Fees and interest rates
The National Credit Act (NCA) will put a stop to exorbitant or unreasonable interest charges and fees and credit agreements.
Currently, the maximum interest rates lenders can charge are 23 percent for transactions of R10 000 or less and 20 percent for transactions of more than R10 000.
According to the NCA, the capped fees and interest rates from June 1 will be:
# Vehicle finance, credit cards, overdrafts and store cards. The maximum initiation fee will be R150 per agreement plus 10 percent of the amount of the facility over R1 000. However, this fee is then capped at R1 000 or 15 percent of the principal debt, whichever is the lowest.
The maximum monthly fee on, for example, an overdraft will be R50. The maximum interest rate will be the repo rate (currently nine percent) multiplied by 2.2 plus 10 percent a year. This equates to 29.8 percent currently.
# Micro-loans. For short-term micro-loans - those up to six months - the maximum interest rate will be five percent a month. For long-term micro-loans - longer than six months - the maximum interest rate will be the repo rate multiplied by 2.2 plus 20 percent a year. This equates to 39.8 percent at the current repo rate of nine percent.
# Incidental credit agreements. These include a cellphone or doctor's account. At the time the service is rendered, it is not considered to be a credit agreement.
But if you fail to pay the account by the due date and it runs into arrears, the supplier will levy interest charges and it becomes an incidental credit agreement. The maximum interest that can be charged is two percent a month.
# Mortgage bonds. The maximum initiation fee will be R1 000 per agreement plus 10 percent of the amount of the agreement over R10 000. However, this is capped at R5 000 or 15 percent of the principal debt, whichever is the lowest.
The maximum interest rate on mortgages will be the repo rate multiplied by 2.2 plus five percent a year. This works out at 24.8 percent at the current repo rate of nine percent.
