The article below was written by Janine Will, Senior Associate in the Commercial Department of Garlicke & Bousfield Inc, and published in Commercial Law News.
The current legal requirement that only those credit providers that have a total principal debt owed to them, under all outstanding credit agreements, other than incidental credit agreements, exceeding R500,000 must register as a credit provider in terms of the National Credit Act is about to change.
With effect from 11 November 2016, the Minister has prescribed the new threshold as nil. In other words, every person who provides credit to another is required to register as a credit provider, no matter how much credit he or she has provided.
Registration as a credit provider is crucial because a credit agreement which is concluded by a credit provider who is not registered as such, but is required to be so registered, is an unlawful agreement, with two limited exceptions. The agreement would be lawful if:
- at the time the credit agreement was concluded, or within 30 days after that time, the credit provider had applied for registration and was awaiting a determination of that application
- at the time the credit agreement was concluded, the credit provider held a valid clearance certificate issued by the National Credit Regulator
If the credit agreement is unlawful, then, despite any other legislation or any provision in an agreement to the contrary, a court is required to make a just and equitable order including a directive that the credit agreement is void as from the date on which the agreement was concluded.
