The Consumer Protection Act[1] (hereinafter referred to as the “CPA”) aims not only to promote a fair, accessible and sustainable marketplace for consumer products and services in order to establish norms and standards for consumer protection but also to promote a consistent legislative and enforcement framework relating to consumer transactions and agreements.
Incidental consumer credit agreements are examples of such consumer transactions and agreements by which the CPA aims to provide norms, standards and an enforcement framework. Unfortunately, the CPA falls short in providing adequate guidance and a relevant framework when it comes to incidental consumer credit agreements. Therefore, the CPA must be read together with the National Credit Act[2] (hereinafter referred to as the “NCA”) which defines and regulates incidental consumer credit agreements.
These are any consumer agreements stipulating a date of payment where after a fee, charge or interest will be payable or offered at a lower price should the consumer pay on or before a specified date, whereafter the consumer will have to pay a higher price.[3] These types of agreements will be considered to be incidental consumer credit agreements whereby the company is obligated to comply with the NCA.
There is a common misconception that only credit providers registered with the National Credit Regulator (NCR) need to comply with the provisions of the NCA. This is incorrect as the NCA requires all credit providers, including suppliers of incidental consumer credit agreements, to comply with the Act.[4]
In terms of the NCA, it is important to take note that an incidental consumer credit agreement is deemed to be concluded twenty business days after the date on which the first late-payment fee or interest was charged.[5] For example:
Should a supplier render an account over a period of time to a consumer in terms of an agreement for goods or services rendered stipulating that the account is due and payable by 10 October 2020, failing which a fee, charge or interest will be levied against the outstanding amount.
Therefore, it will be deemed that an incidental consumer credit agreement will be concluded on 10 November 2020, twenty business days after 11 October 2020,[6] whereby the supplier is entitled to charge interest on the outstanding amount.
Importantly, a company supplying incidental consumer credit agreements is exempted from registering with the National Credit Regulator and will still be legally entitled to charge interest on default payments at a fixed flat rate of 2% per month on the outstanding amount as from the day after default date, which is deemed to be twenty business days after the account becomes payable.[7]
However, should the company charge interest immediately after the day on which the goods are supplied or services are rendered, the credit agreement would not amount to an incidental credit agreement but as “actual credit”, which only registered credit providers are entitled to do.
Suppliers of incidental consumer credit agreements are strongly urged to ensure compliance with the Consumer Protection Act[8] and the National Credit Act[9] and that the correct interest rate of 2% per month is applied to such agreements as well as levied on the correct date after default payment. Failure to comply with the Act could place the company at risk and render the fee, charge or interests voidable by the consumer.
Should you require any assistance or Consumer related advice, please contact your nearest SEESA office, or SMS the word “SEESA” to 45776 for professional legal advice.
About the author:
Vernon Harms obtained his B.Com (Law) and LL.B degrees in 2014 and 2016 respectively from the University of the Free State. He commenced his LL.M degree with specialisation in Private Law in 2017. His LL.M degree was conferred upon him in July 2019 and he was admitted as an Attorney in the High Court of South Africa in September 2019. Thereafter he started his career at the SEESA Upington branch as a Legal Advisor in Labour Law and Consumer Protection.
Resources:
- Consumer Protection Act 68 of 2008.
- National Credit Act 34 of 2005.
- Section 1 of the National Credit Act 34 of 2005.
- National Credit Act 34 of 2005.
- Section 5(2) of the National Credit Act 34 of 2005.
- The National Credit Act 34 of 2005 determines that the first date on which a fee, charge or interest is charged is excluded from the calculation.
- Section 103 of the National Credit Act 34 of 2005.
- Consumer Protection Act 68 of 2008.
- National Credit Act 34 of 2005.