The rampant tendency of many consumers to ignore the “terms and conditions apply” section in credit agreements is a dangerous and highly risky practice, warns the National Credit Regulator (NCR).
In a statement the NCR said many consumers take it for igranted that they understand these terms and conditions and often don’t read or take the initiative to understand them before signing a credit agreement.
“Some consumers get into financial difficulty unintentionally and this is partly due to a lack of understanding of the agreements they have entered into,” says Cornie Tema, Manager: Education & Communication at the NCR.
“Before signing any form of credit agreement make sure you read the fine print carefully, and ask the credit provider as many questions as possible”, advised Tema. He emphasised that in terms of credit guarantee agreements people are quick to sign such agreements not fully understanding the consequences of such agreements should the main signatory fail to pay.
The NCR encourages all consumers to think carefully before signing a credit agreement so that you understand all the cost implications and to ensure that you have made plans to service your debt as per the agreement.
Questions you need to ask yourself before applying for credit include:
• Why am I applying for credit? Is this a necessity or a desire?
• What is the true cost of credit taking into consideration other costs such as monthly service fees, once off initiation fee, interest, credit insurance, etc.
Over and above these costs, credit providers can also charge costs for an extended warranty agreement; delivery, installation, initial fuelling charges; connection fees, levies or charges; taxes, licence or registration fees. After knowing how much the credit will cost, you need to ask yourself, how will you repay it?
When applying for credit, the NCA requires the credit provider to provide the consumer with a pre-agreement statement and quotation which clearly stipulates all costs attached to the credit before signing the agreement. These can be written in one document or in separate documents and are valid for five business days.
Your name, address, contact number and identity number must be displayed on the pre-agreement statement and quotation. Further information on rights and obligations of consumers will also be included in the document. These will include things such as frequency of payments, statements and a clause on how the consumer should go about settling their credit agreement early, should they want to. It will also include marketing options where consumers can state if they want to be sent marketing material.
It is your right as a consumer under the NCA to receive a credit agreement in plain, simple language that is easy to understand.
The NCA states that any change that is made to a credit agreement, which a consumer has already signed is void, unless:
· the change reduces the consumer’s liabilities under the agreement;
· after the change is made (unless the change is effected in terms of the NCA ) where a consumer at the time of application of the credit facility or at any later time, in writing, has specifically requested the option of having the credit limit automatically increased from time to time. A credit provider may unilaterally increase the credit limit once during each year;
· the consumer signs or initials in the margins opposite the change made;
· the change is recorded in writing and signed by both the consumer and the credit provider; or
· if the change is agreed upon orally it must be recorded and thereafter reduced to writing.
“It is important for consumers to familiarise themselves with the National Credit Act so that they are aware of their rights and responsibilities in order to take charge of their finances. The NCR believes that an informed consumer is a protected one. Consumers who require workshops about the NCA should contact the NCR on 0860 627 627 ,” concludes Tema.