Selling on-line? When do you need to register as a credit provider under the national credit act 34 of 2005
If I’m selling products and services on-line do I need to be registered as a credit provider?
Where you sell goods or services and have an agreement or arrangement with the consumer to either –
- Allow the consumer to pay for the goods and services at a later date, or
- Bill the consumer periodically for all or any part of the cost of goods or services,
Then this agreement or arrangement MAY be regarded as a credit agreement as envisioned in the National Credit Act.
The National Credit Act states that when a credit agreement is entered into, the credit grantor must be registered as a credit provider under the National Credit Act, irrespective of the size of the credit or whether or not it is a once off transaction.
There are however exceptions to this rule, one of such exceptions is where the agreement or arrangement amounts to an incidental credit agreement.
An incidental credit agreement means an agreement where an invoice for goods or services that have been provided to the consumer, or goods or services that are to be provided to a consumer over a period of time and either or both of the following conditions apply
- a fee, charge or interest became payable ONLY when payment of an amount charged in terms of that account was not made on or before the agreed date; or
- two prices were quoted for settlement of the account, the lower price being applicable if the account is paid on or before a determined date, and the higher price being applicable due to the account not having been paid by that date.
Where the agreement or arrangement amounts to an incidental credit agreement then registration as a credit provider under the National Credit Act will NOT be required.
This can be clearly illustrated in the below example
“I run an online shop selling clothing. From time to time I allow some of my customers to pay me back over time. It’s usually not big amounts and I only do it to help them because I know times are tough. A friend warned me though that I should be careful as I may be required to register as a credit provider. Is this true?”
In this case the online shop owner is entering into a credit facility with his/her clients by allowing them to pay for the goods over a period of time.
In the event that the online shop owner does not charge the customers a fee or interest in return for allowing them to pay for the goods over a period of time, then this arrangement will be an incidental credit agreement and registration as a credit provider under the National Credit Act will not be required.
Notwithstanding the above, in the event that the customer/s fail to pay the online shop owner on the date/s agreed, then he/she will be able to charge a penalty or interest on the overdue amounts without the transaction becoming one that requires registration as a credit provider.
In the event that the online shop owner charges the customers a fee or interest in return for allowing them to pay for the goods over a period of time, then this arrangement will be credit agreement in the form of a credit facility and registration as a credit provider under the National Credit Act will be required.
The distinguishing factor as to whether you need to register as a credit provider rests on whether or not you charge interest or a fee in return for allowing the consumer to pay for the goods or services over a period of time and thereby increasing the price of the goods by virtue of the right to pay over time.