Only credit providers of a certain size must register with the National Credit Regulator. Credit providers who have less than 100 agreements in their book or whose total outstanding credit agreements does not exceed 500 000 do not have to register. However the requirement not to register does not exempt such entities from the application of the Act. If a company is required to register and they do not register, all credit agreements they enter into can be declared unlawful.
In Townships a “Mashonisa” is usually an individual that gives small loans to people in the community. Most of the time, they do not have to register with the National Credit Regulator because of their small size but they are still required to comply with the law. In such cases the consumer must ensure that they are charged legal interest rates and fees and that illegal collection methods such as the retention on ID Books, pin codes and bank cards are not used.”
Under the NCA, the maximum amount of interest, based on the current repo rate, that a credit provider or “Mashonisa” can charge on an unsecured loan is 31% per year. For short term credit agreements the permitted interest rate is at 5% per month. This is for amounts less than R8000 and a term not longer than six months. This equals a rate of 60% per year.
The NDMA advises consumers to shop around and get different quotes as not all lenders charge the maximum amount of interest allowed under the Act. It is also advisable that consumers request a quote to see the cost and other terms and conditions of the loan.
Key questions to ask your Mashonisa:
- How much interest will be charged over the term of the agreement and is it according to the National Credit Act?
- Are there any other fees and charges that they are going to add?
- How will the instalments be paid and on what dates?
- Is there credit life insurance, how much does it cost per product and what are its benefits? How does it compare with other products in the market? What is your right to take out your own insurance policy and not accept the one suggested by the credit provider?
- Exactly what total amount should be repaid per month and for how long?
- Will you be required to sign anything and will you be given a copy?
- What process will be followed if you cannot pay and who should you contact should you experience payment difficulties?
- Who should you report them to if there is a disagreement?
- How will your personal details, account information and payment behaviour be shared with the credit bureau and what are your rights and responsibilities in this regard?
Consumers who need more information can call the NDMA Responsible Credit Helpline on 086 111 6362 or SMS “Soul City” at 44238. The SMS is R1.50.
