November 11, 2021

You could end up in even more debt.

During the festive season, consumers often find themselves wanting to take out loans.

However, not everyone will qualify for a loan and desperate measures might see consumers making use of so-called “loan sharks”. Consumers should avoid getting trapped in the shark tank this festive season and keep the provisions of the National Credit Act (“NCA”) in mind. The NCA is an important tool that can be used to protect consumers who enter into a credit agreements with these credit providers who take advantage of vulnerable consumers without complying with the law. In addition to provisions of the NCA, the National Credit Regulator (“NCR”) is a forum tasked with the duty to crunch down on these unlawful credit providers.

How can you identify a loan shark?

A loan shark can be defined as a person/business that provides credit or lends money to consumers (“credit providers”) without complying with the legal requirements. The following three signs can help to identify a loan shark.

Sign one

>     The NCA provides that all credit providers must be registered with the NCR and must visibly display their registration certificate on their business premises. The registration certificate must contain the credit provider's registration number (linked to the letters “NCRCP”), which can be used to report any complaints to the NCR.

>     If a credit provider does not have a registration certificate on display or is unable to provide you with their NCRCP number, this is an indication that the credit provider is not registered. Any credit agreement entered into with an unregistered credit provider (such as a loan shark) is unlawful and unenforceable in a court of law.

 Sign two

>     In addition to being registered, credit providers are also required by the NCA to conduct affordability assessments. This means that the credit provider will request certain documents from you to establish if you qualify for the credit or loan you are applying for, for example, your latest payslips or bank statements.

>     If a credit provider offers you a loan without requesting any documentation that can be used to assess your ability to pay back the loan, this is another indication that you may be dealing with a loan shark.

Sign three

>     Loan sharks often also use unlawful adverts that entice vulnerable consumers into taking out loans. These adverts often contain phrases like “black listed applicants allowed” or “no credit check required”.

>     These types of adverts are unlawful and consumers should not respond to these adverts no matter how desperate they are.

What are some of the dangers when dealing with loan sharks?

>     Dealing with loan sharks can not only lead to legal dangers (excessive interest rates, invalid agreements and so on), but it can also be dangerous in a physical and emotional sense.

  >   Loan sharks often use extreme and unregulated collection procedures, for example,

-      assaulting, intimidating or threatening the consumers or their family members to ensure payment is made; or

-      requesting and holding consumers' identity books, bank cards and so on until payment has been made in full.

Where can a loan shark be reported to?

>     If you feel that a credit provider is contravening the NCA, for example, not being registered, charging excessive interest, or using extreme and unregulated collection procedures, you can file a complaint with the NCR for investigation (a complaint form can be on their website:

>     In some instances, the loan sharks can also be reported at the South African Police Service (“SAPS”). This can be in instances where the loan shark used extreme and unlawful collection procedures, such as, intimidation, threats or assault.

 >    The NCR also has the power, after completing an investigation into a complaint, to refer a matter to the SAPS.

 What if I am already caught up in a spiral of debt and need help?

>     Loan sharks specialise in praying on people who are in vulnerable financial situations. Do not find yourself trapped in a pool of sharks and struggling to get out of the deep waters.

>     The NCA introduced debt counselling (also known as debt review) as a tool to assist people experiencing financial problems in keeping their heads above water.

>     Debt counselling is a procedure in which an over-indebted consumer applies to court to have his/her debt re-arranged, for example, by reducing the monthly instalment amount and extending the period over which the outstanding balance is paid back to the credit provider.

Did you know… Any credit agreement entered into with an unregistered credit provider is unlawful and unenforceable in a court of law.