The Act determines that, in certain instances, a credit agreement in its totality could be rendered unlawful.

This occurs when the entire principle under which the contracts were concluded are unlawful and the Act regards these contracts as void from the day they were entered into.

During the Debt Counselling process, it is important to identify these agreements and refer them to the court for judgment.

These instances include:

• Agreements entered into with an unemancipated minor unassisted by a guardian
• Agreements entered into with a person that has been declared mentally unfit by a competent court
• Agreements entered into with a person subject to an administration order as contemplated in section 74(1) of the Magistrates Court Act where the court appointed administrator has not consented to the agreement
• Agreements that result from negative option marketing
• Agreements that contain an unlawful provision and purports to supplement another credit agreement
• Agreements entered into with an unregistered credit provider required to be registered
• Agreements entered into with a credit provider who had received a notice from the NCR ordering it to stop engaging in the granting of credit

*Note: The agreements listed above will not be regarded unlawful where the consumer induced the credit provider to believe that he/she had legal capacity by withholding or obscuring the true facts.

Consequences of an Unlawful Agreement

The court will:

• Declare the agreement void from the date it was entered into and order the credit provider to refund any money paid by the consumer together with interest on the amount at the rate stipulated in the agreement; and order that the credit providers rights in terms of the agreement either be cancelled, or forfeited to the State.

Unlawful Provisions of Credit Agreements – Section 90

With a view of enhancing the consumer protection, the Act prescribes certain standards concerning the terms of a contract. These standards include the following prohibitions:

• Provisions that are deceptive or fraudulent or defeat the purpose and effect of the Act.
• Provisions that waive or deprive a consumer right that is stated in the Act or that exclude the credit providers obligations in terms of the Act or allow the credit provider to contravene the Act.
• Provisions that waive common law rights
• In particular Exception Error calculated (exception that there was an error in calculation), Exception non Numerate Pecuniae (exception that money was paid out) and Exception on cause debit (exception that the agreement was never entered into).
• Provisions that are a result of negative marketing e.g. offering to enter into an agreement on the basis that the agreement will come into existence unless the consumer declines the offer.
• Provisions in a contract that make the contract subject to a supplementary agreement that has provisions that are unlawful.
• Provisions in a contract that exempt or limit a credit providers liability with regard to
• Actions and omissions of its agents and Standard warranties
• Provisions that compel the consumer to agree that before the conclusion of the agreement the credit provider did not make representations or warranties.
• Provisions that appoint the credit provider, it’s employees and agents as agents for the consumer.
• Provisions that grant a power of attorney in advance to the credit provider in respect of any matter related to the granting of credit
• Provisions that compel a consumer to sign in advance any documentation pertaining to the enforcement of the agreement
• Provisions that require a consumer to consent to a pre-determined value of costs for the enforcement of the agreement.
• Including actions instituted against the credit provider
• Provisions that require a consumer to consent to the jurisdiction of the High Court – when the Magistrates Court also has jurisdiction or make the consumer to consent to the jurisdiction of a court that is outside of the residential workplace area of the consumer
• Provisions that require a consumer to deposit with the credit provider; an identity document or credit or debit card or bank account details or an ATM access card
• Provisions that require a consumer to give personal details and codes to enable access to his account
• Provisions that require any person processing payments to prioritize the payment of the credit providers debt above other debts
• Provisions that permit the credit provider to satisfy an obligation of the consumer by making a charge on an asset or account held by a third party – excluding debit order.

Consequences of an Unlawful Provision in an Agreement

The court will:

• Declare the provision unlawful and delete it from the agreement or order the term to be amended in such a way which will render it lawful if it is reasonable to do so, or
• Declare the entire agreement unlawful from the date it was entered into and order the credit provider to refund any money paid by the consumer and that the credit providers rights in terms of the agreement either be; Cancelled or Forfeited to the State