New NCA regulations

The last year has certainly stirred the credit industry, with consumers and credit providers struggling to keep abreast of latest developments, dos and don’ts. Various credit providers have also been called upon to defend their credit practices, by the National Credit Regulator and consumers alike.

The National Credit Amendment Act was assented to on 19 May 2014, and new draft regulations were published on 1 August 2014, both of which contain significant changes to credit law as we know it, with new procedures, factors and requirements in general.

On Friday 13 March 2015, the mentioned Amendment Act and regulations were finally announced to be effective with immediate effect. The regulations however, contain numerous changes to the draft that saw the light in August last year, but the spirit and intention thereof remains. These regulations, in contrast with previous (2013) guidelines, for example require consumers to provide credit providers with authentic documentation to perform affordability assessments. Affordability assessment processes are also regulated more strictly, with defined items to be included in the assessment of income and expenditure. Reference is also made therein to obtain proof of income, even if a consumer does not receive formal payslips.

It is expected that most credit providers’ business models will have to change in line with these new requirements on an urgent basis.

For a detailed discussion on how these amendments may impact on you or your business, kindly contact our offices.

Protection of personal information act: Effective date

The Protection of Personal Information Act has been a long time coming. And since its promulgation in 2013, various organisations have embarked on projects to bring their operations – and the way in which they handle personal information, in line with POPI’s requirements and conditions.

Once this seemingly daunting task has been started, we have seen that many organisations realise that POPI is not that “unfair” to responsible parties (organisations or persons who collect, process (read “use”) and store personal information) after all – it actually comes down to good business practices that can have a very positive overall effect on the controls and processes of the company.

Tackling a compliance project like a POPI compliance project can however take a significant amount of time, require dedicated resources and will also require the necessary guidance to fully understand the POPI impact on the organisations – especially with regards to obligations that can pose large risks if neglected. In newsletters to follow, we will unpack these in more detail. So watch this space for the first information sheet of our “POPI series” next month.

There have been some rumours in different industries that POPI’s effective date is imminent, which have caused an anxious state for many organisations that suddenly realised that their current non-compliance needs to be addressed. Although we believe that it is unlikely that the commencement date will be published in the near future (please note that we have been wrong before, and this is merely our view, based on all the steps that we believe should probably take place first – to ensure effective enforcement), we seriously advise organisations who have not started their projects to commence without any further delays. Companies who started their projects but somehow lost a bit of steam (granted, it is rather difficult to keep the momentum going without a fixed date) should pick up on it again and finish the good work that it started!

Remember that there is NO quick fix for POPI compliance. Any project will also require training to really be successful. Depending on the size of your organisation, it may take years to complete a successful project.

Currently the only POPI sections already in force, are those relating to the administrative side and that allow for the Information Regulator to be set up. The Information Regulator will comprise of 4 members and 1 chairperson. After the Information Regulator has been appointed, it will first need to create its administration and staff, in order to give effect to and enforce POPI rights.

Lastly, the Regulations will also need to be created.

To conclude – there is no real indication as to when the commencement date will be published. Organisations will have a one year period from the commencement date to become compliant. If you have not started your project, we suggest that you start without any further delay.

Prescribed rate of interest lowered to 9%

The Prescribed Rate of Interest Act, No. 55 of 1975 (“the Act”) prescribes the maximum (and minimum) interest rate that a creditor can claim on interest-bearing debts in instances where an applicable interest rate has not been agreed by the parties contractually, or is not regulated by another law, or is not governed by a trade custom.

Previously the prescribed interest rate was 15.5% per annum, and a typical example of where this would find application was a judgment debt where one of the prayers in a summons would typically include “interest at 15.5% per annum from date of judgment”. This prescribed interest rate of 15.5% has however been lowered to 9% with effect from 1 August 2014. This means that all interest-bearing debts that started to bear interest on or after 1 August 2014 and which fall within the ambit of the Act, will bear interest at 9%. The amendment to the interest rate will not apply retrospectively and the rate applicable to debts that started bearing interest before 1 August 2014 will remain at 15.5%.

So let’s look at situations where the rate of 9% per annum will apply: A typical example would be where parties agreed to a date of repayment for a specific amount of money, and the party under the obligation to pay the agreed amount by the agreed date, then fails to pay in terms of the agreement – meaning that the debtor is “in default” or in “mora”. Another example where this “mora interest” will also apply is where parties didn’t agree on a date for repayment, but one party has demanded repayment from the other – thus putting the other “in mora”.

As the interest so charged is simple interest, one cannot compound the interest annually (i.e charging interest on interest). The interest is simply calculated with regard to the original capital amount that was owed.

It is important to realise that this rate is a peremptory provision, which prescribes 9% (previously 15.5%) as both a minimum and a maximum, if the interest rate is not governed by other agreements or laws, and the debt was not intended to be interest-free. One must however remember that nothing prohibits parties from agreeing to a different rate contractually – provided that no other legislation regulates the specific agreement (an agreement in terms of the National Credit Act will be an example where another law regulates the applicable interest rate allowed).