Name Three Ways In Which The Credit Agreements Act Provides Protection To A Credit Receiver

A credit provider can only go to court to enforce a credit agreement if SASFA, an association of SME finance companies, has recently been established due to the rapid growth of the SME finance market in South Africa. The main objective of the association is to promote the creation of a self-regulating inter-professional association and industry standards in order to ensure fair treatment of SME customers and to preserve the reputation and sustainability of the unregulated financial sector of SMEs. [5] SaSFA`s Board of Directors is composed of representatives of SME finance companies, namely Bridgement, Lulalend, Merchant Capital, Transaction Capital Business Solutions and Retail Company. It has been argued that consumers are often responsible for allowing themselves to be over-indebted by recklessly borrowing too much money or buying too much on credit. This is usually the result of economic distress and a lack of understanding of the difficulties encountered in repaying or repaying their debts. However, credit providers are often responsible for ruthlessly giving too much credit to consumers who cannot afford to pay off their debts. One of the main objectives of the law is to combat over-indebtedness and ruthless credit. Sections 78 to 88 of the Act contain detailed, extensive and extremely important provisions in this regard. Until 1 June 2007, the Usury Act (now repealed by the National Credit Act) provided limit values for interest rates that credit providers could calculate. Until that date, the maximum interest rate was twenty percent per annum for all credit agreements up to R10,000 and seventeen percent per year for credit agreements above R10,000. However, registered micro-consumers were exempted from the Usury Act from 1992, meaning they were allowed to calculate the interest rates they wanted.

This has led to exorbitant interest rates, with microcreditors typically calculating thirty percent per month (or 360 percent per year) – eighteen times higher than the 20 percent per year limit for other loans. Due to the huge profits that microcreditors have been able to make, the sector has slipped and grown rapidly from year to year. For example, in the three years between September 2003 and August 2006, industry disbursements more than doubled. The sector has grown at an average of more than 30% per year. In the twelve months to the end of August 2006, the total marginal value of loans disbursed in the registered microfinance sector exceeded R30,000,000,000. It will be extremely difficult for consumers to find the money to pay the introductory fees in advance when they borrow, precisely because they need cash. Most lenders will therefore not be able to afford to pay the introductory fees when borrowing, especially in the case of very bad borrowing for consumption purposes. These people will therefore be forced to capitalize and repay the initiation fees, probably at the same number of payments as the initial loan and at the same interest rate as the initial loan. The result will be that the actual cost of monthly credit will increase. A contract is a credit agreement, if it provides for a deferral of payment or a delay in payment, and when fees or interest are levied for the deferral of payment. The law does not require that a credit agreement be signed in writing and signed by both parties, although this is implicit in the entire law.

A credit agreement may be a credit facility, a credit transaction or a credit guarantee (or a combination thereof). . . . .