National Credit Act - implications

Explaining the bond to the buyer
When the Financial Intelligence Centre Act ("FICA") was first released there was some confusion over whether it was permissible for conveyancers to charge for the time taken to comply with the requirements of FICA. This confusion has ultimately been resolved as indicated by Korbitec's survey in 2006 which indicated that an average amount of approximately R220 was charged by the conveyancers for complying with FICA.

In a way that is similar to the FICA, the National Credit Act has (indirectly) placed a burden of explaining the bond and the insurance on the conveyancer. The way in which this happens is as follows:

Section 81(2) of the National Credit Act ("NCA") requires that a Credit Provider (i.e. bank) or its agent (i.e. the conveyancer) must take reasonable steps ensure that the consumer has a "…general understanding and appreciation of the risks and costs of the proposed credit, and of the rights and obligations of a consumer under a credit agreement…".

Section 106(5) of the NCA requires that any contract of insurance that a consumer enters into must be explained by the Credit Provider (if the insurance is offered through the Credit Provider).

Bearing in mind the fact that the conveyancing attorney has far more interaction with the mortgagor than the bank, it appears likely that the banks are going to be eager for the conveyancers, rather than the banks themselves, to explain the necessary provisions to each mortgagor.

There can be no doubt that if the banks do require the conveyancers to comply with the requirements of the NCA as their agent, there will be an administrative cost to conveyancers which will inevitably result in less efficiency on the part of the conveyancer, unless the conveyancer charges for this service. Although the requirement to explain the bond and the insurance will only become effective on 01 July 2007, it would seem wise for conveyancers to already consider what amount, if any, they would charge for this service.

To assist with this question GhostDigest would like you to answer the following question:
What would you charge for explaining the NCA implications of a bond to the mortgagor?

1. The banks will do it
2. No charge
3. Less than R100
4. R101-R150
5. R151-R250
6. R251-R450
7. R451 or more.