Abstract

The legislature has repeatedly been criticised for the anything but clear wording in the National Credit Act 34 of 2005. In November 2016, an amendment to the threshold values applicable to the registration requirement of credit providers under section 40(1) of the act came into effect when the minister of trade and industry lowered the threshold value that had been applicable for the first decade since the act was passed, from the initial R500 000 to nil. Considering the effect of inflation in the preceding decade, this change was far-reaching.
The act does provide in section 42(3)(a) for an indefinite grace period for businesses that were already operating in the credit industry before the amendment became effective but that were not previously required to register because the threshold of R500 000 was not exceeded in their business. The concerned businesses that had applied for registration before the deadline of November 2016 were allowed to continue with their credit business until a decision on the registration has been taken by the registration authority.
Possibly, the relevant section may be construed in such a way as to do justice to the intention of the legislature to be able to distinguish for purposes of the grace period between potentially law-abiding legal subjects who dutifully applied for registration and the opportunists who did not. The former are rewarded with being allowed to carry on their business while the latter will be met with the full power of the law. Section 42(3)(a) has not yet been scrutinised in any reported case law. In the present judgment, it is interpreted in such a way that no distinction is made between a potentially law-abiding legal subject and the opportunists, as both are lumped together. This confirms what is already established: “That the Act is not a model of clarity is an accepted fact, as has been pointed out by other courts, including this Court. It is an understatement to say that its interpretation is a daunting exercise” (par 44 of this judgment).
In all fairness, however, the judgment must be commended for the fact that a clear line is drawn through the well-established misrepresentations of many commentators on the act who wrongly wished to infer from the wording of the definition section that pawnbrokers under the act may retain all the proceeds of the sales in execution because the definition states: “the party that advanced the money or granted the credit is entitled on expiry of a defined period to sell the goods and retain all the proceeds of the sale” irrespective of the actual extent of the outstanding performance obligation of the credit debtor for which the pledge served as security. In reality the defining section 1 continues: “in settlement of the consumer’s obligations under the agreement” and consequently there is no difference in this regard with the legal position under the Roman or Roman-Dutch common law governed by the lex commissoria as applicable to all secured claims secured by a limited real right of security. The perceived difference in the act in this regard with other so-called “secured loans” does not exist.