Understanding The South African National Credit Act

Before you apply for credit, it’s important to understand the new National Credit Act, and its effect on consumers in South Africa.

The South African National Credit Act (NCA) has significantly affected the way that credit is granted and used in South Africa. For lenders and borrowers alike, it’s important to understand how the NCA works, because it affects every credit transaction that takes place in South Africa.

Because of the tighter lending conditions dictated by NCA, many consumers have regarded the legislation with scepticism, believing that it serves to thwart their attempts to access credit. However, this is a misperception. In fact, the NCA serves primarily to protect the consumer from excessive debt, provide greater transparency in lending, and enable consumers to make informed decisions about credit.

When you apply for a credit card, your application will be considered according to the terms laid down by the NCA. Below, we’ve unpacked the National Credit Act and the reasons for its implementation.

3 Things you need to know about the National Credit Act

1. The Act serves to protect you, the consumer, against irresponsible lending

This means that you’ll only qualify for credit that you can reasonably afford to repay. Credit will no longer be granted “recklessly”, meaning that, when you apply for a loan – be it a credit card, car loan or a bond – you’ll only qualify for the loan (or loan size) that you can afford to repay. This protects you against excessive debt and unmanageable repayments.

Lenders are now legally obliged to assess your application very carefully, by thoroughly examining your credit history, determining whether you’ll be able to repay the loan, providing you with a no-obligation pre-agreement and credit quote, and ensuring that you understand the terms and implications of the loan.

2. Underhanded credit practices have been outlawed
Remember the days when you were automatically given a store card, or sold a product or service, unless you specifically opted out of the offer? This is known as “negative option marketing”, and has been deemed illegal under the terms of the NCA.

In essence, practices that actively encourage consumers to extend or apply for credit are no longer allowed.

3. You have the right to full disclosure
Under the NCA, consumers have the right to full disclosure of credit terms, which means that interest rates, fees and other costs associated with their credit application must be disclosed. Furthermore, the NCA stipulates maximum interest rates, service fees and initiation costs applicable to each type of credit transaction. Misleading advertising, such as “guaranteed loans”, “no credit checks” or “free credit” have also been banned.

It’s still possible to qualify for credit in South Africa
While the NCA does lay down stricter condition for lending, it’s by no means there to stop lending altogether. If you are responsible in your borrowing, and require a quality South African credit card, you can compare credit cards online to see which will fit your lifestyle and pocket best.