Do you perhaps render accounts to consumers stipulating a date for payment, where after a fee, charge or interest will be payable? Or do you sometimes offer a lower price, should the consumer pay on or before a specified date, where after the consumer will have to pay a higher price? If so, you might wish to follow this discussion with some interest, if you will pardon the pun.
The National Credit Act 34 of 2005 (hereinafter referred to as “the Act”) defines an incidental credit agreement as an agreement for the provision of goods or services over a period of time in terms of which agreement a fee, charge or interest becomes payable if the amount charged isn’t paid before a certain date or a lower price applies if the account is paid before a certain date after which a higher price applies.
The difference between an incidental credit agreement and a credit agreement was determined by the court in MNV Textiles (Pty) Ltd v Chalain Spareinves 14 CC 2010 (6) SA 173 (KZD). The court held that the main difference between a credit facility and an incidental credit agreement is that a fee, charge or interest only becomes payable in terms of an incidental credit agreement if the consumer does not pay his debt on the agreed date and interest is only levied to compensate the credit provider for late payment.
When the credit provider charges a late-payment fee or interest an incidental agreement is deemed to be concluded twenty business days after the date on which the first late-payment fee or interest was charged. By way of example, a supplier, renders an account for services rendered which stipulates that the account is payable by 23 June 2014, failing which a fee, charge or interest will be levied against the outstanding amount. The consumer, defaults with his payment and the supplier charges interest on the outstanding amount from 24 June 2014. Twenty business days after 24 June 2014 they are deemed to have concluded an incidental credit agreement. As such the date of conclusion of the incidental credit agreement is 23 July 2014 as the Act determines that the first date on which a fee, charge or interest is charged is excluded from the calculation.
If you, as a credit provider, only supply incidental credit you are not required to register as a credit provider. However, should you as a credit provider supply both incidental and credit agreements the incidental credit agreements will not be taken into consideration for the purposes of registration requirements as determined by Section 40 of the Act.
The Minister, in terms of Section 103 of the Act, prescribes the interest rates which can be charged in terms of an incidental credit agreement. The current interest rate is 2% per month which accumulates to 24% per annum which can be charged on default payments within an incidental credit agreement.
The Act determines that certain provisions of the Act does not apply to incidental credit agreements, however Section 129 and 130 of the National Credit Act still applies to incidental credit agreements and as such, should you, as a credit provider be desirous of enforcing the incidental credit agreement a Section 129 read together with Section 130 notice will have to be issued before legal proceedings can be instituted.
In summary, the supplier which only supplies incidental credit need not be registered as a credit provider. However, as it is deemed that an incidental credit agreement is concluded twenty business days after the first date on which interest is charged on the outstanding amount, the supplier desirous of enforcing the incidental credit agreement through legal proceedings, will have to comply with Sections 129 and 130 of the Act.