National Credit Act not a licence to increase your debt

28 November 2012

March 3, 2007
By Neesa Moodley

If you are entering into loan agreements and committing yourself to debt, be warned that the National Credit Act (NCA), which comes into full force on June 1, will not apply to any loan agreements taken out before then.

You will also not be able to default on credit agreements that you entered into before June and cite the NCA as your protection. This means you will be fully liable for any credit agreements entered into before June 1.

Reckless lending provisions in the NCA (these place more responsibility on stores and banks that give you credit or lend you money). But these provisions will apply only to transactions entered into after June this year, Peter Setou, the senior manager of education and strategy at the National Credit Regulator (NCR), warns.

However, the Banking Association this week announced it had a code of conduct which banks have promised to adhere to with immediate effect. The principles of the new code will remain in force as a minimum standard for banks even after the NCA comes into play in June, Cas Coovadia, the managing director of the Banking Association says.

Some of the provisions in the new code of conduct for banks include:
• Bank representatives will inform you at the beginning of a telephone conversation that the call is about a credit offer and the conversation will continue only if you agree. The representative will end the call if you, at any point, indicate you are not interested in the offer.
• Banks will contact customers to offer credit only if they have assessed the customer’s ability to repay the debt.
• The bank will inform you that a preliminary assessment indicates you qualify for the offer but you will still be taken through the appropriate credit checks and Financial Intelligence Centre Act (FICA) processes if you accept the offer.

• Banks will limit their credit approaches to the hours between 8am and 7pm from Monday to Friday and between 8.30am and 1pm on Saturdays.
• Unless you agree to it, salespeople will not contact you more than once every two months to offer you the same product and calls will be subject to client confidentiality. All outgoing call-centre campaigns will be recorded.
• The code will cover all communication channels, including direct mail, call centres, SMSs, e-mails and faxes.

For existing bank clients, provisions of the new code of conduct include:
• Banks will ensure that they regularly and accurately update your credit bureaux records with regard to credit agreements you have made.
• They will make you offers based only on an estimate of your ability to repay the loan using your last known salary and internal customer account information, as well as your debt obligations as listed by the credit bureaux.
• Bank employees will confirm they are speaking to you before making you any offers telephonically.
• The salesperson will ensure the product is fully explained and an explicit decision is obtained from you.
• If you are not a client of the bank that is offering you a credit service, then the bank will make the funds available to you only once you have signed the necessary documentation.

From June, debt-counselling services will be available to you if you are unable to honour credit agreements. However, the service is not about pardoning defaulters or writing off debt but is about assisting consumers who have more debt than they can afford to reschedule or restructure so that repayments are at manageable levels.

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