The field of application of the National Credit Act 34 of 2005 : a critical over view of the agreement

Abstract

The credit industry in South Africa has grown exponentially over the past two decades. Previously the industry was regulated by different Acts that had to be interpreted jointly, and while there was an overlap between them they also differed. The dual implementation made consumer credit an extremely difficult and confusing environment, especially for the consumer. Global movement towards socio-economic type legislation and in an effort to bring a solution to the eminent credit crisis resulted in new consumer protection law. Enacted on 10 March 2006 and phased in stages over a 12 month period from 1 June 2006 till 1 June 2007 the National Credit Act has a wider field of application than any of its predecessors, bringing with it a single platform for consumer credit regulation. The management of the credit relationship between the credit provider and the consumer is largely by agreement or in other words contract. The National Credit Act to a considerable extent codifies this relationship. The NCA applies to every credit agreement between parties dealing at arm’s length and made within, or having an effect within, the Republic. This definition is subject to limitations and the exclusions. The way in which the NCA defines its field of application may differ from its predecessors and even common law. The Act defines three main types of credit agreements namely credit facilities, credit transactions and credit guarantees. Credit transactions also consist of eight subcategories. It is critical to distinguish between these different credit agreements and the manner in which the Act defines them must be scrutinised. This is not only important to determine if a certain agreement is a credit agreement in terms of the National Credit Act, but also if the Act applies, to what extent. Unfortunate grammatical construction and word choice by the legislator does not assist in this task. How the Act defines its field of application in relation to the types of agreement it applies to will be critically discussed and analysed.