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Reckless Credit:
Reckless credit is prohibited under the NCA & is defined as lending money to customers without first:
- Ensuring they have enough income to pay for it.
- Assessing a customer’s debt repayment history.
- Ensuring a customer understands the costs, risks & obligations of the Credit Agreement being entered into.
The Contract:
- Documents should be written in plain understandable language so that all customers can understand them.
- Customers will receive a Pre-Agreement Quote that will list all costs when borrowing money. This quote is valid for a minimum of 5 business days.
The Fee Structure:
The NCA specifies that customers may be required to pay the following as part of the principal debt:
- An initiation fee, connection fee, levies or charges.
- The cost of an extended warranty agreement.
- Service fees, default & collection fees.
- Taxes, license or registration fees.
- Credit insurance.
The NCA also lays down maximum initiation and service fees and interest rates charged, depending on the type of Credit Agreement.
Interest Rates and Charges:
The NCA states that:
- A credit provider may charge a customer an interest rate that varies during the term of the agreement, but only if the variation is linked to a reference rate.
- Customers should be notified in writing 5 days in advance of any changes to the interest rate or fees.
Insurance Matters:
Credit providers may require customers to take out credit life insurance for the duration of the credit agreement, however:
- The amount of insurance may not exceed the total outstanding debt owed to the credit provider under the agreement.
- Insurance must not exceed the full replacement value of a property or the outstanding amount on a vehicle agreement.
- Customers must be informed of the right to waive a proposed policy from the credit provider and provide a policy of their own choice.
- Where the credit provider arranges insurance for a customer, the credit provider may not charge any additional amount over & above the actual cost of insurance.
Complaints:
The National Credit Tribunal was launched on 1 September 2006 and acts as an informal court to resolve problems that customers experience with credit transactions, credit bureaus and credit providers.
Demographic Reporting:
Credit Providers will have to report to the National Credit Regulator the volume & type of credit extended.
