Your rights as a consumer
Arming yourself with knowledge of your rights as a consumer under any credit agreement means you are empowered to make informed financial decisions and you are protected against unfair credit practices.
Credit plays an important role in any economy and society. However, as you have discovered, there are many dangers of credit, including people taking credit they cannot afford, leading to their over-indebtedness. The protection of the consumer against unfair practices in the credit market has become a key focus of South African legislation. Various consumer rights relating to access and the granting of credit have been written into to law to protect the consumer. One such piece of legislation is the National Credit Act 32 of 2005.
The NCA classifies the basic rights the consumer has with regard to the credit market. In the past, many consumers were exploited – a large part of this was due to credit agreements that were complicated and written in a language the consumer could not understand.
The NCA is not one-sided in only restricting the credit provider and its behaviour; it also prescribes the duties of the consumer in the application for credit. Below the rights and obligations of BOTH the consumer AND the credit provider are given.
The rights you have as a consumer are something that underpins or supports the NCA itself, and they are discussed below.
Application for credit
- Application for Credit - The Act says that every person, like you, has the right to apply for credit. However, don’t misunderstand: Just because you have the right to apply for credit does not mean that you have the right to receive credit.
- Discrimination - While a credit provider can refuse credit for reasonable business reasons, it cannot discriminate against a consumer on the grounds of race, religion, pregnancy, marital status, ethnic or social origin, gender, sexual orientation, age, disability, culture or language when granting credit. Everybody must be treated equally and their application must be assessed in the same way.
- Credit assessment - When your credit application is being assessed, credit providers must take all reasonable steps to prevent reckless credit and over-indebtedness. This means considering your affordability and creditworthiness (as discussed in Section 9). A credit provider that gives credit without first determining whether you can afford to repay the loan will be guilty of reckless lending. However, you will not be protected if you do not answer questions fully and honestly in the loan application process, for example about your current income and expenses. In such a case, the credit provider will not be guilty of reckless lending.
- Decline of credit - If you apply for credit, and your application is declined, you have the right to be given the reason for credit being refused or discontinued in writing.
- Language - Credit providers must ensure that their credit agreements are easily understandable. This means it should be in plain language that the average consumer will understand. You as the consumer also have the right to be given a pre-agreement quotation and credit agreement in an official language that you can read and understand, so the credit provider should have these available in at least two of the official languages. This means that the contents, meaning and importance of these documents must be easy to understand, and any points you do not understand must be questioned, and the credit provider must take the time to ex- plain them to you. If you do not understand the terms and conditions of the credit agreement, it is important that you do not sign it.
- Documents - In the NCA, clear guidelines are given in terms of the fact that you should receive a pre-agreement statement and quotation, which is valid for five business days. You are also protected in terms of the content of credit agreements (what information can and cannot be written in the agreement). Guidelines are also provided regarding information to appear on documents (for example a Section 129 letter of demand) and statements. It also states how often a credit provider must provide you with a statement.
- Fees and charges - The Act prescribes the types of fees and charges that credit providers are allowed to charge. The regulations that accompany the NCA state the maximum fees and charges that credit providers are allowed to charge. The NCA also places a maximum amount that can be charged on other fees, for example initiation, service and default fees and collection costs. Insurance cover on loans is allowed, but it must be reasonable, and you have the right to use an existing policy instead of taking out a new policy.
- Credit information - All credit providers must report any new credit agreements, as well as the termination or amendment of an existing one, to all credit bureaus in South Africa. However, a credit provider must inform you before reporting any unfavourable information to the bureau. The NCA says you have the right to a free credit report once a year, and then a small fee per enquiry after that. You also have the right to query or challenge any information that is kept by credit bureaus about you. The credit bureau or National Credit Regulator (NCR) must investigate this at no charge to you, and rectify any incorrect or fraudulent information. The NCA regulations also prescribe the maximum periods that different categories of consumer credit information may be kept by credit bureaus, for example judgements or payment history.
- Confidentiality - The NCA clearly states that all stakeholders must take all steps to protect your information. Credit bureaus are required to protect the confidentiality of all of the credit information they have for all consumers. Credit providers must also give you the option of being excluded from telemarketing campaigns, marketing or customer lists that are sold or distributed to third parties, and to opt out of the mass distribution of e-mail or SMS messages. You also have a right to have information held about you treated confidentially. This means the credit provider may only use information for the purpose for which it was given.
- Marketing of credit - Agents of credit providers cannot sell credit door to door, at your place of work, or at your home, unless you have specifically invited them or there is an arrangement with your employer. Negative option marketing is also prohibited. This is a marketing tool when credit is offered to you with the statement that if you do not refuse the credit within a certain period, then you have agreed to enter into the credit agreement. Advertisements used by credit providers must also not be misleading, fraudulent or deceptive; or contain prohibited terms such as ‘blacklisted welcome’ or ‘free’. Credit providers and debt counsellors are also not allowed to make use of the NCR logo in their advertisements. As stated, you must be provided with a quotation and pre-agreement statement that is valid for five days, with all the details about the loan, so that you can shop around and compare prices. The NCA also states that credit providers may not harass anyone, or try to persuade anyone to apply for credit.
- Termination and settlement of agreements - You have the right to fully pay out the credit agreement (or settle the amount owing) at any time, and end the agreement. For home loans or large agreements (greater than R250 000), you may have to pay a termination charge of not more than three months’ interest for such termination of the agreement.
- Surrender of goods - You are also entitled to return goods that are subject to a credit agreement, whether or not you are in default, to the credit provider. This is for instalment agreements, for example when you buy furniture or a television from a retailer. The credit provider must then sell the goods and use the proceeds to settle the account, and you will be liable for the shortfall. You must notify the credit provider in writing of the termination of the agreement, and return the goods to the credit provider. The credit provider must then notify you of the estimated value of the goods within 10 days.
- Debt enforcement - You are protected in terms of debt enforcement, which is the collection of outstanding debt by credit providers, for example the letters they have to send to you, and how long you must be in default before they can take legal action against you. Procedures regarding debt enforcement in a magistrate’s court are also prescribed in terms of the legislation.
- Debt counselling - When consumers cannot pay their debts, they will have the right to approach a debt counsellor for assistance. The debt counsellor will help you to restructure or rearrange your debt repayments if you are found to be over-indebted – this arrangement will be made an order of court, and you will be under debt review until your debt is settled (and a clearance certificate is issued) or the court order is rescinded. You will not have access to further credit while you are subject to debt counselling and under debt review.
The NCA also stipulates that the credit provider has certain rights. They have the right to:
- Access your credit records when you apply for credit, but with your permission
- Decline credit, but must provide you with sufficient reasons why credit was declined
- Receive regular payments as agreed on the credit given, including interest and fees
- Enforce the agreement, so they may take steps to collect the debt as agreed in the credit agreement and according to the NCA, which also means recovering any goods sold or used as security for the loan
- Request that a court orders you to pay any costs incurred by them in the collection of such debt, as well as for the attachment of goods
Every right that you have requires a duty from the part of the credit provider. So they are required to:
- Conduct a credit assessment
- Take all reasonable steps to prevent your over-indebtedness and reckless credit
- Supply you with a statement of account
- Give you a pre-agreement quotation and disclosure
- Give you a copy of the credit agreement
- Disclose all costs pertaining to a credit agreement
- Report regularly to all registered credit bureaus and to the NCR
- Advise you to seek counselling or advice when you are in default
- Maintain records of applications, agreements and accounts for a prescribed period
- Sell goods subject to a credit agreement as soon as possible, for the best price possible, should you request it, and to provide you with a financial statement
The Act requires that credit providers keep records of all applications for credit, credit agreements and credit accounts for a prescribed period.