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R5 Administration fee on your bond?

A recent ruling by the Supreme Court of Appeal (SCA) has surprised many parties and set an interesting precedent. The SCA recently ruled in favour of the National Credit Regulator (NCR) in their case against Standard Bank, for overcharging on administration fees on home loans granted under the Usury Act.

(It is important to note that the Usury Act has been repealed by the National Credit Act.)

The SCA have ruled that banks (and other creditors) could not charge a fee of more than R5 (excluding VAT) for administration.

However, the NCA includes transitional provisions relating to preexisting agreements, and some of its provisions apply to preexisting credit agreements which would have been subject to the NCA had it been in effect when the agreements were concluded.

The SCA said that Std Bank are not entitled to charge an administration fee greater than that allowed by the Usury Act on home loans (which existed at the time the NCA came into operation) until the fee is amended under the powers conferred by section 105(1) of the NCA. This has not happened yet.

NCR legal adviser Annemarie Friedman said :“Since the NCA came into operation, the minister has not increased the home loan administration fees and the maximum of R5 is therefore still applicable”.

Friedman says that consumers who entered into home loan agreements prior to June 1, 2007, (before the NCA came into effect) with mortgage amounts less than R500,000 should check their bank statements to establish whether they had been overcharged on their home loan administration fees.

The figure they should look for is anything more than R5. If they have been charged more they should approach the NCR or complain to Standard Bank.