The National Credit Act of South Africa has changed the economic landscape for consumers, making it easier for them to understand their financial situation, understand their rights and also to defend their rights as consumers. Though this alone would have been a marked improvement, the Credit Act of South Africa was not only instituted to explain consumer rights.
Although the National Credit Act does a lot for South African consumers, it has also had marked effect on the way that credit institutions conduct business. The act has redefined the way that creditors can lend money, as well as curbing uncouth debt collection practices on their part.
The National Credit Act of South Africa now prevents creditors from lending recklessly – in order to approve a credit application, the creditor must run a credit check on the consumer and ensure that they can afford the debt. This means that creditors cannot grant credit on a whim, and must check off certain prerequisites before approving an application.
Secondly, creditors have a duty to explain the credit agreement to consumers in easy and plain language, ensuring the consumer is informed of every loophole, potential payment, as well as the highest possible repayment amount.
Creditors have a duty to inform consumers of changes in interest rates, fees or charges, meaning that consumers will have the time to readjust their budgets when this happens.
There is process that creditors have to follow should a consumer be in default, and if this process is not followed, consumer rights will be violated. In effect The National Credit Act of South Africa has created a safer space for consumers to incur debt in, whilst at the same time putting an end to reckless lending and unfair credit practices from creditors. Nowadays creditors have limits to work with.