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Common law set-off in credit agreements given the boot.

Section 90(2)(n) of the Act stipulates that a provision in a credit agreement is unlawful if it permits the credit provider to satisfy an obligation of a consumer by making a charge against an asset or amount deposited for the consumer, unless s124 of the Act permits this. Section 124 basically allows the charge against the asset if specific authorisation is given by the consumer in the credit agreement.

It would seem that, pending an appeal of the recent judgment in the matter of the National Credit Regulator v Standard Bank of South Africa Limited (44415/16) [2019] ZAGPJHC 182 (27 June 2019), which ruled in favour of the National Credit Regulator, common law set-off in circumstances where the National Credit Act is applicable, has been se(n)t off packing. It must be pointed out that this judgment once again highlighted that the Act’s drafting imperfections are nothing new and that the Supreme Court of Appeal has already held that the Act is not a model of clarity.

Set-off allows the termination of obligations without an exchange of performance. Where parties are indebted to one another, set-off operates automatically under the common law when the requirements for set-off are satisfied. Set-off is an important revenue-generating option for a bank. By way of an example, customer A has an overdrawn current account, but a credit balance in a savings account or any other account for that matter. By operation of the common law, the credit balance in the savings or other account can automatically be set-off against the overdrawn current account.
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National Credit Regulator to appeal judgment on extended warranties and club fees sold by Lewis.

Just as we thought the dust settled on this issue, the NCR is set to take its three-year-old battle against furniture group Lewis Stores to the SCA. The SCA has granted the NCR leave to appeal the High Court in Pretoria’s judgment on extended warranties sold by Lewis, which sells mainly to lower-income groups through in-store credit facilities, and club fees charged by the retailer. The High Court ruled that the fees and warranties were not a contravention of the NCA.

"The charging of unlawful fees on credit agreements is one of the most egregious breaches of the Act" said N Motshegare, CEO of the NCR.

The NCR is also appealing to the SCA against a separate high court ruling on club fees charged by Edcon. The NCR has also lodged cases against TGF and Mr Price.
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A landmark court case seeks to stop over-charging by creditors.

Previously the Stellenbosch University Law Clinic brought justice to victims of garnishee order abuse. Now it aims to stop over-charging by creditors. The so-called in duplum (‘double’) rule was written into the National Credit Act (NCA) in 2007, and means that once a borrower is in default, the outstanding amount payable can never be more than double the outstanding debt at the time of default.

Some creditors saw what looks like a loophole in the NCA, and added service, administration and legal fees, claiming these fell outside the Act.