*Case study: personal loans*
“I lent someone a sum of R80000 and then we made an agreement in black and white and there were some initial payments as per our agreement but then from the 26 of April he stopped paying me.
So I just want to know what should I do now?”
Mc Naught and Co says –
To protect borrowers from unscrupulous loan sharks, the National Credit Act now governs loans and a lender may need to be a registered credit provider and the loan agreement needs to be registered in terms of the law. There are certain obligations a credit provider also needs to comply with, such as doing an analysis of the borrower’s ability to repay such a loan before the funds are handed over.
Loans that do not provide for any interest or costs to be collected are exempt from the Act, but that means you can’t collect any interest or costs from a person you have lent money to if you are not a registered credit provider and the loan has not been registered.
Even private loans that provide for repayment and interest are classed as credit transactions in terms of Section 8 (4) of the National Credit Act (except to family). If the loan document is deemed to be a credit agreement, the lender is deemed to be a credit provider and the loan needs to be registered in terms of Section 69 (2) of the National Credit Act, even if the lender is not required to register as a credit provider. A credit provider needs to have done a prior assessment of the borrower’s ability to repay the loan.
The bottom line is don’t go lending someone money and expect it to be repaid if you haven’t consulted a lawyer and have proper documentation in place that protects both lender and borrower before you give the money.
What is allowed is for a borrower to sign an Acknowledgment of Debt confirming that funds have been lent to him and that he will repay the debt and provided no interest or costs are claimed in the document, this will be legal and enforceable if the borrower does not comply with the repayment stipulations.
In the case in question, the document of the lender needs to be checked out for compliance in terms of the Act and if it qualifies as a document exempt from the provisions of the Act, a Summons can be issued for repayment from the defaulting borrower.
A loan and credit agreement declared to have been made recklessly in terms of Sections 80 – 83 of the Act can be suspended and the borrower will not need to repay the loan, as is also the case if a credit agreement is found to be unlawful for instance where the lender ought to have registered under the Act.
# The National Credit Act covers some 116 pages and this information is a brief summary and the Act as a whole needs to be consulted in relation to the exact facts of each case in question.#