National Credit Act, 2005 (Act No. 34 of 2005)RegulationsNational Credit Regulations, 2006Chapter 3 : Consumer Credit PolicyPart D : Over-indebtedness, reckless lending and debt counselling23A. Criteria to conduct affordability assessment application |
| (1) | These Regulations apply to:— |
| (a) | current, prospective and joint consumers; |
| (b) | all credit providers; and |
| (c) | all credit agreements to which this Act applies, subject to Regulation 2. |
| (2) | These Regulations do not apply to a credit agreement in respect of which the consumer is a juristic person and do not apply to:— |
| (a) | a developmental credit agreement; |
| (b) | a school loan or a student loan; |
| (c) | a public interest credit agreement; |
| (d) | a pawn transaction; |
| (e) | an incidental credit agreement; |
| (f) | an emergency loan; |
| (g) | a temporary increase in the credit limit under a credit facility; |
| (h) | a unilateral credit limit increase in terms of sections 119(1)(c); 119(4); and 119(5) of the Act under a credit facility; |
| (i) | a pre-existing credit agreement in terms of Schedule 3 Item 4(2) of the Act; |
| (j) | any change to a credit agreement and/or any deferral or waiver of an amount under an existing credit agreement in accordance with section 95 of the Act; and |
| (k) | mortgage credit agreements that qualify for the Finance Linked Subsidy Programs developed by the Department of Human Settlements and credit advanced for housing that falls within the threshold set from time to time. |
Existing financial means and prospects
| (3) | A credit provider must take practicable steps to assess the consumer or joint consumer's discretionary income to determine whether the consumer has the financial means and prospects to pay the proposed credit instalments. |
| (4) | A credit provider must take practicable steps to validate gross income, in relation to:— |
| (a) | consumers that receive a salary from an employer: |
| (i) | latest three(3) payslips; or |
| (ii) | latest bank statements showing latest three(3) salary deposits; |
| (b) | consumers that do not receive a salary as contemplated in (a) above by requiring: |
| (i) | latest three(3) documented proof of income; or |
| (ii) | latest three(3) months bank statements; |
| (c) | consumers that are self-employed, informally employed or employed in a way through which they do not receive a payslip or proof of income as contemplated in (a) or (b) above by requiring: |
| (i) | latest three (3) months bank statements; or |
| (ii) | latest financial statements. |
| (5) | Where the consumer's monthly gross income shows material variance, the average gross income over the period of not less than three (3)pay periods preceding the credit application must be utilised. |
| (6) | The consumer must accurately disclose to the credit provider all financial obligations to enable the credit provider to conduct the affordability assessment. |
| (7) | The consumer must provide authentic documentation to the credit provider to enable the credit provider to conduct the affordability assessment. |
Existing financial obligations
| (8) | A credit provider must make a calculation of the consumer's existing financial means, prospects and obligations as envisaged in sections 78(3) and 81(2)(a)(iii) of the Act. |
| (9) | The credit provider must utilise the minimum expense norms table below, broken down by monthly gross income when calculating the existing financial obligations of consumers. |
| (10) | The methodology in the table requires for: |
| (a) | credit providers to ascertain gross income; |
| (b) | statutory deductions and minimum living expenses to be deducted to arrive at a net income, which must be allocated for payment of debt instalments; and |
| (c) | when existing debt obligations are taken into account, the credit provider must calculate discretionary income to enable the consumer to satisfy any new debt. |
Table 1 : Minimum Expense Norms
Minimum |
Maximum |
Minimum monthly Fixed Factor |
Monthly Fixed Factor = % of Income Above Band Minimum |
R0.00 |
R800.00 |
R0.00 |
100% |
R800.01 |
R6,250.00 |
R900.00 |
6.75% |
R6,250.01 |
R25,000.00 |
R1,167.88 |
9.00% |
R25,000.01 |
R50,000.00 |
R2,855.38 |
8.20% |
R50,000.01 |
Unlimited |
R4,905.38 |
6.75% |
| (11) | The credit provider may however on an exceptional basis, where justified, accept the consumer's declared minimum expenses which are lower than those set out in table 1 provided the questionnaire set out in the Schedule, as issued from time to time, is completed by the consumer or joint consumers. |
| (12) | When conducting the affordability assessment, the credit provider must:— |
| (a) | calculate the consumer's discretionary income; |
| (b) | take into account all monthly debt repayment obligations in terms of credit agreements as reflected on the consumer's credit profile held by a registered credit bureau; and |
| (c) | take into account maintenance obligations and other necessary expenses. |
Debt re-payment history as a Consumer under Credit Agreements
| (13) | A credit provider must take into account the consumer's debt repayment history as a consumer under credit agreements, as envisaged in section 81(2)(a) and must ensure that this requirement is performed:— |
| (a) | within seven(7)business days immediately prior to the initial approval of credit or the increasing of an existing credit limit; and |
| (b) | within fourteen (14) business days with regards to mortgages. |
Avoiding double counting in calculating the Discretionary Income
| (14) | Where a credit agreement is entered into on a substitutionary basis in order to settle off one or more existing credit agreement, a credit provider must:— |
| (a) | record that the credit being applied for is to replace other existing credit agreement/s; and |
| (b) | take practicable steps to ensure that such credit is properly used for such purposes. |
Disclosure of the credit cost multiple and the total cost of credit
| (15) | A credit provider must:— |
| (a) | disclose to the consumer the credit cost multiple and total cost of credit in the pre-agreement statement and quotation; |
| (b) | ensure that the credit cost multiple disclosures for credit facilities is based on one year of full utilisation up to the credit limit proposed; |
| (c) | ensure that the attention of the prospective consumer is drawn to the credit cost multiple and that the cost of credit as disclosed, is understood by the prospective consumer; |
| (d) | disclose a total cost of credit which includes but not limited to, the following items:— |
| (i) | the principal debt; |
| (ii) | interest; |
| (iii) | initiation fee, if any; |
| (iv) | service fee aggregated to the life of a loan; and |
| (v) | credit insurance aggregated to the life of a loan, as set out in section 106 of the Act. |
Outcome of Affordability Assessment
| (16) | A consumer who is aggrieved by the outcome of affordability assessment may at any time lodge a complaint in terms of section 134 or 136 with the credit provider for dispute resolution. |
| (17) | The credit provider must attempt to resolve the complaint within fourteen (14) business days after receiving notification of the complaint from the ombud in terms of section 134. |
| (18) | If the grievance is not addressed by the credit provider within the period referred to in sub-regulation 10A (15) above, the consumer can approach the National Credit Regulator. |
| (19) | The National Credit Regulator must resolve the complaint within seven (7) business days. |
| (20) | If the National Credit Regulator issues a notice of non-referral in response to a complaint, the consumer may refer the matter directly to the National Consumer Tribunal, subject to its rules of procedure. |
[Regulation 23A inserted by Notice No. R. 202, GG 38557 dated 13 March 2015