The National Credit Act 34 of 2005 background and rationale for its enactment with a specific study of the remedies of the credit grantor in the event of breach of contract

Abstract

The National Credit Act 34 of 2005 was the ultimate product of an initiative by the Department of Trade and Industry to address the shortcomings of the previous legislative enactments in the area of credit regulation, that is the Usury Act 73 of 1968 and the Credit Agreements Act 75 of 1980. The Act is a dramatic departure from the old bi-legislative credit dispensation. Its aims are, inter alia, to provide a fair and non-discriminatory marketplace, to prohibit unfair credit practices and reckless lending, to establish national norms and standards relating to consumer credit and to promote a consistent enforcement framework relating to consumer credit. The Act repealed the Usury Act and the Credit Agreements Act. Furthermore, it established two new bodies, namely the National Credit Regulator and the National Consumer Tribunal to monitor and enforce the framework relating to consumer credit. Through enactment of the National Credit Act the government appears to have focused much energy on the prevention of over-indebtedness by instilling prohibitions on reckless lending practices by credit providers and a variety of processes for the prevention and alleviation of over-indebtedness. However, and despite these endeavours, the ever important considerations of the inevitably commonplace breach of the credit agreement by consumers and the recovery process available to credit providers, remain to be deliberated. The relationship between the two major role players the provider and consumer is the nub of any discussion, theory or legislative enactment pertaining to credit. The thesis commences with an examination of the historical background and rationale for the Act, putting into context not only for the South African but so too for the foreign jurist, the rules and regulations which govern the relationship between the parties when an agreement is breached as well as the remedies and recourses that are available to the aggrieved party in terms of the Act. At all times the grounding of the common law, which acts as a stabiliser especially in times of changes in and of specific legislation, is examined in relation to breach and remedies as affected by the Act. Chapter 1 is a basic Introduction to the topic, sets the background for the discussion which ensues and examines the purpose and methodology adopted in the work. Chapter 2 encompasses a concise historical introduction to credit parameters; it looks at how the historical regulatory pendulum of the credit market swings to and fro. By examining the history one is able to discern what the current legislative trends are, and where they are likely headed. Chapter 3 examines the background and rationale for the new Act. The reasons why the previous credit regime was deemed ineffective for the present day credit market are also considered. Chapter 4 is a consideration of the previous legislative regime and introduction to the current legislative setting. Chapter 5 introduces the nature of the obligation and breach of contract, followed by a study of the procedures that are required before debts can be enforced through the courts. The procedures so required by the previous credit legislation, as well as those expected in foreign jurisdictions are also examined. The final chapter, Chapter 6, is an examination of specific remedies available to the credit provider as provided by the common law and by the Act and how the Act amends some of the common law remedies. Throughout the thesis a comparative examination of the jurisdictions of England and Italy are conducted as well as how these countries have tackled the problem of regulation of consumer credit, breach and their ensuing remedies and consequences. The jurisdictions examined are an example of a common law system and a civilian one, respectively. Due to the movements in harmonisation of commercial private law and due to the massive influence of this process on individual regional legislations, it is submitted that with contemporary legal developments due to cross-border trade, analysis of legislative developments in any European country cannot be carried out without reference to the law-making sanction of the European Union. Accordingly, the European Union, in so far as it relates to credit, has been studied together with the other two foreign jurisdictions. The conclusion is a consideration of whether the legislature has, through promulgation of the Act in relation to the remedies for breach, over protected the consumer through overregulation and whether such paternalism has proved, over time, to be detrimental to the credit market. The under protection of the consumer cannot be ruled out either, and this too has been considered given that the import of the wording of the Act as well as the interpretations of its sections by the judiciary will be an on-going exercise. The common law, the thread that gathers the South African legislative garment and sets it apart from the civilian tradition, and its effects are contemplated throughout the work. The closing remarks consider whether the Act is fair and sustainable in the South African environment and how it compares with foreign jurisdictions. The conclusion will reveal whether room exists for suggested improvements both to the Act and to the interpretation thereof in the area of recovery and whether the description given to the French Civil Code, that is that it is like an old lady, with both wisdom and weaknesses, will eventually be capable of assignment to the National Credit Act.