National Credit Act, 2005 (Act No. 34 of 2005)

Chapter 1 : Interpretation, Purpose and Application of Act

Part B : Purpose and Application

4. Application of Act

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1)Subject to sections 5 and 6, this Act applies to every credit agreement between parties dealing at arm’s length and made within, or having an effect within, the Republic, except-
a)a credit agreement in terms of which the consumer is-
i)a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold value determined by the Minister in terms of section 7(1);
ii)the state; or
iii)an organ of state;
b)a large agreement, as described in section 9(4), in terms of which the consumer is a juristic person whose asset value or annual turnover is, at the time the agreement is made, below the threshold value determined by the Minister in terms of section 7(1);
c)a credit agreement in terms of which the credit provider is the Reserve Bank of South Africa; or
d)a credit agreement in respect of which the credit provider is located outside the Republic, approved by the Minister on application by the consumer in the prescribed manner and form.

 

2)For greater certainty in applying subsection (1)-
a)the asset value or annual turnover of a juristic person at the time a credit agreement is made, is the value stated as such by that juristic person at the time it applies for or enters into that agreement;
b)in any of the following arrangements, the parties are not dealing at arm’s length:
i)a shareholder loan or other credit agreement between a juristic person, as consumer, and a person who has a controlling interest in that juristic person, as credit provider;
ii)a loan to a shareholder or other credit agreement between a juristic person, as credit provider, and a person who has a controlling interest in that juristic person, as consumer;
iii)a credit agreement between natural persons who are in a familial relationship and-
aa)are co-dependent on each other; or
bb)one is dependent upon the other; and
iv)any other arrangement-
aa)in which each party is not independent of the other and consequently does not necessarily strive to obtain the utmost possible advantage out of the transaction; or
bb)that is of a type that has been held in law to be between parties who are not dealing at arm’s length;
c)this Act applies to a credit guarantee only to the extent that this Act applies to a credit facility or credit transaction in respect of which the credit guarantee is granted; and
d)a juristic person is related to another juristic person if-
i)one of them has direct or indirect control over the whole or part of the business of the other; or
ii)a person has direct or indirect control over both of them.

 

3)The application of this Act in terms of subsection (1) extends to a credit agreement or proposed credit agreement irrespective of whether the credit provider-
a)resides or has its principal office within or outside the Republic; or
b)subject to subsection (1)(c), is-
i)an organ of state;
ii)an entity controlled by an organ of state;
iii)an entity created in terms of any public regulation; or
iv)the Land and Agricultural Development Bank.

 

4)If this Act applies to a credit agreement-
a)it continues to apply to that agreement even if a party to that agreement ceases to reside or have its principal office within the Republic; and
b)it applies in relation to every transaction, act or omission under that agreement, whether that transaction, act or omission occurs within or outside the Republic.

 

5)If a person sells any goods or services and accepts, as full payment for those goods or services-
a)a cheque or similar instrument upon which payment is subsequently refused for any reason; or
b)a charge by or on behalf of the buyer against a credit facility in terms of which a third person is the credit provider, and that credit provider subsequently refuses that charge for any reason,

the resulting debt owed to the seller by the issuer of that cheque or charge does not constitute a credit agreement for any purpose of this Act.

 

6)Despite any other provision of this Act-
a)if a consumer pays fully or partially for goods or services through a charge against a credit facility that is provided by a third party, the person who sells the goods or services must not be regarded as having entered into a credit agreement with the consumer merely by virtue of that payment; and
b)if an agreement provides that a supplier of a utility or other continuous service-
i)will defer payment by the consumer until the supplier has provided a periodic statement of account for that utility or other continuous service;

and

ii)will not impose any charge contemplated in section 103 in respect of any amount so deferred, unless the consumer fails to pay the full amount due within at least 30 days after the date on which the periodic statement is delivered to the consumer,

that agreement is not a credit facility within the meaning of section 8(3), but any overdue amount in terms of that agreement, as contemplated in subparagraph (ii), is incidental credit to which this Act applies to the extent set out in section 5.

 

7)In respect of an advertisement concerning credit, or in respect of a credit agreement or proposed credit agreement to which this Act applies, if there is an inconsistency between a provision of this Act read with any relevant definition in section (1), and a provision of sections 42 to 51 of the Electronic Communications and Transactions Act, 2002 (Act No. 25 of 2002)-
a)the provisions of both Acts apply concurrently, to the extent that it is possible to apply and comply with one of the inconsistent provisions without contravening the second; and
b)the provisions of this Act prevail to the extent that it is impossible to apply or comply with one of the inconsistent provisions without contravening the second.