By SHAUN BERGOVER, Attorney at the Rhodes University Law Clinic
This week’s article continues last month’s theme by investigating other rights and duties applying to credit agreements, which many members of the general public may not be familiar with.
Right to information held by credit bureaux
Credit bureaux play an important role in providing credit providers with information regarding the consumer’s creditworthiness. Information held by a credit bureau includes a person’s credit history, payment patterns, defaults, termination of credit and other related information. Increasingly such information is reduced to a “credit score”, often accessible via an app.
The consumer has the right to question and challenge any information pertaining to him/her that is held by a credit bureau. Should the credit bureau fail to provide the consumer with proof of the accuracy of any information disputed by the consumer, it can be compelled to remove the disputed information from its records.
A registered credit bureau must remove information relating to any paid-up judgments within seven (7) days after receiving proof of such payment (either by a clearance certificate if a debt counsellor was involved or a proof of payment in the case of a judgment). Within three (3) days of removing the adverse credit information and information relating to paid up judgments, a registered credit bureau must notify all other registered bureaus of the removal.
In summary, if a credit bureau continues to keep a consumer blacklisted for longer than seven (7) days, it is unlawful, and a complaint may be lodged with the National Consumer Tribunal.
Right to cooling off
In certain circumstances, consumers may terminate credit agreements within five business days of signing them, provided this is done in writing and is properly communicated to the credit provider. Typically, this cooling-off right will apply to credit sales on instalments (e.g. purchases of cars, books, household appliances) concluded at the consumer’s home or place of work. The consumer must return the goods bought, and the credit provider must refund amounts paid by the consumer within seven days of termination, less the following:
- Reasonable costs of return and repair of damages after sale.
- Rent for use of the goods, unless they are still in their original packaging; and
- Compensation for depreciation in value of the goods (by agreement or court order only).
EARLY SETTLEMENT AND PREPAYMENTS
Consumers are entitled to settle their debts in advance at any time, with or without advance notice, after requesting a statement from the credit provider of the amount required to settle the account. No settlement charge is payable for small agreements, and interest and other fees are payable only until the date of settlement. This means that a consumer can request from the credit provider the balance due, can then pay the entire amount, and not be penalised for doing this.
This, however does not apply to large agreements such as loans secured by mortgage bonds. If a consumer wishes to settle a bond, she/he must first give notice of cancellation for three months to the credit provider. When a mortgage bond is cancelled, the consumer will be liable for bond cancellation costs.
Furthermore, consumers may prepay any amount due under a credit agreement (e.g. instalments due or an extra monthly amount), and credit providers are obliged to accept such amounts, even if they are not due. Such payments are used for unpaid interest and fees first and then to reduce the principal debt.
Surrender of goods
A consumer may at any time return to a credit provider goods that are subject to a credit agreement, whether or not the consumer is in default. The credit provider must then sell the goods and use the proceeds to settle the account. This provision gives the consumer an extraordinary right, enabling them to rid themselves of the agreement whenever they choose to do so.
Duties of credit providers
Every consumer right discussed above and in last month’s article entails a duty on the part of the credit provider. The duties on credit providers are onerous and provide many administrative burdens for them. Some of the more important co-relative duties are to:
- Make credit assessments of the consumer;
- Give to the consumer a pre-agreement statement and quotation;
- Give to the consumer a copy of the agreement;
- Give to the consumer a periodic statement of account and further statements on request;
- Protect the confidentiality of information about consumers;
- Report to the National Credit Regulator or credit bureau the details of every credit agreement concluded, as well as the termination of the agreement when the debt has been paid in full;
- Advise the consumer to seek assistance when the consumer is in default;
- Maintain records of credit applications, agreements and accounts as prescribed in the Regulations.
Some of these duties will be explored in more detail in subsequent articles in this year’s series.
