NCA News

National Credit Act – your responses

Results from last week's successful poll, and your opinions in the article National Credit Act - Implications. The longest of which came from Heloise Maritz and has been reproduced below:
"I have to say our firm disagrees, quite strongly, with many of the views of the author contained in the article of 22 September headed National Credit Act - Implications. The most curious text is the following:

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.

The conveyancer certainly doesn't have more interaction with the mortgagor than the bank. After all, it is the bank, and not the Conveyancer who ultimately has a 20-year (or more) relationship with the mortgagor. This is conservatively translated into a relationship where the mortgagor has interaction with the bank on (at least) 240 occasions by way of paying its monthly bond instalments throughout the bond term of 20 years. This naturally excludes your normal bond-related visits to the bank, interest rate hikes, drawing and debating statements, etc. The Conveyancer's interaction, in contrast with this, is limited to perhaps 12 weeks (registration period) and 1 or 2 consultation/s. (For the analysts among us, this is about 1.15% compared to the bank's interaction.).

  1. If this duty is passed (presumably by way of some sort of collective agreement) to the conveyancer, analogous to the current FICA statutory duty on Conveyancers, we think it would be insensible if any conveyancer charges less than R 1,400.00 for the advice given on:
    (a) the general understanding of the risks and costs of the credit,
    (b) the rights and obligations of a consumer under a credit agreement such as a mortgage bond and
    (c) whether or not the consumer can afford this agreement and the terms it embodies. (The Act requires that these 3 aspects are not only disclosed to the Creditor, but also understood by the consumer). The basis of this calculation is fairly simple and most conservative: professional time + expertise + introduced risk. Naturally, any Conveyancer would first have to study and understand for herself these aspects, before advice could be given.

  2. Now, if any conveyancer would venture to proffer views to client on any of these aspects it could be construed to be "advice" for purposes of Act 37 of 2002. Not sure what this Act is? Click to see the document here. This is of course the Financial Advisory and Intermediary Act. Want to dispense financial advice? Make sure to get accredited through the Registrar first and, oh, did we mention the penalties imposed by this act?

  3. Apart from this, any sensible Conveyancer would in our view also require that the mortgagor indemnify its firm against any change of the consumer's financial affairs after date of signature of the documentation, as in many instances unbeknownst to the Conveyancer, the mortgagor approaches its bank after a few months or years to re-negotiate terms, grant indulgences, extend or reduce credit or even include or release sureties.

  4. Interestingly, Conveyancers should be aware that most of the provisions of this Act (not all) apply only to consumers who are natural persons, as opposed to juristic persons. In our mind the act, therefore, does not apply to the specific consumer, the conveyancer (and the bank) would not have any responsibility. Any practice would have to be 'geared' for this, as a result.

  5. We should like to issue a friendly caution to our colleagues to first study the Act and the recently promulgated regulations most carefully before introducing this risk to their practices. Download the Act and the latest regulations on Colleagues should also, for safety's sake, consider Act 31 of 2002 as good bed time reading.

  6. Humble speculation might suggest that, in our capacities as Conveyancers, we are held in such regard by the phantom author of this article or the banks (or both - or others, for that matter) that this duty, too, we are asked to accept for the greater good of our nation."

Looking at the results of the survey we see that of the twenty two respondents, eighteen favour charging more than R150.00 and of those, five respondents would like to charge over R450.00 to explain the provisions of the Credit Act to mortgagors, which in the words of one correspondent "takes longer than one would think", and "conveyancers are continually being squeezed for fees". It is interesting to note that three responders indicated that they would not charge a fee as they felt that this would contribute to escalating costs. Another responder is: "concerned about the rising number of firms who use bond secretaries to interview the mortgagors. These firms should look carefully at their duties, both towards their client banks, the provisions of the NCA, and of course good customer relationships with the mortgagors."

And finally
"Hoe kan die Aktevervaardiger elke liewe bank se produkte ken en aan kliënte verduidelik. Die verantwoordelikheid is veronderstel om by die bank te bly en om sy kliënt te "educate" ten opsigte van die produk, en tog moet die bank die vooraf toets doen om te kyk of die kliënt in staat is om 'n lening te kan bekostig. Hoe op aarde kan jy as aktevervaardiger daardie besluit uitvoer, as jy tog absoluut geen kennis dra van die kliënt se finansiele posisie nie!

Dit is absoluut verregaande!!"

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