New rules for credit providers

THE days of unregistered credit providers supplying funding under the threshold of R500 000 is coming to an end.
From 1 November, the threshold will be nil.
No matter how small the amount of money lent, every person who provides credit to another will be required to register with the National Credit Regulator as a credit provider.
The zero threshold was prescribed by Department of Trade and Industry (DTI) Minister Rob Davies in terms of section 42(1) of the National Credit Act to regulate and monitor all credit providers in South Africa.
‘Registration as a credit provider will be crucial, because a credit agreement concluded by a credit provider who is not registered as such is an unlawful agreement, with two limited exceptions,’ explained Garlicke & Bousfield Inc Senior Associate Janine Will.
‘The agreement would be lawful if, at the time the credit agreement was concluded or within 30 days after that time, the credit provider had applied for registration and was awaiting a determination of that application.
‘It would also be lawful if at the time the credit agreement was concluded, the credit provider held a valid clearance certificate issued by the National Credit Regulator.
‘If the credit agreement is unlawful, then, despite any other legislation or any provision in an agreement to the contrary, a court is required to make a just and equitable order, including a directive that the credit agreement is void as from the date on which the agreement was concluded.’
The DTI stated the amendment would contribute to an equal playing field in the credit market and increase responsible credit lending.