Credit guarantees in terms of section 8(5) of the National Credit Act 34 of 2005

Abstract

The South African credit reform journey was catapulted into motion by the Department of Trade and Industry’s policy framework for consumer credit. The policy’s objective was to establish a regulated credit market that would be effective in unlocking the nation’s economic potential while also addressing the structural legacy of racial exclusion and discrimination perpetuated against marginalised people in the country. Several factors and challenges revealed the necessity for a legislative framework aimed at protecting consumers participating within the credit market from over-indebtedness and preventing the granting of credit recklessly. The National Credit Act 34 of 2005 came into operation on 01 June 2007 and was the first consolidated piece of consumer protection legislation to regulate the South African consumer credit industry. The Act repealed the Credit Agreements Act 75 of 1980 and the Usury Act 73 of 1968. It recognises the imbalances that exist in consumer-creditor agreements and makes certain remedies available to consumers who have fallen victim to reckless credit lending practices. The Act aims to promote and advance the social and economic welfare of South Africans by promoting a fair, transparent, competitive, sustainable, responsible, efficient, effective, and accessible credit market. Although the NCA has been welcomed and hailed for creating some structure in the credit market, its effectiveness has been heavily criticised. With the growth and development of the global economy, creditors and consumers alike are looking to exploit economic opportunities and it goes without saying that procedural certainty becomes imperative in maintaining a good understanding of the consumer and creditor position in the credit agreement. Whilst credit may offer multiple opportunities for consumer protection, there exist multiple factors which could ultimately increase risks to both creditors and consumers.