Author: Gary Moore
Date: 15 June 2017
The National Credit Act, 2005[1] is an Act to[2] promote a non-discriminatory marketplace for access to consumer credit, provide for general regulation of consumer credit, prohibit certain unfair credit practices, promote responsible credit granting, prohibit reckless credit granting, regulate credit information, and establish norms and standards relating to consumer credit.[3]
The Act states[4] a credit provider must not unfairly discriminate[5] against any person[6] (relative to the treatment of any other consumer[7]) on a ground set out in the Constitution[8] or the Promotion of Equality and Prevention of Unfair Discrimination Act, 2000,[9] when—
Assessing that person’s ability to meet a proposed credit agreement’s obligations,
deciding whether to refuse his application to enter into a credit agreement,[10]
proposing[11] an agreement’s terms and conditions,
assessing[12] his compliance with the agreement,
exercising rights[13] under it,[14]
determining whether terminate[15] the agreement, or
determining whether to report[16] credit information.[17]
The Act states a court may draw an inference that a credit provider discriminated unfairly against a consumer[18] if the credit provider—
Refused to enter into a credit agreement with that consumer;
offered him a lower credit limit under a credit facility than he applied for,
reduced or refused to increase his credit limit under an existing facility; or
refused to renew an expiring credit card or similar renewable facility with the consumer.[19]
This means[20] a credit provider, by the mere act of refusing or reducing a consumer’s credit facility, is presumed to have discriminated unfairly against him.[21]
This reverse-onus provision[22] departs from the rule that he who alleges should prove.[23] The provision thus arguably violates a Rule of Law principle that laws should be just.[24] (However, though generally a reverse onus can violate the Rule of Law, the Constitution itself authorises this particular reverse onus, in providing that discrimination on a listed ground[25] is unfair unless it is established it is fair.[26])
The Act states that a credit agreement must not contain a clause if its general purpose or effect is to “defeat the purposes or policies of this Act.”[27] The precise meaning of this provision is unclear. It appears to prohibit arrangements to avoid the application of the Act.
In principle parties may legitimately arrange a transaction to avoid the operation of a statute.[28] Thus it was held the Act did not apply where a borrower[29] had issued to the lender[30] a blank cheque to be honoured by the borrower with a “profit share” stipulated by the borrower; the court found the loan and cheque were different agreements, and ruled the Act did not apply to the cheque, so the lender could sue on it without compliance with the Act.[31]
The Supreme Court of Appeal has pointed out “the notorious fact” that the Act is not a model of clarity and a significant number of its provisions are “fraught with ambiguity and vagueness” as attested by “the scores of court decisions interpreting its various provisions.”[32]
The Act’s provision that a credit agreement must not contain a clause if its general purpose or effect is to “defeat the purposes or policies of this Act”[33] is ambiguous and vague.
The provision violates the Rule of Law principle that the law should as far as possible be intelligible, clear and predictable.[34] (The Rule of Law as a constitutional principle requires that a citizen, before committing himself to any course of action, should be able to know in advance what are the legal consequences that will flow from it.[35] Justice[36] demands that a citizen[37] should be able to ascertain from the language of the Act the rules by which he is to be bound.[38] A norm cannot be regarded as a “law” unless formulated with sufficient precision to enable a person to foresee[39] the consequences a given action may entail.[40])
[1] National Credit Act 34 of 2005.
[2] Inter alia.
[3] National Credit Act, Long title.
[4] National Credit Act s 61(1)(a), (b) and (d)–(h).
[5] Directly or indirectly.
[6] Any natural person, juristic person or association of persons.
[7] Or prospective consumer.
[8] Constitution of the Republic of South Africa, 1996 s 9(3). The grounds are race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth.
[9] Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000. It prohibits inter alia the provision of inferior services to a racial group compared to those of another racial group, and conduct that unfairly limits access of women to finance and other resources: Ch 2 ss 7(d) and 8(e).
[10] Or to offer or enter into a credit agreement.
[11] Or agreeing.
[12] Or requiring.
[13] Of the credit provider.
[14] Or the Act or applicable provincial legislation.
[15] Or continue, enforce or seek judgment in respect of.
[16] Or reporting.
[17] Or records.
[18] Or prospective consumer.
[19] National Credit Act s 61(7)(b) read with s 62(1)(a)–(d).
[20] In effect.
[21] The credit provider would then bear the onus of disproving this presumption of unfair discrimination.
[22] National Credit Act s 61(7)(b) read with s 62(1)(a)–(d).
[23] If a person claims something from another in court, he should satisfy the court he is entitled to it. The plaintiff normally bears the burden of proof in a civil trial. Joubert, The Law of South Africa vol 18 3 ed, “Evidence” (CWH Schmidt and DT Zeffertt, rev DP van der Merwe), Sufficiency: Burden of proof: Incidence in civil trials, par 269.
[24] Justice includes the principle of fairness, which is echoed in the Rule of Law. “The Just Rule of Law.” N Cowdery QC and A Lipscomb (2000) 4 Southern Cross University Law Review 1 at 6.
Fairness determines the incidence of the burden of proof. Pillay v Krishna and Another 1946 AD 946 953 in fin to 954, citing Wigmore on Evidence para. 2486.
[25] Race, gender, disability, etc. See fn 8.
[26] Constitution s 9(5). This constitutionally-mandated reverse onus is an exception to the Constitution’s principle of the supremacy of the Rule of Law: Constitution s 1(c).
[27] National Credit Act s 90(2)(a)(i) read with s 90(1).
[28] A transaction is not rendered illegitimate by the mere fact that the parties intend to avoid the operation of the law, and that the selected course is as convenient in its result as another which would have brought them within it. Dadoo Ltd and others v Krugersdorp Municipal Council 1920 AD 530 548.
“Die ooreenkoms is geen verbloemde transaksie wat die partye bedink het om die Wet te omseil nie, maar ’n egte een wat hulle geregtig was om aan te gaan, ten einde hulle sake so te reël dat hulle buite die trefwydte van die Wet val.” Van Heerden v Pienaar [1987] 1 All SA 280 (A) 285.
[29] Involving a loan under Muslim custom.
[30] Who was not registered as a credit provider under the Act.
[31] Essa v Asmal 2012 (2) SA 576 (KZP) per Seegobin J. The decision was upheld on appeal. See fn 32.
[32] Asmal v Essa [2014] 3 All SA 115 (SCA) par [15] per Maya JA (Mpati P, Lewis and Shongwe JJA and Mathopo AJA concurring).
[33] National Credit Act s 90(2)(a)(i) read with s 90(1).
[34] Lord Bingham, “The Rule of Law.” Sixth Sir David Williams Lecture, 2006. Centre for Public Law, University of Cambridge: first sub-rule.
[35] Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591 (HL) 638 per Lord Diplock.
[36] The need for legal certainty.
[37] Or a competent lawyer advising him.
[38] Fothergill v Monarch Airlines Ltd [1980] 2 All ER 696 (HL) 705 per Lord Diplock.
[39] To a degree reasonable in the circumstances.
[40] Sunday Times v United Kingdom (1979) 2 European Court of Human Rights 245, 271, §49.
Gary Moore
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