What the parties don’t keep in mind, however, is that this agreement between the parties constitutes a credit transaction as defined in the National Credit Act (hereinafter called the Act) and that in certain circumstances the seller will have to register as a credit provider in terms of the Act.
1.The Act will apply to all written credit agreements between parties dealing at arm’s length. This is probably to curb underhand dealings between family members at the peril of other third parties.
2.Arm’s length transactions are not defined in the Act but they exclude, for example, transactions between family members who are dependent or co-dependent on each other and any arrangement where each party is not independent of the other and does not strive to obtain the utmost possible advantage out of the transaction.
3.A large agreement (i.e. more than R250 000, such as a mortgage) is entered into with a juristic person whose asset value or turnover is less than R1m.
2. A credit transaction does not necessarily require interest or fees to be paid. An instalment agreement would suffice to qualify as a credit transaction.
3. An installment agreement is defined and relates only to the sale of movable property.
4. A credit transaction also includes any other agreement where payment of an amount owed is deferred and interest or fees are charged.
A mortgage agreement qualifies as a credit transaction [Section 8(4)(d)] and the importance is that mortgage is defined in the Act as a pledge of immovable property that serves as security for a mortgage agreement. Mortgage agreement is also defined as a credit agreement secured by a pledge of immovable property.
3.All the purported rights of the credit provider under the credit agreement to recover any money paid or goods delivered to, or on behalf of the purchaser in terms of the agreement, are either cancelled or forfeited to the State.
Sellers, be careful when you enter into these types of agreements, as non-compliance with the Act could be a costly exercise.