The National Credit Act's remedies for reckless credit in the mortgage context

Authors

DOI:

https://doi.org/10.17159/1727-3781/2018/v21i0a2955

Keywords:

National Credit Act, reckless credit, remedies, mortgage, constitutional property law

Abstract

The National Credit Act prohibits the granting of reckless credit and also provides for certain remedies that courts can grant to consumers who have fallen victim to reckless lending practices. Depending on the circumstances, these remedies are the partial or full setting aside of the consumer's rights and obligations under the agreement; the temporary suspension of the effect of the agreement; and the restructuring of the consumer's obligations. This article investigates these remedies with a focus on the effect that they would have on a creditor provider under a mortgage agreement. The argument is made that the contractual and security rights of creditor providers amount to "property" for purposes of section 25(1) of the Constitution (the property clause) and that, to some degree or another, each of these remedies involve a "deprivation" (limitation or modification) of the creditor provider's rights (property). The consequence is that, when one of these remedies is granted to a consumer, the court must tailor the remedy in such a way that the effect on the credit provider is not "arbitrary" as meant in the property clause. Therefore, the proposal is that there must be a sufficient relationship between the purpose of the remedy (to discourage reckless lending and to rectify the damage caused) and the effects thereof on the credit provider. In general, the remedy should not go further than what is necessary to rectify the prejudice suffered by the consumer due to the credit provider's conduct. The formulation of the remedy should accommodate considerations such as whether and to what extent either or both parties have already performed under the agreement, and it should accordingly ensure that the consumer will not be unjustifiably enriched. The remedy should also account for the effect that it would have if the consumer is permitted to keep the property that was subject to the reckless credit agreement. The article furthermore raises doubts regarding the recent high court judgment in ABSA v De Beer, where all the consumer's rights and obligations under a mortgage agreement were set aside due to the credit provider's reckless conduct. Remedies like this have serious consequences and therefore it is imperative that courts carefully investigate all the effects that the order would have, so that a just and reasonable outcome is achieved. This articles accordingly aims to provide some guidance with reference to the principles of constitutional property law.

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Author Biography

  • Reghard Brits, University of Pretoria
    Senior Lecturer, Department of Mercantile Law

References

Bibliography

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Legislation

Constitution of the Republic of South Africa, 1996

Credit Agreements Act 75 of 1980

Deeds Registries Act 47 of 1937

Hire-Purchase Act 36 of 1942

Insolvency Act 24 of 1936

National Credit Act 34 of 2005

National Credit Amendment Act 19 of 2014

Uniform Rules of Court: Rules Regulating the Conduct of the Proceedings of the Several Provincial and Local Divisions of the High Court of South Africa (cited as "High Court Rule")

Usury Act 73 of 1968

List of Abbreviations

Int Insolv Rev International Insolvency Review

JQR Juta's Quarterly Review

NCA National Credit Act

PELJ Potchefstroom Electronic Law Journal

SA Merc LJ South African Mercantile Law Journal

SALJ South African Law Journal

SAPA South African Press Association

Stell LR Stellenbosch Law Review

THRHR Tydskrif vir Hedendaagse Romeins-Hollandse Reg

TSAR Tydskrif vir die Suid-Afrikaanse Reg

Published

15-01-2018

Issue

Section

Articles

How to Cite

Brits, R. (2018). The National Credit Act’s remedies for reckless credit in the mortgage context. Potchefstroom Electronic Law Journal, 21, 1-34. https://doi.org/10.17159/1727-3781/2018/v21i0a2955

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