Before the institution of the National Credit Act of South Africa, entering into credit agreements could be a far more dangerous and murky situation for consumers. With the institution of the Credit Act of South Africa, consumers are now more aware of their rights, and are in a far better position to understand their financial situation.
The National Credit Act (NCA) came into effect on 1 June 2007 and changed the entire credit landscape in South Africa. Suddenly responsibilities shifted and it was no longer the consumer who had to ensure that they do not incur debt recklessly; the NCA turned it around so that creditors were the ones who should not lend recklessly to consumers who cannot afford repayment on the debts. In terms of the National Credit Act of South Africa, only credit agreements that are entered into after the date of commencement are subject to the act, but certain sections to apply to older debts.
In terms of the National Credit Act of South Africa, credit providers should investigate whether or not a consumer is credit worthy, and if not, they should reject the application and inform the consumer of the reason for the rejection. They should also explain every aspect of the debt agreement to the consumer and ensure that they understand the consequences thereof.
The act also aims to prevent unfair advertising of credit services and to establish a regulator for all credit practices in South Africa. This regulator is known as National Debt Regulator, or NCR.
The most important aspect of the act is that it created rights that consumers did not enjoy before its promulgation. These rights include the right to apply for credit, to be told why a credit application was denied, to be granted fair credit, as well as the right to see your credit score and dispute it.