Unlawful credit agreement : an analysis of Section 89(5) of the National Credit Act 34 of 2005 with specific focus on Section 89(5)(c)

Abstract

This study is a critical analysis of section 89(5) of the National Credit Act, with specific focus on section 89(5)(c). Although section 89(5) deals with the consequences of unlawful credit agreements listed under section 89, this study will focus on the consequences of unlawful credit agreements of unregistered credit providers. The National Credit Act is the regulatory framework for the credit market in South Africa and it places an obligation on certain individuals or legal persons to register as credit providers. Credit providers who fail to register when they are required to do so face the consequence of having their credit agreements being void and unlawful. A further adverse consequence is that the credit providers rights to restitution for goods delivered or money lend will either be cancelled or forfeited to the State in terms of section 89(5)(c). Case law will be utilised to demonstrate the far-reaching consequences of section 89(5)(c). The key problem with section 89(5)(c) of the National Credit Act is that it does not afford the court the opportunity to exercise a discretion when dealing with disputes concerning credit agreements which are unlawful. The common law action of unjustified enrichment, on the other hand, allows the court to exercise this discretion. The recent approval of the National Credit Amendment Bill has resulted in an amendment to section 89(5). This study will reveal whether or not the proposed amendment to section 89(5) will solve the problems which have arisen from the provision.