This section details how to configure interest and fees for Unsecured Credit Transaction Loan Products in South Africa, adhering to the National Credit Act (NCA) Regulations.

Interest

RSA: The rand amount of interest is calculated for each particular day.

Regulation 42 (1) of the Regulations: This regulation has been amended by substitution.

• Reference Rate Dependent: If you select this checkbox, the interest calculation will depend on the Reference Rate (Repo Rate or ruling SA Reserve Bank Repurchase Rate) and will adjust accordingly.

• Initial Factor: This is the standard value used when a loan is created. The National Credit Act Regulations specify a Maximum Prescribed Interest Rate as: [(Reference Rate * Factor) + Percentage] per year. The Factor's maximum value is 2.2.

  • Minimum Factor: You can specify a minimum Factor that is less than the NCA Regulations' maximum, allowing you to create loans with interest rates lower than the prescribed maximum.
  • Maximum Factor: You can specify a maximum Factor that cannot exceed what the NCA Regulations permit. When creating a loan, you won't be able to change the factor beyond this value.

• Initial Percentage to Add: Specify the standard percentage. This will be used when a new loan is created. You can change this value on the loan, but it cannot be less than the minimum or more than the maximum. The National Credit Act Regulations specify a Maximum Prescribed Interest Rate as: [(Reference Rate * Factor) + Percentage] per year.

• Minimum Percentage to Add: Specify a minimum percentage that may be less than the maximum prescribed value in the NCA Regulations.
• Maximum Percentage to Add: Specify a maximum percentage that may not exceed the maximum prescribed value in the NCA Regulations.

Maximum Prescribed Interest Rates (per year):

• Mortgage Agreements: RR + 12%
• Credit Facilities: RR + 14%
• Unsecured Credit Transactions: RR + 21%
• Developmental Credit Agreements: RR + 27%
• Other Credit Agreements: RR + 17%
• Incidental Credit Agreements: 2% per month

Initiation Fee

Regulation 42(2) of the Regulations: This regulation amends "Table B" and states:

"An initiation fee must only be charged when a new credit agreement is established with a consumer and must not be charged on a transactional basis where there is no new credit agreement with the consumer."

• Base Amount Percentage: The National Credit Act Regulations state that the Initiation Fee may never exceed 15% of the principal debt. The values below represent specific caps:

  • Mortgage Agreements:
    • a) R 1,100 per credit agreement, plus 10% of the amount of the agreement in excess of R 10,000.
    • b) But never to exceed R 5,250.
  • Credit Facilities:
    • a) R 165 per credit agreement, plus 10% of the amount of the agreement in excess of R 1,000.
    • b) But never to exceed R 1,050.
  • Unsecured Credit Transactions:
    • a) R 165 per credit agreement, plus 10% of the amount of the agreement in excess of R 1,000.
    • b) But never to exceed R 1,050.
  • Developmental Credit Agreements:
    • For the development of a small business:
      • a) R 275 per credit agreement, plus 10% of the amount of the agreement in excess of R 1,000.
      • b) But never to exceed R 2,600.
    • For low-income housing (unsecured):
      • a) R 550 per credit agreement, plus 10% of the amount of the agreement in excess of R 1,000.
      • b) But never to exceed R 2,600.
  • Short Term Credit Transactions:
    • a) R 165 per credit agreement, plus 10% of the amount of the agreement in excess of R 1,000.
    • b) But never to exceed R 1,050.
  • Other Credit Agreements:
    • a) R 165 per credit agreement, plus 10% of the amount of the agreement in excess of R 1,000.
    • b) But never to exceed R 1,050.
  • Incidental Credit Agreements: Nil

• In Excess Percentage: This is the percentage (e.g., 10%) that must be added when the agreement amount exceeds the "in excess amount" specified by the regulation.

• Maximum Base Fee Amount: This is the amount that may be charged when the agreement does not exceed the "in excess amount" (e.g., R 165.00).

• Maximum Total Fee Amount: This is the amount that may never be exceeded (e.g., R 1,050.00).

• Maximum Fee Amount Percentage of Capital: This percentage (15%) enforces that any newly calculated initiation fees do not exceed this value's percentage of the loan capital amount. It can then be changed at the user's discretion. According to regulation 43(3), your Initiation Fee may never exceed 15% of your capital amount.

Service Fees

Regulation 44: This regulation has been amended.

• (a) Substitution of sub-paragraph preceding sub-regulation (1): "The maximum monthly service fee, prescribed in terms of section 105 (1) of the Act,..."

• (b) Addition of sub-regulations after sub-regulation (2):

  • (3) Service Fee Coverage: "The service fee covers the cost of administering a credit agreement, which includes the operational costs of the credit provider such as rent, labor, communication, banking, processing of repayments, and any other costs related to the administration of a credit agreement."
  • (4) Charging Basis: "A service fee must be charged for a calendar month in which it is due and payable, and on a pro rata basis where the credit agreement was concluded during the course of that calendar month."

• Initial Monthly Service Fee: Specify the standard monthly service fee for new loans, ensuring it does not exceed what is allowed by the National Credit Act Regulations.

• Minimum Monthly Service Fee: You may specify a minimum monthly service fee that is less than the prescribed maximum amount.

• Maximum Monthly Service Fee: The prescribed maximum monthly service fee, according to NCA regulations, is R 60.00.

• Charge First Monthly Service Fee: If you select this checkbox, the system will charge the first service fee in the first month the loan is granted. It is recommended that you do not select this box.

• Standard Monthly Service Fee: Specify the standard monthly service fee for new loans, not exceeding what is allowed by the National Credit Act Regulations.

  • Note for Annual Service Fee: When an annual service fee is levied, the applicable limit is:
    • The monthly limit on the service fee, multiplied by 12.
    • Where the period for which the fee is levied is less than 12 months, the monthly service fee multiplied by the number of months in such a period.
  • If a service fee is payable on a transaction basis, or a combination of periodic and transaction bases, the total of such fees may not exceed the monthly or annual limit.
  • You are allowed to charge a service fee for every calendar month in the duration of the loan (amended Regulation 44(b)(4)). If the first calendar month is not a full month, the service fee must be calculated pro-rata. This calculation should work from the agreement date.

• Charge Pro Rata First Monthly Service Fee: If you select this checkbox, the system will charge the pro-rata first month service fee.

• Charge Pro Rata Final Monthly Service Fee: If you select this checkbox, the system will charge the pro-rata service fee in the final month.

  • Pro Rata Fee Calculation: Daily Service Fee * number of days from when the credit agreement was concluded until the last day of the calendar month.
  • Pro-rata service fee must be calculated for the month in which the credit agreement is concluded as well as the last month.

In Default Settings

• Allow Charging of Fees and Interest when "in Default": Select this checkbox if you want the system to charge fees and interest when the loan goes into default.

  • RSA Note (Section 103(5)): "Despite any provision of the common law or a credit agreement to the contrary, the amounts contemplated in section 101(1) (b) to (g) that accrue during the time that a consumer is in default under the credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under that credit agreement as at the time that the default occurs."

• Late Payment Grace Period: You can leave this value empty or 0. Otherwise, specify the grace period, in number of days, after the final payback date, before "in Default" interest and fees are charged.

Buttons

• Cancel: Click to discard your changes and not save the information to the database.
• Save: Click to save the entered information to the database.
• Close: Click to close the request and return to the previous page.
• Save & Close: Click to save the information to the database and then close the screen, returning you to the previous page.