NATIONAL CREDIT ACT – KNOW YOUR RIGHTS
Consumers in South Africa are offered a wide range of protection in the form of legislated consumer rights. These rights have been developed and applied over the years into the framework that we know today.
“Over the years, this has been vital; particularly in the financial services sector,” says Shaun Rademeyer, CEO of MultiNET Home Loans. “Despite these rights, over the past few years, we have seen that there are major corporates and scam artists that are very willing to take advantage of the public without a second thought.”
What rights do consumers have?
All bank and mortgage originator customers have a right to expect to be treated fairly, reasonably, and ethically by their bank or mortgage provider. This right is reinforced by the banks and mortgage originators undertaking not to unfairly discriminate any customer on grounds such as marital status, gender, age or race in the provision of financial services or in the quality (and terms) of the services that are offered to the consumer.
“However, it is important to note that not all discrimination is unfair,” says Rademeyer. Banks and mortgage originators have special products or service offerings that are specifically designed for members of a target market group.
Consumers’ right to apply for credit
In terms of the National Credit Act, all adult natural persons, and every juristic person or association of persons, has the right to apply for credit.
However, the Act also recognises the banks’ right to refuse to enter into an agreement with a consumer provided that the reasons for the refusal are reasonable and consistent with the law and the banks’ risk appetite.
For example, the bank would be within its right to decline any application for a home loan based on lack of affordability.
Right to negotiate for a more favourable interest rate
Many customers dispute the interest rate charged on their loan accounts and feel that it is too high. Often, a challenge faced in these matters is that the consumers lodge their complaints after they have signed acceptance of the terms and conditions of their agreements with the credit provider.
“Unfortunately, unless the interest rate applied by the bank is not in line with the prescribed rate per the NCA, the consumer will be bound by the agreement and there is no way to force the bank/loan provider to renegotiate a better, more acceptable, rate for the customer, simply because the terms no longer suit them,” says Rademeyer.
Shaun reminded consumers that they have the right to negotiate with credit providers, and preferably shop around, especially if the interest rate that is being offered is not in line with what the consumer deems fair.
“Consumers do not have to accept the first offer they receive from credit providers. Before acceptance of an offer by the consumer, there is no legally binding agreement. Therefore, consumers have a right to consider and compare the offer made considering the term, interest rate offered, the instalment payable and the total amount repayable,” says Rademeyer.
Shaun adds that after considering the full terms of the agreement, consumers have the right to refuse the interest rate that has been offered and negotiate for a better rate.
“Furthermore, consumers are also not forced to accept the amount initially requested and offered by a credit provider. They have the right to request for the amount to be reduced and be in line with what they believe will be affordable for their pockets,” says Rademeyer.
Consumer Rights regarding “set off” as per Section 124 of the National Credit Act
Previously, it was acceptable for banks, without prior notice, to transfer monies out of a customer’s account that was in credit (such as a cheque account) and pay the funds into an account that was in default (such as a home loan account or credit card), with the aim to reduce the customer’s indebtedness to the bank. This principle is referred to as “set off.”
Section 124 of the National Credit Act (NCA) regulates set off in respect of credit agreements regulated by the NCA. The aim of Section 124 is to safeguard the rights of consumers in the set off process by giving the consumer a say in the way in which the set off is applied.
The aim of Section 124 is to prevent banks and loan providers from having the autonomy to decide to debit a consumer’s account with an amount the bank unilaterally deems appropriate, without prior consultation with the consumer. The current legal position is that for any set off to be lawful, it must be conducted in line with the provisions of Section 124.
“This means that the consumer’s written prior authorisation must be obtained, and, in the authorisation, there must be an agreement as to the account to be debited, the amount to be debited as well as the date on which set off will be applied. Lastly, the credit provider/bank is required to provide a notice to the consumer before any set off is made,” says Rademeyer.
Some banks may still be applying common law set off in respect of credit agreements falling within the National Credit Act and it is important that consumers know about their rights when it comes to deductions from one account to pay another account.
Right to receive notice prior to the bank closing an account
The issue regarding the closure of bank accounts is currently topical and is receiving a lot of media attention. The current legal position is that the banks are allowed to terminate their relationship with consumers. The only requirements are that the bank must provide the consumer with a reasonable notice of the termination (30 days or more depending on the number of accounts that the consumer has with the bank) as well as the reasons for the termination.
This position is also regulated within the Conduct Standard for Banks. One of the most prevalent reasons banks close/block access to the accounts is that customer accounts are being used or are involved in confirmed criminal activities.