The National Credit Act was implemented on the first of June 2007 since the government deemed it necessary to help over-indebted consumers and to regulate debt provision. The government saw it fit to implement this Act due to reckless lending by the lenders which in turn resulted in over-indebtedness. And in a way, it did help the country avoid some major economic crisis that have hit in the past. This allowed Africa, according to some people, to grow in a forward direction.
Credit is not properly lent if:
- The lender did not educate the consumer regarding the laws and process with regards to lending.
- The lender, with knowledge indicating that the consumer did not fully understand the terms on the credit agreement, still allowed a loan to be issued.
- The lender, knowing that if the consumer enters into the agreement he/she will have a very high risk of becoming over-indebted, still continues with the agreement.
Over-indebtedness happens when:
- When you no longer have the funds and means available to pay your debt in a timely manner and to satisfy your obligations on the agreement.
So how exactly can the NCA help?
The first thing you need to know is that the people of South Africa rely on credit to pretty much pay for almost everything. The problem is, due to lack of education regarding making a loan, most of these lenders fall into the trap of lending an average amount while paying a great deal of money due to interest. And if loans aren’t paid by a majority of borrowers the effect is that the interest rates go up instead of down. So the goal of NCA is to go to the root of the problem which is reckless lending while also helping those already in debt. The NCA helps the people in three ways.
First, the lenders are now required to inform the consumers of any fine print attached to the agreement. The consumer must be told how much the interest rate is and what additional charges will be placed on the purchased item. They must also inform and educate the lenders in terms of the cost, risks, and obligations involved in the proposed credit agreement. This allows the consumers to make informed decisions when it comes to loans.
Second, lenders are now required to decline applications if they deem it necessary. They are obligated to do the needed credit check before they approve any loan. This means that you no longer need to worry about being over-indebted in the future since this allows you to know what your current standing is and gives you knowledge regarding what to do in order to have a loan approved. If you do get declined then don’t worry, there are still a other ways to get a loan. You can asks more information from the lender and asks what your other options are in terms of making a loan.
Third, credit limits are no longer automatically increased. You no longer need to worry about having your limit increased without your authorization. This was one of the reasons why so many consumers had a very high debt.