Interest cap on short-term loans ruled invalid
The Gauteng High Court (Pretoria) has ordered that regulations capping rates and fees on short-term credit agreements be reviewed and set aside. This is on the grounds that the National Credit Regulator (NCR) and the Minister of Trade and Industry failed to consider the effect these caps would have on the microlending industry and the provision of short-term credit to consumers.
According to a BusinessLIVE report, the court found that the Minister could not support assertions that he had consulted the short-term credit industry and had balanced the rights of consumers and credit providers. Nor could the regulator provide evidence of its own alleged research, including engagements with 19 credit providers.
The judgment follows an application brought by MicroFinance SA in terms of the Promotion of Administrative Justice Act. The report notes short-term credit agreements include loans not exceeding R8 000, which are repayable within a period of not more than six months. The NCR is to appeal the decision.
Article disclaimer: While we have made every effort to ensure the accuracy of this article, it is not intended to provide final legal advice as facts and situations will differ from case to case, and therefore specific legal advice should be sought with a lawyer.
