“Development credit contracts” are credit contracts for the development of a small business, an education loan or a loan for the construction of low-cost housing. The maximum interest rate is 38.8% per year. This is serious. Many of these provisions are intended to penalize credit providers. Credit providers will be very careful to reduce the risk of non-performing loans. These provisions should therefore reduce over-indebtedness and reckless lending, at least in the formal sector. However, a negative result for consumers may be that lender loans will be much more reluctant in the future and, as a result, fewer people will have access to credit. In addition, this could lead to an increase in the number of unregistered and illegal credit providers. In the case of pawnshops, the loan is paid and the borrower provides collateral assets with a resale value greater than the credit. The creditor has the right to sell the property if the money is not repaid on an agreed date and to retain the proceeds of the sale. Overall, the strength of the national credit regulator, the extensive powers of the National Consumer Court and the courts, the almost paternalistic tendency of lawmaker protection and the vast network of dispute settlement accounts for consumer legislation, which will have a huge impact on the huge credit industry in South Africa. [12] The Minister may ask the NCR to create a single national registry of outstanding credit contracts, but has not yet done so.
After creation, credit providers must provide the following information for each credit contract: does the late payment notification actually have to reach the consumer to be effective? In Sebola/Standard Bank,[14] the Constitutional Court held that, although the law does not have a clear meaning for “supply,” it requires the credit provider to demonstrate the application of a credit contract and proves that the notification was sent to the consumer. When the creditor publishes the notification, the proof of the shipment registered to the consumer, accompanied by proof that the communication has reached the corresponding post office for delivery to the consumer, constitutes sufficient proof of the delivery (in the absence of contrary evidence). With respect to the NCA, it must be deferred for an agreement, a credit contract, money loans, the payment of an amount owed by one person to another person, and the interest that is collected, since interest is the cost of the loan lien. The NCA is applicable to any credit contract concluded or effective in South Africa, provided there is no exclusion. Consumers have the right to obtain an offer and a credit contract in an official language that they read or understand, as long as it is reasonable. All documents that are not required must be available in a plain language (a language that an ordinary consumer understands with average reading and writing skills and minimal credit experience). Mortgage contracts are cash loans secured by the registration of a mortgage on land and whose income is generally used for the purchase of land or housing. This provision helps prevent credit providers from taking abbreviations by simply accepting apparently solvent debtors at face value.
A lender can use its own valuation mechanisms, provided they are fair and objective. The consumer, on the other hand, must provide the requested information in a complete and truthful manner. Otherwise, the credit provider could fully defend the charge of granting reckless credits. Different types of credit contracts are subject to different interest rates: a credit provider cannot enter into a reckless credit contract with a consumer.