Gauteng High Court Rules For DTI & NCR over Interest Rates
The Minister of Trade and Industry & the National Credit Regulator vs Micro Finance South Africa case no A172/17
The Full Bench of the North Gauteng High Court has reviewed the matter between Micro Finance South Africa (MFSA) and the Department of Trade and Industry (DTI) & National Credit Regulator (NCR) and now overturns the original finding and ruled in favour of the NCR and DTI.
Reduced Interest Rates On Subsequent Loans
Recently, MFSA took the DTI & NCR to court over changes that they claimed were made to the National Credit Act regulations without proper industry consultation and consideration of how the changes would affect industry parties. Many smaller credit providers often give consumers repeated loans such as small pay day advances etc and this case dealt with the rate that could be charged. The court originally ruled in favour of the MFSA.
The DTI then asked that the matter, as previously ruled on by Justice Louw in the North Gauteng High Court, be reviewed as they were not happy with the outcome and how the case was handled.
What Is The Fight All About?
The recent changes to the NCA regulations which were published, meant that if a credit provider gave another loan to a consumer, within a calendar year (which is very common with small lenders and low-income consumers) that the rate cap for that loan then dropped from 5% per month (original loan cap) down to 3% per month (subsequent loans).
A full bench of several Judges carries more weight than a ruling by a lone Judge and in this case, when the matter was reviewed, the ruling swung in the opposite direction (now in favour of the DTI).
The ruling in the case of The Minister of Trade and Industry & the National Credit Regulator vs Micro Finance South Africa case no A172/1 makes a number of points and says that the previous ruling was incorrect because (1) the Judge didn’t consider all the evidence, the changes to the regulations help combat heavy debt, credit providers (like the big banks) have already adjusted to the new regulations and MFSA members (small lenders) are relatively unimportant in terms of the over all credit industry (ouch). It also says that the Minister of Trade & Industry did actually consider the effect and do enough research.
Summary: Due to this new ruling, the regulation changes about subsequent short term loans is still in effect and consumers will pay 5% interest on the first short-term loan and then a reduced 3% interest on any other short term loans from that credit provider within a calendar year.