Abstract
In terms of the National Credit Act a credit provider may conclude a credit agreement with a consumer only after he has made a proper financial assessment and concludes that the consumer will be able to satisfy all of his obligations under all his credit agreements. However, a practice of not conducting this affordability assessment has evolved amongst certain credit providers where the credit agreement involved is a suretyship agreement. This article investigates whether or not a suretyship agreement is indeed a credit agreement in terms of the National Credit Act, and if a financial assessment should be conducted in the case of a suretyship agreement. The main aim of the article is to try to identify what the concept of a “credit guarantee”, as defined in the Act, encompasses and ultimately if the common-law contract of suretyship falls under this definition. Our conclusion is that “credit guarantee” is as vague and problematic as many of the other definitions in the Act. If one reads the Act in its entirety (including the regulations to the Act), it seems unlikely that the legislature intended not to regulate common-law suretyships also.
Highlights
The provisions that prohibit reckless credit granting form part of the measures that were introduced by the National Credit Act1 with the aim of resolving the problem of over-indebtedness and preventing reckless credit lending
It seems that a practice of not conducting this assessment has evolved amongst certain credit providers where the credit agreement involved is a suretyship agreement
This article investigates whether or not a suretyship agreement is a credit agreement for the purposes of the National Credit Act; what the definition of a credit guarantee set out in section 8(5) encompasses; and if a section 81(2) assessment should be conducted in the case of a suretyship agreement
Summary
The provisions that prohibit reckless credit granting form part of the measures that were introduced by the National Credit Act with the aim of resolving the problem of over-indebtedness and preventing reckless credit lending. The credit agreement will be reckless in terms of the National Credit Act if the credit provider fails to conduct this assessment, irrespective of the outcome of the assessment. It seems that a practice of not conducting this assessment has evolved amongst certain credit providers where the credit agreement involved is a suretyship agreement. This article investigates whether or not a suretyship agreement is a credit agreement for the purposes of the National Credit Act; what the definition of a credit guarantee set out in section 8(5) encompasses; and if a section 81(2) assessment should be conducted in the case of a suretyship agreement
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
