Business Maverick Analysis: Who has to register as a credit provider under the National Credit Act?

One of the respects in which the NCA has created confusion relates to the obligation to register as a credit provider. Section 40 of the NCA provides that a person must apply to be registered as a credit provider if the total principal debt owed to that credit provider under all outstanding credit agreements exceeds the prescribed threshold – which has been nil since 11 May 2016, and prior to that was R500,000.

This obviously covers many transactions between friends, family members and business associates in circumstances where the lender or seller would not be a registered credit provider – with draconian and probably unintended results. The consequence of failure to register is dire: a credit agreement entered into by a credit provider who is required to be registered but who is not, is an unlawful agreement and is void.

The court reasoned that a credit provider who is party only to a single credit agreement is not required to register, notwithstanding that the total debt owed under that agreement exceeds the prescribed threshold. In addition to raising logical inconsistencies ,is both a misreading of the NCA and an example of judicial law-making: the proviso that a credit provider be a “participant in the credit market” for the registration requirement to apply is not found in the NCA.

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