Do all credit providers need to register?

Do all credit providers need to register?

It has been widely reported that all credit providers should now register with the National Credit Regulator (the “NCR”) as a result of the new threshold for registration as a credit provider of R0 (nil) which was published on 11 May 2016. But is it really required that every business that lends money, regardless of the amount, must now, strictly speaking, register as a credit provider with the NCR?

Section 40 of the National Credit Act 34 of 2005 (“NCA”) requires a person to register as a credit provider if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds the threshold determined by the Minister of Trade and Industry. Prior to the recent amendments of the NCA a person had to register as credit provider if it was the credit provider of at least 100 credit agreements or the principal debt owed to him or her in terms of all current credit agreements exceeded R 500 000. After the amendment of the NCA by the National Credit Amendment Act 19 of 2014, a person was only required to register as a credit provider if the total principal debt owed to him or her in terms of all current credit agreements exceeded R 500 000 (meaning that the number of 100 credit agreements or not became irrelevant and even if the number of 100 was exceeded but the total principal debt owed in terms of the total agreements was less than R 500 000, then no registration was required). On 11 May 2016, however, a new threshold of R 0 (nil) was published and from 11 November 2016, 6 months after the publication of the new R 0 (nil) threshold, all credit providers (irrespective of the number of credit agreements) should register as credit providers with the NCR. Failure to register as a credit provider could result, amongst others, in the credit agreement between the credit provider and its debtor being declared void as an unlawful agreement.

This does, however, not mean that every single person or business that lends money must register as a credit provider. The following should be considered to determine whether to register or not:

  • Is the credit agreement an incidental credit agreement? Section 40(1)(a) of the NCA does not require the registration of a credit provider if the transaction relates to an incidental credit agreement.
  • Is the person a credit provider as defined in the NCA?
  • Is the transaction a credit agreement as defined in the NCA?
  • Will the credit agreement be concluded within, or will it have an effect within the Republic?
  • Are the parties to the credit agreement dealing “at arm’s length“?
  • Do any of the exceptions provided in section 4 apply? For example: the NCA does not apply to a credit agreement where the consumer is 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 (currently R 1 million).

To determine whether you are required to be registered before the due date of 11 November 2016, do not hesitate to contact us.

8 thoughts on “Do all credit providers need to register?

  1. A company (juristic person) has entered into a substantial finance lease with a customer for the hire of plant. Does it need to register with the NCR? I’m confused by the exemptions: both this company’s turnover and assets exceed R1mil; therefore is it exempt from registration???

    1. Good Day

      Section 4 of the National Credit Act 34 of 2005 (“NCA”) provides for certain exceptions to NCA application– meaning that in some instances the NCA provisions will not apply to a particular situation. One of these is a credit agreement (that on the face of it meets the definition of a credit agreement in terms of the NCA) entered into by the two parties as “credit provider” and “consumer” if the consumer is (i) a juristic person and (ii) its 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 (currently R 1 million). It is therefore the consumer’s annual turnover and asset value that will need to be taken into consideration to determine whether the credit provider will need to register with the NCR or not.

      If you require any further information you can get in touch with our Regulatory team directly by emailing Jana van Zyl at jana@dommisseattorneys.co.za

      Regards
      The Dommisse Attorneys Team

  2. Hi, how long does the process for registration take and can you start your business while the registration is in process and not finalized yet?

    1. Dear Louise, thanks for your query. A credit registration application can take anywhere between approximately 9 to 12 weeks’ to be approved, subject to all the information being accurate on the date of the submission to the NCR, but this is not guaranteed. Further to this, you may be able to start with your business if you have already completed your registration application to the NCR and is awaiting a determination on that application. In this regard, please note that we offer a service to assist with this registration. Louw Bothma from our offices will be sending the required information to you.

  3. Good day. I would like to start a rent to own company for vehicles and want to know if I need to register for this? What is the procedure to be taken if I need to register?
    Regards

    1. Good day

      Thank you for your comment. We recommend that you contact the Financial Services Board (“FSB”) directly for assistance at 0800 11 04 43. Alternatively, if you require a more in-depth analysis of your proposed business model, you are welcome to contact us to arrange a consultation.

      Kind Regards

      The Dommisse Attorneys team

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