Credit Act – Comment by Aphsana Yusuph

The National Credit Act (NCA) that came into force on 1 June 2007 has dramatically changed the home loan industry from the initial application stage right up to cancellation of your bond.

The main objective of the NCA is to regulate the credit industry, to promote transparency and fairness, to prevent 'reckless lending", and to establish an effective "enforcement framework" that would ensure compliance with the NCA.

For the purposes of the act a mortgage agreement is regarded as a credit agreement that falls within the ambit of the NCA. According to the NCA the relevant credit grantor is obliged to conduct an assessment of the "total indebtedness" or exposure of the applicant before granting a homeloan.

Section 80 of the Act entitles the consumer to cancel the agreement if the credit provider did not properly inform the consumer of the risk and extent of their obligation. This is called "reckless lending" and the consumer is entitled to apply for debt review, which will have the effect of having monthly installments suspended until the matter is resolved.

Section 92 of the NCA stipulates that the credit provider is obliged to provide the consumer with a " pre agreement in the form of the proposed agreement" and a "quotation" at no cost to the homeloan applicant , that sets out the principal debt and all related costs including all commission that is due to any party in the transaction.

The consumer thereafter has five (5) business days to reject or accept the quotation.

The consumer also has the right to choose their own homeowners insurance. These provisions will have the effect of ensuring that that the consumer makes aan informed decision before entering into a homeloan agreement.

The final most significant provision that would affect the homeloan industry is section 121 which entitles the consumer to terminate the credit agreement at any stage, and the relevant credit grantor will not be entitled to impose
penalties for early termination of the agreement. The penalty fees for early termination of your mortgage bond are prohibited.

However the protection that the NCA has given to consumers does not come without a price. The all important turnaround time for the registration of your mortgage bond will no longer be (6) weeks, and the process for credit
application will be even more interrogatory and stringent.
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