A recent judgment has clarified how fees in separate agreements are handled under the National Credit Act (NCA), setting a new precedent.
The judgment handed down in National Credit Regulator v Stelland Finansies Trust & Another in June updates the regulatory landscape set by earlier cases, including the older Barko v National Credit Regulator case.
In the Stelland case, the National Consumer Tribunal examined whether the fees charged by Intecon, a service provider with a separate agreement from Stelland, the credit provider, violated the NCA.
Intecon provided a service that facilitated consumer payments to Stelland for their credit agreements, charging fees for this service. To provide some context, consumers seeking short-term loans from Stelland would enter an agreement outlining the loan and repayment terms. If a consumer opted to settle payments through electronic debit orders, they would enter a separate agreement with Intecon, which facilitated these payments. As part of this process, clients signed promissory notes in favour of Intecon, to ensure payment for its service.
The core issue was whether Stelland violated section 91 of the NCA by directly or indirectly requiring or inducing consumers to enter supplementary agreements, such as the promissory notes, which contained provisions that would be unlawful if included in the credit agreement. Additionally, there was concern that the combined fees from Stelland and Intecon could exceed the maximum service fee allowed under the NCA.
Intecon and Stelland contended that the agreement between Intecon and the consumer was voluntary, fell outside the NCA’s provisions, and did not constitute a service fee as defined by the NCA that is charged by the credit provider for maintaining a credit agreement.
They argued that Intecon’s fee was simply for facilitating payments, not for routine credit administration. Moreover, they maintained that consumers voluntarily opted into the ALLPS (Authenticated Early Debit Order Payment System) system, authorising the deduction of additional fees, including the promissory note fee, which was separate from any fees, interest, or charges specified by the credit provider.
However, the National Credit Regulator (NCR) argued that Stelland failed to disclose this additional fee in the credit agreement, thereby violating section 91(2) of the NCA. The NCR asserted that Stelland was obligated to disclose the total cost of the proposed credit, including Intecon’s facilitation fees. The NCR claimed these additional fees breached Regulation 44, because they resulted in charges to the consumer exceeding the allowable fees under the NCA.
The Tribunal ruled that because Intecon’s fees were governed by a separate agreement with consumers and did not impact Stelland’s regulated service fees, they did not breach the NCA’s fee cap.
Three key takeaways
According to Anne-Carien du Plooy, an NCA compliance officer at Moonstone Compliance and Risk Management, this judgment clarifies that fees under separate agreements between a service provider and consumers are not inherently illegal, as long as they remain distinct from the fees regulated under the credit provider’s agreement.
Du Plooy explains that, in contrast, the earlier Barko case involved a credit provider directly imposing fees on consumers. The case also included a secondary agreement between Barko and a service provider.
“The critical issue was that the service provider’s fees, charged to Barko, were added to the service fee charged to consumers by Barko. This resulted in the total cost of credit, including both Barko’s and the service provider’s fees, exceeding the NCA’s regulatory limits, thereby violating the fee cap.”
Du Plooy highlights three key takeaways from the judgment, the first being the legal standing of separate agreements.
“The Stelland judgment clarifies that fees governed by separate agreements with service providers, like Intecon, are not automatically considered unlawful under the NCA, provided they do not affect the credit provider’s regulated service fees cap being exceeded.”
She adds that the decision highlights that separate agreements, which are distinct from the credit provider’s fees, do not violate the NCA if managed correctly.
The second is fee integration.
Du Plooy explains that unlike the Barko case, which required all fees to fall within the NCA’s fee cap, the Stelland ruling allows for separate agreements to handle additional costs legally, as long as these fees are separate from the credit provider’s regulated service fees.
“This provides more flexibility in fee structuring,” she says.
A third key highlight is that the Stelland case also addressed the issue of inducement, noting that while offering separate agreements to consumers is allowed, it must be done with full transparency.
“The Stelland judgment updates the framework established by Barko, offering a refined understanding of how separate agreements and additional fees should be managed under the NCA,” Du Plooy says.
For further guidance on aligning with these regulations, contact Moonstone Compliance’s NCA team by emailing NCA@moonstonecompliance.co.za
To find out of more about Moonstone’s NCA compliance services, go to www.moonstonecompliance.co.za > Our services
