ss 119(1)-(4).
59 Ibid ss 90 (2)(a)(i), (2)(b).
60 See also: Matina Stevis, 'Unsecured Loans Beset South Africa', The Wall Street Journal, 28 September 2014
<http://www.wsj.com/articles/unsecured-loans-beset-south-africa-141194 9648> in which the author describes the unsecured debt market as
a 'subprime-loan crisis for the country'.
61 Guy Debelle, 'A Comparison of the US and Australian Housing Markets' (Paper presented at the Address to the Sub-prime Mortgage
Meltdown Symposium, Adelaide, 16 May 2008) 8 <http://www.rba.gov.au/speeches/2008/sp-ag-160508.html>.
62 Australian Securities and Investments Commission Act 2001 (Cth) sub-div BA s 12BF ('Unfair terms of consumer contracts and small
business contracts').
63 Ibid.
64 See: Access Canberra Australian Capital Territory et al, Commonwealth of Australia, Unfair Contract Terms: A Guide for Businesses
and Legal Practitioners (March 2016) 21.
65 Todd C Frankel, 'Why the CDC Still Isn't Researching Gun Violence, Despite the Ban Being Lifted Two Years Ago', The Washington
Post, 14 January 2015 <https://www.
washingtonpost.com/news/storyline/wp/2015/01/14/why-the-cdc-still-isnt-researching-gun-violence-despite-the-ban-being-lifted-two-years-ago/>.
66 Section 16(1)(c).
67 National Credit Regulator, Home (2016) <http://www.ncr.org.za>.
68 National Credit Act ss 16(1)-(2).
69 National Credit Regulator, Annual Report 2011/2012 (2012) 13, 34-7; National Credit Regulator, Annual Report 2012/2013 (2013) 33-6;
National Credit Regulator, Annual Report 2014, above n 6, 20-3; National Credit Regulator, Annual Report 2014/2015 (2015) 19-20, 33;
Nomsa Motshegare, 'An Overview of the NCR's Research, Awareness & Education Activities as Part of Executing Its Mandate' (Paper
presented at the International Conference on Over-Indebtedness and Credit Regulation, Pretoria, South Africa, August 2010) 14
<http://www.up.ac.za/media/shared/Legacy/sitefiles/file/47/327/lawclinicdraftpa persfromconference/nomsaslides.pdf>.
70 National Credit Regulator, Annual Report 2011/2012, above n 69, 14, 24; National Credit Regulator, Annual Report 2012/2013, above n
69, 27; National Credit Regulator, Annual Report 2014/2015, above n 69, 27; Motshegare, above n 69, 7.
71 National Credit Regulator, Annual Report 2011/2012, above n 69, 19, 20; National Credit Regulator, Annual Report 2012/2013, above n
69, 30; National Credit Regulator, Annual Report 2014, above n 6, 36-7; National Credit Regulator, Annual Report 2014/2015, above n 69,
25; Motshegare, above n 69, 6.
72 National Credit Regulator, Annual Report 2011/2012, above n 69, 22; National Credit Regulator, Annual Report 2014, above n 6, 38;
Motshegare, above n 69, 4.
73 National Credit Regulator, Annual Report 2011/2012, above n 69, 22; National Credit Regulator, Annual Report 2012/2013, above n 69,
32.
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74 National Credit Regulator, Annual Report 2011/2012, above n 69, 22; National Credit Regulator, Annual Report 2012/2013, above n 69,
23.
75 National Credit Regulator, Annual Report 2011/2012, above n 69, 24; National Credit Regulator, Annual Report 2014, above n 6, 32-4.
76 National Credit Regulator, Annual Report 2011/2012, above n 69, 23.
77 Ibid 25; National Credit Regulator, Annual Report 2012/2013, above n 69, 28; National Credit Regulator, Annual Report 2014, above n 6,
35.
78 National Credit Regulator, Annual Report 2011/2012, above n 69, 25; National Credit Regulator, Annual Report 2012/2013, above n 69,
29; Motshegare, above n 69, 4.
79 National Credit Regulator, Annual Report 2011/2012, above n 69, 278; National Credit Regulator, Annual Report 2014, above n 6, 19;
National Credit Regulator, Annual Report 2014/2015, above n 69, 18, 30-1.
80 National Credit Regulator, Annual Report 2011/2012, above n 69, 29-31; National Credit Regulator, Annual Report 2012/2013, above n
69, 15; National Credit Regulator, Annual Report 2014, above n 6, 29-31; National Credit Regulator, Annual Report 2014/2015, above n 69,
23-4; Motshegare, above n 69, 4; Kgomotso H Masilo and Edward Rankhumise, 'The Implementation of Debt Counselling: An Exploratory
Study' (2014) 12 Problems and Perspectives in Management 334, 338.
81 National Credit Regulator, Annual Report 2011/2012, above n 69, 13, 31-4; National Credit Regulator, Annual Report 2012/2013, above
n 69, 16-22; National Credit Regulator, Annual Report 2014, above n 6, 24-8, 40; National Credit Regulator, Annual Report 2014/2015,
above n 69, 21-2.
82 National Credit Regulator, Consumer Credit Market Report (CCMR) (2016)
<http://www.ncr.org.za/consumer-credit-market-report-ccmr>.
83 Penelope Hawkins, Pricing of and Access to Consumer Credit, Research Report Summary (National Credit Regulator, June 2009) 2.
84 Developmentnomics, Literature Review on the Impact of the National Credit Act (NCA) Has Had (sic) on South Africa's Credit Market,
Final Report (National Credit Regulator, June 2012) 52.
85 Magauta Mphahlele, 'South Africa's Proposed Credit Regulations Irk Credit Providers, Please Consumers' on Center for Financial
Inclusion Blog (15 July 2015) <https://cfi-
blog.org/2015/07/15/south-africas-proposed-credit-regulations-irk-credit-providers-please-consumers/>.
86 Developmentnomics, above n 84, 34.
87 Hawkins, above n 83, 1.
88 Ibid 4.
89 National Credit Regulator, NCR Task Team on Debt Counselling, Briefing Note (March 2010) 3-4; Melanie Roestoff et al, 'The Debt
Counselling Process -- Closing the Loopholes in the National Credit Act 34 of 2005' (2009) 12 Potchefstroom Electronic Law
Journal/Potchefstroomse Elektroniese Regsblad 247, 247; Developmentnomics, above n 84, 45.
90 Roestoff et al, above n 89, 247; Developmentnomics, above n 84, 13.
91 Developmentnomics, above n 84, 62.
92 Ibid 19.
93 Ibid 58.
94 Ibid 106.
95 Ibid.
96 Ibid 107.
97 Ibid.
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98 Ibid 108.
99 See also: Mphahlele, above n 85.
100 Developmentnomics, above n 84, 109.
101 National Credit Regulator, Consumer Credit Market Report (CCMR), First Quarter/March 2016, 1-2.
102 National Credit Act s 1; Renke, Roestoff and Haupt, above n 8, 232.
103 Renke, Roestoff and Haupt, above n 8, 236.
104 For an account of types of agreement not at arm's length, see: ibid 237.
105 National Credit Regulator, Register of Registrants: Credit Providers (2016) <http://www.
ncr.org.za/register_of_registrants/registered_cp.php>.
106 National Credit Act s 40(1)(a).
107 Ibid s 8(2)(c).
108 'Stokvel', Oxford Dictionaries (Oxford University Press, 2016) <http://www.oxforddic tionaries.com/definition/english/stokvel>.
109 National Stokvel Association of South Africa ('NASASA'), Homepage (2016) <http://nasasa.co.za/site/>; Gillian Jones, 'A Stokvel by
Any Other Name is Still Empowering', Business Day, 11 May 2015 <http://www.bdlive.co.za/business/financial/
2015/05/11/a-stokvel-by-any-other-name-is-still-empowering>.
110 National Credit Amendment Act 2014 s 10.
111 South Africa, Determination of a Threshold for Credit Provider Registration,Government Notices,Gazette, No 39981, 11 May 2016, 5,
[2].
112 National Credit Act s 8(3)(b).
113 Ibid s 4(1)-(2).
114 Sidwell Medupe, Minister Davies Determines a New Threshold for Credit Provider Registration (Department of Trade and Industry, 25
May 2016) <https://www.thedti. gov.za/editmedia.jsp?id=3743>.
115 National Credit Act s 40(4). See also: Matthew Thomson, Am I Required to Register as a Credit Provider? Recent Changes to the
National Credit Act and Regulations (21 June 2016) Dingley Marshall
<http://www.dingleymarshall.co.za/am-i-required-to-register-as-a-credit-provider/>.
116 See, eg, National Credit Act s 133 ('Prohibited collection and enforcement practices'). Compare the position in the United States where,
in 2015, the Consumer Financial Protection Bureau 'received more than 85, 200 complaints about debt collection, making it by far the largest
source of consumer grievances among the sectors it watches over'. Yuka Hayashi, 'CFPB Unveils Overhaul of Debt Collection', The Wall
Street Journal, 28 July 2016 <http://www.wsj.com/articles/cfpb-unveils-overhaul-of-debt-collection-1469678460>.
117 National Credit Act s 90(2)(h)(i).
118 Solli-Hubbard, above n 3, 72.
119 Ibid.
120 National Credit Act s 60(1).
121 Ibid s 60(2).
122 Ibid s 60(3).
123 Constitution of the Republic of South Africa 1996 (South Africa) s 9(3).
Page 19
124 Promotion of Equality and Prevention of Unfair Discrimination Act 2000 (South Africa) ch 2.
125 National Credit Act.
126 Ibid s 61(1)(a).
127 Ibid s 61(1)(b).
128 Ibid s 61(1)(c).
129 Ibid s 61(1)(d).
130 Ibid s 61(1)(e).
131 Ibid s 61(1)(f).
132 Ibid s 61(1)(g).
133 Ibid s 61(1)(h).
134 Solli-Hubbard, above n 3, 72.
135 Ibid.
136 Stuart Theobald, The Risk of Unsecured Lending in South Africa, Occasional Research Report (10 June 2013) 7. For more on the
dangers of sub-prime (or microcredit as it is also known), and the devastation caused by the extension of sub-prime loans to the poorest of
the poor in 'Bolivia, Bosnia, Pakistan, Nicaragua, Morocco and most catastrophically, in Andhra Pradesh State in India, site of 250 000
suicides by indebted farmers', see: Bateman, 'Microcredit and Marikana', above n 15, 2.
137 Bateman, 'Microcredit and Marikana', above n 15, 2.
138 Ibid 3.
139 See, eg, Plain Language Institute, Plain Language Legislation in SA (2010) <http://www.plainlanguageinstitute.co.za/context.php>.
140 Constitution of the Republic of South Africa 1996 (South Africa).
141 Interim Constitution of the Republic of South Africa 1993 (South Africa).
142 Consumer Protection Act 2008 (South Africa).
143 National Credit Act s 64(2).
144 These issues were addressed by the High Court of South Africa in Standard Bank of South Africa Ltd v Dlamini [2013] 1 SA 219
[52]-[53], [64].
145 South Africa, Government Notices, Gazette, No 38557, Regulation Gazette, No 10382, 13 March 2015
<http://www.ncr.org.za/documents/pages/NCA-amendment-Regulations-March -20151.pdf>.
146 Sidwell Medupe, The DTI Publishes Affordability Assessment Regulations for Public Comment (Department of Trade and Industry, 5
August 2014) <https://www.thedti.gov.za /editmedia.jsp?id=3104>.
147 South Africa, Government Notices, above n 145, ch 3, s 2.
148 Angelique Arde, 'New Plans to Tighten Your Access to Credit', Independent Online, 10 August 2014
<http://www.iol.co.za/business/personal-finance/new-plans-to-tighten-your-access-to-credit-1732819>.
149 South Africa, Government Notices, above n 145, s 4(a).
150 Ibid s 4(b).
151 Ibid s 4(c).
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152 South Africa, Government Notices, above n 145, s 5.
153 Ibid s 6.
154 Ibid s 7.
155 National Credit Act s 78(3).
156 Ibid s 81(2)(a)(iii).
157 South Africa, Government Notices, above n 145, s 9.
158 Ibid 19.
159 Ibid s 10.
160 Ibid s 13.
161 SA Taxi Securitisation (Pty) Ltd v Mbatha; SA Taxi Securitisation (Pty) Ltd v Molete; SA Taxi Securitisation (Pty) Ltd v Makhoba
[2011] 1 SA 310 (GSJ) [56]. See also: Liphoko v ABSA Bank Ltd [2010] ZANCT 10 [4.2].
162 SA Taxi Securitisation (Pty) Ltd v Mbatha; SA Taxi Securitisation (Pty) Ltd v Molete; SA Taxi Securitisation (Pty) Ltd v Makhoba
[2011] 1 SA 310 (GSJ) [69].
163 Standard Bank of South Africa Ltd v Hales [2009] 3 SA 315 (D) [12]. See also: Mareesa Kreuser, 'The Application of Section 85 of the
National Credit Act in an Application for Summary Judgment' (2012) 45 De Jure 1, 15.
164 Kreuser, above n 163, paraphrasing Standard Bank of South Africa Ltd v Hales [2009] 3 SA 315 (D) [13].
165 National Credit Act s 78(2).
166 Subsequently amended by National Credit Amendment Act 2014 (South Africa) s 25, in which jurisdiction is extended to include
tribunals.
167 For more, see: J Otto, 'Recent Decisions under the National Credit Act 34 of 2005' (2012) Northernlaw Newsletter 1, 2
<http://www.northernlaw.co.za/important_information_for_ members/articles_by_prof_j_otto_on_ncr/MAY_2012_REPORTS.pdf> and the
decision in Andrews v Nedbank Ltd [2012] 3 SA 82 (ECG) [19].
168 SA Taxi Securitisation (Pty) Ltd v Mbatha; SA Taxi Securitisation (Pty) Ltd v Molete; SA Taxi Securitisation (Pty) Ltd v Makhoba
[2011] 1 SA 310 (GSJ) [68(1)].
169 National Credit Act s 86(7)(c)(ii)(dd).
170 Ibid s 89(5)(a).
171 Ibid s 89(5)(b).
172 Ibid s 89(5)(c)(i).
173 Ibid s 89(5)(c)(ii).
174 SA Taxi Securitisation (Pty) Ltd v Mbatha; SA Taxi Securitisation (Pty) Ltd v Molete; SA Taxi Securitisation (Pty) Ltd v Makhoba
[2011] 1 SA 310 (GSJ) [46].
175 National Credit Act.
176 Ibid.
177 Ibid. See further the provisions of s 130(1), ibid; SA Taxi Securitisation (Pty) Ltd v Mbatha; SA Taxi Securitisation (Pty) Ltd v Molete;
SA Taxi Securitisation (Pty) Ltd v Makhoba [2011] 1 SA 310 (GSJ) [49].
178 National Credit Act;FirstRand Bank Ltd v Olivier [2008] JOL 22139 (SE) [14]-[15]. See also: Kreuser, above n 163, 13.
Page 21
179 Standard Bank of SA Ltd v Panayiotts [2009] ZAGPHC 22 [77] (Masipa J) and cited with approval in SA Taxi Securitisation (Pty) Ltd v
Mbatha; SA Taxi Securitisation (Pty) Ltd v Molete; SA Taxi Securitisation (Pty) Ltd v Makhoba [2011] 1 SA 310 (GSJ) [48]. See also:
Corlia van Heerden, 'Section 85 of the National Credit Act 34 of 2005: Thoughts on its Scope and Nature' (2013) 46 De Jure 968, 985.
180 SA Taxi Securitisation (Pty) Ltd v Mbatha; SA Taxi Securitisation (Pty) Ltd v Molete; SA Taxi Securitisation (Pty) Ltd v Makhoba
[2011] 1 SA 310 (GSJ) [45].
181 National Credit Act.
182 Hermie Coetzee, 'Voluntary Surrender, Repossession and Re-Instatement in Terms of the National Credit Act 34 of 2005' (2010) 73
Journal of Contemporary Roman-Dutch Law 569, 572; Bentley Credit Control and Bentley Attorneys, Voluntary Surrender of Goods --
Section 127 of the NCA (11 September 2009) creditmanagement.co.za <http://www.
creditmanagement.co.za/voluntary-surrender-of-goods-section-127-of-the-nca/>.
183 National Credit Act.
184 Ibid s 128(2).
185 Ibid. See judgment in: Dumas v Motor Finance Corporation [2008] ZANCT 2. See also: Tanya Woker, 'A Critical Examination of the
Role that the National Consumer Tribunal Plays in Debt Relief with Suggestions for Reform' (Paper presented at the International
Conference on Over-Indebtedness and Credit Regulation, Pretoria, South Africa, August 2010) 9
<http://www.up.ac.za/media/shared/Legacy/sitefiles/file/47/327/lawclinicdraftpa persfromconference/tanyawokerdraft.pdf>.
186 Coetzee, above n 182, 572.
187 For more on the abuse and corruption of these orders, see: Theobald, above n 136.
188 For more on this see: Angelique Arde, 'Garnishee Orders: Are You Exploited?', Independent Online, 28 October 2012
<http://beta.iol.co.za/business/personal-finance/garnishee-orders-are-you-exploited-1412226>; Franciscus Haupt et al, The Incidence of and
the Undesirable Practices Relating to Garnishee Orders in South Africa (University of Pretoria, 2008).
189 National Credit Act.
190 Ibid.
191 Ibid.
192 Ibid s 15(b).
193 Ibid s 15(c).
194 Ibid s 15(e).
195 Ibid s 15(f).
196 National Credit Act s 15(h).
197 Ibid s 15(i).
198 Ibid s 15(h).
199 Ibid.
200 Ibid s 27. See also ss 142-8, dealing with tribunal consideration of complaints, applications and referrals and ss 149-52, dealing with
tribunal orders.
201 Ruth Goodwin-Groen, The National Credit Act and its Regulations in the Context of Access to Finance in South Africa (FinMark Trust
South Africa, November 2006) 61 [5.6.1].
202 Solli-Hubbard, above n 3, 77.
203 Ibid.
Page 22
204 See: National Credit Regulator v Season Star Trading 333 CC [2013] ANCT 41 (NCT) [32] citing with approval Re Competition
Commission (South Africa) [2003] ZACT 43 [99].
205 National Credit Act s 151.
206 National Credit Regulator v Season Star Trading 333 CC [2013] ANCT 41 (NCT) [39]-[40].
207 National Credit Act s 151(2).
208 Ibid s 161.
209 Ibid s 161(a).
210 Ibid s 161(b).
211 National Credit Regulator v Season Star Trading 333 CC [2013] ANCT 41 (NCT) [33].
212 Ibid. See also: Vicky Comino, 'Effective Regulation by the Australian Securities and Investments Commission: The Civil Penalty
Problem' (2009) 33 Melbourne University Law Review 802, 804 n 8.
213 National Credit Act s 153.
214 Ibid s 154.
215 Ibid s 155.
216 Ibid s 155(2).
217 Ibid s 155(1).
218 Ibid s 155(3)(a).
219 Ibid s 155(3)(b).
220 Ibid s 155(5).
221 Ibid s 155(6).
222 Ibid s 155(7).
223 Ibid s 158(a).
224 Ibid s 158(b)(i).
225 Ibid s 158(b)(ii).
226 Ibid s 159.
227 Ibid sub-s (a).
228 Ibid.
229 Ibid s 161(a).
230 Ibid s 161(b).
231 Ibid.
232 National Credit Act s 151(2)(a).
233 Ibid s 151(2)(b).
Page 23
234 Ibid s 151(3)(a).
235 Ibid s 151(3)(b).
236 Ibid s 151(3)(c).
237 Ibid s 151(3)(d).
238 Ibid s 151(3)(e).
239 Ibid s 151(3)(f).
240 Ibid s 151(3)(g).
241 Renee Bonorchis, 'African Bank's Ellerine Faces Closing as Buyers Stay Away', Bloomberg, 4 November 2014
<http://www.bloomberg.com/news/articles/201-11-04/afri can-bank-s-ellerine-faces-closing-as-buyers-stay-away>.
242 Renee Bonorchis, 'Shoprite Probed for Reckless Lending by S African Regulator', Bloomberg Business, 14 October 2015
<http://www.bloomberg.com/news/articles/2015-10-14/shoprite-probed-for-reckless-lending-by-south-african-regulator>.
243 F Coppola, 'South Africa Has Bailed out a Predatory Lender', Forbes, 12 August 2014, 4
<http://www.forbes.com/sites/francescoppola/2014/08/12/south-africa-has-bailed-out-a-pre datory-lender/>.
244 Bateman, 'Microcredit and Marikana', above n 15, 3.
245 National Credit Act.
246 See further: Haupt et al, above n 188; Arde, above n 188; Alec Hogg, 'Former ABIL CFO on Why We Should Worry About Unsecured
Lending', BizNews, 22 May 2014 <http://www.biznews.com/interviews/2014/05/22/former-abil-cfo-on-why-we-should-worry
-about-unsecured-lending/>; Melanie Roestoff and Stefan Renke, 'A Fresh Start for Individual Debtors: The Role of South African
Insolvency and Consumer Protection Legislation' (2005) 14 International Insolvency Review 93; Department of Trade and Industry,
Republic of South Africa, above n 9.
247 Theobald, above n 136.
248 For more on the role played by the National Credit Act in insulating South Africa from the Global Financial Crisis, see: Woker, 'Why
the Need for Consumer Protection Legislation', above n 13, 217-18, 231 n 6. See also: Wilson, above n 32, 79.
249 See: Bateman, 'Microcredit and Marikana', above n 15; Milford Bateman, 'Microcredit has been a Disaster for the Poorest in South
Africa', The Guardian, 19 November 2013
<http://www.theguardian.com/global-development-professionals-network/2013/nov/19/microcredit-south-africa-loans-disaster>; Saliem
Fakir, 'South Africa: The Fall of African Bank: How Unsecured Loans Create a Hollow Economy' (2014) South African Civil Society
Information Service 1 <http://sacsis.org.za/site/article/2108>; Saliem Fakir, 'From Marikana to the Fall of African Bank: How Unsecured
Loans and Low Wages Create a Hollow Economy' (2014) South African Civil Society Information Service 1
<http://sacsis.org.za/site/article/2108>.
250 For an empirical analysis of the effects of the National Credit Act on credit extension in South Africa, see: Chimwemwe Chipeta and
Douglas Mbululu, 'The Effects of the National Credit Act and the Global Financial Crisis on Domestic Credit Extension: Empirical Evidence
from South Africa' (2012) 5 Journal of Economic and Financial Sciences 215.
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