Credit agreements concluded by credit providers that are required to register as such and have failed to register, in terms of Section 40(1) of the National Credit Act 34 of 2005 (”the NCA”), are unlawful, and a Court is required to declare such agreements void in terms of section 85 of the NCA.
In terms of Section 40(1) of the NCA, a person must 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 prescribed in terms of section 42 (1). Presently the threshold is R0.00.
An unregistered credit provider is barred from enforcing a loan repayment, this was reiterated in Blacher v Josephson A15/22) [2023] ZAWCHC 27[1]. The Court a quo raised two questions with regards to a loan advanced by the Respondent. Firstly, whether the Respondent was registered as a credit provider in terms of the NCA at the time of the conclusion of the loan agreement. Secondly, whether the Respondent had conducted a credit assessment, prior thereto.[2] The rationale behind these questions was that the loans constituted credit agreements in terms of the NCA, and as such, the Respondent was obliged to be registered as a credit provider with the National Credit Regulator at the time the loan was concluded, and to conduct a prior credit assessment of the Appellant. Accordingly, the objective is to determine whether the borrower is credit worthy.
In Friend v Sendal 2015 1 SA 395 (GP),[3] the Court held that the requirement to register as a credit provider in terms of the NCA was directed only at regular participants in the credit industry and that although a credit agreement may be consistent with section 8(4) (f) of the NCA, a credit provider is not obliged to register as a credit provider when doing a once off transaction.[4]
This was the legal position until overturned by the Supreme Court of Appeal (“SCA”) in Du Bruyn NO & others v Karsten (929/2017) [2018] ZASCA 143 (28 September 2018). The SCA held “that the requirement to register as a credit provider is applicable to all credit agreements once the prescribed threshold is reached, irrespective of whether the credit provider is involved in the credit industry and irrespective of whether the credit agreement is a once-off transaction”.[5]
Blacher v Josephson serves as a further warning to unregistered credit providers that failure to register as a credit provider as required by the NCA will render the credit agreement unlawful, and void by the Court. Consequently, a provider will be unable to enforce the terms of the agreement, and further, shall not have any claim, based on the said credit agreement for any amounts paid or credit extended.
However, a lender who is seeking to enforce a credit agreement could be able to claim in terms of section 89(5) of the NCA, which affords the Court the right to make an order that is just and equitable. The amount which the Court may grant would depend on numerous factors.
In addition, an unregistered credit provider may be able to seek a claim in terms of unjustified enrichment, as confirmed by the Constitutional Court in National Credit Regulator v Opperman and Others 2013 1 SA 1 (CC), [6]. This remedy is however more complicated than the statutory remedy provided by section 89(5) and more complicated than a breach of contract as there are several intricacies to consider. The extent of the claim and the date that the claim arises may also differ.
Accordingly, it is advisable for all credit providers to register as a credit provider. It is however worth mentioning that certain exceptions apply to the applicability of the NCA, such as where:
Daniel Treves: Director;
Kirshia Pillay: Candidate Attorney; and
Sive Dukada: Candidate Attorney.
[1] Blacher v Josephson (A15/22) [2023] ZAWCHC 27 (14 February 2023) (hereinafter Blacher).
[3] Friend v Sendal 2015 1 SA 395 (GP).
[6] National Credit Regulator v Opperman and Others 2013 1 SA 1 (CC)