Could your lender be committing fraud?

After countless rejections you may consider applying for credit with companies that you may not really know much about or have even heard of. But you may open yourself up to fraud, says Angelique Ruzicka.

Getting rejected for a loan can be stressful particularly if you are cash strapped and need to pay for essentials like school fees and your mortgage. Getting approval may push you to consider applying for credit with companies that you may not really know much about or have even heard of.

Borrowing from unscrupulous lenders was one of the main reasons behind the Marikana striker’s increase in wage demands. Some of these credit providers charged the miners as much as 60% interest a month and held their ID documents illegally. According to the NCA, the most you can be charged on an unsecured loan is 31% (5 x 2.2 + 20 = 31).   “The danger of approaching unregistered lenders is that they charge you in excess of the prescribed parameters of the National Credit Act,” says Ronald Sabelo, legal advisor of the National Credit Regulator (NCR).

Approaching unscrupulous lenders means that you could also be made to borrow more than what you can afford. “You could be granted credit that by its very nature is reckless as they don’t do a proper affordability analysis, resulting in people being caught in a vicious debt cycle as people will often go back to these lenders for more credit,” explains Sabelo.

The added danger of lending from an institution or person that is not registered with the NCR is that you could end up borrowing from criminals. “It’s dangerous as you are giving away personal information and you will have no control over how it will be used. Some even hold your bank cards or ID cards and that is an outlawed practice,” says Sabelo.

Lend from reputable institutions
The registration of credit providers, credit bureaux and debt counsellors is a critical factor in the effective regulation of the credit industry in South Africa. If the lender is registered with the NCR their activities are carefully monitored to ensure they are acting within the provisions of NCA.

The NCA provides that all parties who enter into credit agreements with 100 or more consumers, or whose principal debt owing by consumers exceeds R 500, 000, must be registered with the NCR as credit providers.  The NCA is, however, still applicable to unregistered parties who provide credit under qualifying transactions that are below this threshold says the NCR. These agreements with consumers must still comply with the NCA regarding interest charged and all the other fees associated with the category of the credit agreement.

“I would urge all consumers to do their homework before choosing credit providers, especially online credit providers and to look out particularly for the credit provider’s NCR registration status and the NCR registration number,” said Adrian Skuy: manager of registrations at the NCR.

“We want consumers to understand that the NCA is there for their own protection and that the NCR takes its job of actively monitoring the credit industry seriously to ensure that they comply with the NCA,” says Skuy.

How to verify if a lender is reputable:
There are several ways to verify if a lender is reputable. Moneybags has put together the following five tips:

1.    Ask to see their registration certificates: Skuy explained that registered credit providers are issued with certificates, which must be displayed prominently at their places of business, and their registration status and number must be visible and legible on all credit agreements and communication with consumers. “There is no differentiation in the NCA between online lenders and those granting credit through conventional means, such as branch networks, as these requirements apply equally to both,” he added.

2.    Find out what interest you are being charged: The NCA also specifies the rate of interest and fees that the credit provider can charge in respect of the various categories of credit agreements. It is a contravention of the NCA to charge in excess of the stipulated amounts. Since inception, the NCR has refunded over R3 million to consumers where they were charged excessive interest and charges.

3.    Check out the environment: “If someone is operating from a car boot and not from an office then this should also set off alarm bells,” says Sebelo.

4.    Get the right documentation from your lender: “Lenders have to give you a peer agreement statement and a quotation so if you don’t get this or have it emailed to you then don’t borrow money from that person or institution,” says Sebelo.

5.    Check the borrower’s credentials: In the event that the credit providers act contrary to the provisions of the NCA, consumers may lodge complaints with the NCR for appropriate intervention. “If you are not sure of the authenticity of a lender you can call the NCR’s helpline,” adds Sebelo.

In the case of consumers who have been over-charged by unregistered credit providers, the agreements are void at the outset, and therefore unenforceable. “This means that the consumer will be under no legal obligation to pay in terms of the agreement”, explains Skuy. “For their part, the unregistered credit providers can only claim in terms of the common law on the basis of unjustified enrichment”.

But if you have borrowed money from an unregistered party that does not mean that you can ignore the problem. “The credit provider still has common law grounds to sue and recover their assets. Some could even come to your home and reclaim assets that are worth well and above what you borrowed for or even resort to physical violence,” warns Sebelo.

To lodge a complaint about credit providers or bureaux, send an email to or call 0860 627 627.