By Salomé van Wyk
Director: Conveyancing, Millers Inc

I am considering to lend an amount of R400,000 to a friend who needs the cash urgently. It will only be on a short term basis as one of his insurance policies will pay out in the next 6 months and he will be able to pay me back with some interest. Somebody mentioned to me that nobody can lend any money to anyone unless the lender is registered as a credit provider. Surely only companies who wish to provide credit on a regular basis will need to register as a credit provider? If the advice is correct then all loan agreements between two parties are null and void unless the lender has applied to be a credit provider? Surely a credit provider is a company who routinely provides credit, as a part of their business? What about all the thousands of one time lending agreements between individuals or companies who are not "credit providers" but just lending money to someone for something?

If a loan agreement is a credit agreement it is governed by the National Credit Act, 43 of 2005. An agreement will be a credit agreement for the purposes of the Act, if two elements are present, namely there is a fee, charge or interest imposed for a deferred payment.

The Act has given consumers many new rights and places a duty on credit providers to make sure that credit is not lent recklessly, and does not cause the consumer to be over indebted.

A plain reading of section 40(1)(b) of the Act provides that a person must register as a credit provider if the total principal debt exceeds the prescribed threshold. On 11 November 2018 the threshold of R500,000 was changed to Nil Rand.

The argument raised in the question above was also the argument of the lender in the case of Du Bruyn No & Others v Karsten. At first the High Court found in the lender’s favour, but it was overturned by the Supreme Court of Appeal who found the requirement to register as a credit provider is applicable to all credit agreements irrespective of whether the credit provider is involved in the credit industry, and irrespective of whether the credit agreement is a once-off transaction. The court readily accepted that this is an imperfect solution, but it is for the legislature to remedy rather than for the courts to attempt to accommodate deficient drafting by attributing meaning to the legislation that is not justified by the words.

The Act also provides several exclusions from the scope of the Act. Some of these exclusions are:
• A credit agreement between a juristic person and someone who has a controlling interest in that juristic person;
• A credit agreement between family members;
• Juristic persons whose asset value or annual turnover exceeds the threshold which currently is R1 million at the time when the transaction is entered into.

First consult your attorney before you lend money to another person.