The National Credit Act (NCA) replaced the Usury Act on 1 June 2006. The provisions of the act will become effective on 1 June 2007. The act governs all lending agreements except for those where the borrower is a juristic person with assets in excess of R1m.
The act impacts the bridging finance industry in a number of ways:
• All bridging financiers have to be registered with the National Credit Regulator
• Interest is limited to 39.8% per year (R1.11 / R1,000 per day)
• No fees, discounting costs or interest may be charged except for an initiation fee calculated at 10% of the loan amount, but limited to R1,000
• The borrower has to accept a quotation in a prescribed format that either shows the rand value of the total cost of credit, or shows the calculation of the total cost of credit
• The lender has to perform an affordability calculation on the borrower to determine his ability to repay his debt
• Should the borrower default, the lender has far fewer rights and options than under the Usury Act
ZS Rational will comply with the provisions of the National Credit Act. The company is a registered credit provider (registration number: 2844). Interest will be charged at R1 per R1,000 per day, or 36.5% per annum. A formal quotation has been added to the application form, as has all the additional information required by the act. Clause 5.5, whereby the borrower cedes his rights to the proceeds of the sale or bond registration, has been removed. A credit search will be performed on all applicants and the credit record will be used to perform an affordability calculation.
Should you have any questions regarding the National Credit Act, or the new application form, do not hesitate to contact our offices.
(src: ZS Rational)