The National Credit Act 34 of 2005 (NCA) has come to be known as a model of uncertainty as evidenced by decisions of the High Courts, the Supreme Court of Appeal and the Constitutional Court. In the case of Du Bruyn NO and others v Karstens (929/2017)  ZASCA 143 (hereafter referred to as ‘Du Bruyn’) the Supreme Court of Appeal (SCA) once again had to grapple with the interpretation of a section of the NCA.
The Du Bruyn case can be considered as a significant case in dealing with one of the most controversial question as to who has to register as a credit provider as per the NCA, particularly for individuals engaging in once off loans involving interest and/or charges .
Originally, section 40 of the NCA dealt with registration as a credit provider and provided, in its relevant part:
(1) ‘A person must apply as a credit provider if–
(a) that person, alone or in conjunction with any associated persons, is the credit
provider of at least 100 credit agreements, other than incidental credit agreements;
(b) the total principle debt owed to that credit provider under all the outstanding
agreements, other than incidental credit agreements, exceeds the threshold prescribed in terms of section 42(1).
(2) In determining whether a person is required to register as a credit provider –…
(3) A person who is required in terms of subsection (1) to be registered as a credit provider, but who is not so registered, must not offer, make available or extend credit, enter into a credit agreement or agree to do any of those things.
(4) A credit agreement entered into by a credit provider who is required to be registered in terms of subsection (1) but who is not so registered is an unlawful agreement and void to the extent provided for in section 89.’
In accordance with the above, section 42(1) of the NCA stated that ‘the Minister must, at intervals of not more than five years, determine the applicable threshold of not less than R500 000, for the purpose of determining whether a credit provider is required to register in terms of section 40(1).
Section 89(5)(a) deals with the consequences of not registering as a credit provider and read:
‘If a credit agreement is unlawful in terms of this section, despite any provision of common law, any other legislation or any provision of an agreement to the contrary, a court must order that-
(a) the credit agreement is void as from the date the agreement was entered into’
The controversial part of section 85(5) which had severe consequences was section 89(5)(c) of the NCA , which stated:
‘all the purported rights of the credit provider under that credit agreement to recover any money paid or goods delivered to, or on behalf of, the consumer in terms of that agreement are either-
(i) cancelled, unless the court concludes that doing so in the circumstances would unjustly enrich the consumer; or
(ii) forfeit to the State, if the court concludes that cancelling those rights in the circumstances would unjustly enrich the consumer’.
The effect of section 89(5)(c) of the NCA was that any claim for the return of money in terms where the creditor was not registered at the time of the transaction would not only be a void credit agreement but also that the credit agreement is cancelled or forfeited to the state, resulting in the credit provider having no claim. The case of Friend v Sendal (A973/2010, 24425/2009)  ZAGPPHC 162 (hereafter referred to as ‘Friend’) dealt with an interpretation of section 40(1) of the NCA and found that the section was only making reference to regular participants in the credit industry and did not apply to those carrying out single transactions where credit was provided, regardless of the amount of credit provided. Accordingly, those carrying out single transactions where credit was provided was not required to be registered as a credit provider.
In the case of National Credit Regulator v Opperman and Others (CCT 34/12)  ZACC 29; 2013 (2) BCLR 170 (CC); 2013 (2) SA 1 (CC) (hereafter referred to as ‘Opperman’), which was decided subsequent to the Friend case, the Constitutional Court dealt with the controversial consequences of section 89(5)(c) of the NCA. In this, the Constitutional Court in Opperman argued that it would be an arbitrary deprivation of property for a credit provider to be unable to recover monies loaned in terms of an unlawful credit agreement and will hinder the right to a fair hearing in term of section 34 of the Constitution of the Republic of South Africa Act 108 of 1996 (hereafter referred to as the ‘Constitution’). Further, it will also be a breach of section 25(1) of the Constitution which states ‘no one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property’. Hence, Section 89(5)(c) was declared to be invalid in the Opperman case as it denied the credit provider the right to restitution of the capital sum lent.
Whilst the Constitutional Court in Opperman made an important ruling it never dealt directly with the issue of when registration as a credit provider is obligatory for a person who was not a regular participant in the credit industry . Therefore many question whether Opperman cannot amounted to an implied overruling of what was held in Friend, and suggested if anything, that the Consitutional Court accepted the ruling in Friend without any further examination.
From 13 March 2015 the National Credit Amendment Act 19 of 2014 (NCAA) amended various sections of the NCA.
On the issue of credit provider registrations, the amendments to the NCA were:
1. The deletion of Section 89(b) and (c) in accordance with the Opperman case leaving only Section 89(5)(a) untouched.
2. The amendment of Section 40(1) of the NCA wherein reference to 100 credit agreements was removed from the section.
Section 40(1)(b) of the NCA now reading:
‘A person must apply to be registered as a credit provider if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds the threshold prescribed in terms of s 42 (1)’.
3. The substitution of Section 42(1) which now reads:
‘The Minister, by notice in the Gazette, must determine a threshold for the purpose of determining whether a credit provider is required to be registered in terms of section 40(1)’.
The original regulation in terms of Section 42(1) kept the R 500 000.00 threshold but a subsequent amendment to the regulations reduced the amount to zero from 11 November 2016.
Nevertheless, even though the NCAA dealt with most of the controversial issues in the NCA there was still vagueness as to whether a person must register as a credit provider for partaking in a single transaction. The Du Bruyn case cleared up confusion on this issue.
The central issue in Du Bruyn was whether the Respondent was obliged to be registered as a credit provider at the time the agreements of sale were concluded. As at the time the agreements of sale was entered, the Respondent
had merely made application to be registered as a credit provider. The High Court explicitly confirmed that the sale agreements in question constituted agreements as per the NCA, thus, the SCA stated that the Respondent had to be registered as a credit provider at the time the sale agreements were concluded. Thus, the SCA concluded that the sale agreements were null and void and set them aside.
The case then clarified the abovementioned amendments in terms of the NCAA. Looking at section 40(1) , the SCA in Du Bruyn concluded that ‘the amount of credit provided is now the sole determining factor to ascertain whether a credit provider is obliged to register’.
Therefore, to sum up the requirements for registration as a credit provider in terms of the NCA:
1) All persons entering credit agreements which fall within the scope of the NCA, excluding those that only provide incidental credit (read the definition of incidental credit in Section 1 of the NCA), are required to be registered as credit providers:
i) Irrespective of whether they are only carrying out a single transaction; and
ii) Irrespective of whether they are a regular participant in the credit industry.
2) If a credit provider is obliged to be registered as such and nevertheless enters a credit agreement, the court must make a just and equitable order including but not limited to an order that the credit agreement is void as from the date the agreement was entered; and
3) the credit provider will have a right to recover the capital sum of the debt, thus, excluding interest, in terms of a claim for unjust enrichment.
4) However, as the Du Bruyn case illustrates, this does not exclude the void provision of section 89(5)(a) and this may have severe consequences as seen in the above case where effectively a sale of a business was set aside.