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National Consumer Tribunal overturns earlier ruling pertaining to effect of fixed interest rate credit agreements


Consumer Tribunal overturns previous rulings

The National Consumer Tribunal recently overturned its earlier ruling pertaining to the effect of fixed interest rate credit agreements. Until now, there existed uncertainty as to the interpretation of those provisions of the National Credit Act (“NCA”) that relate to “fixed interest rate credit agreements”.

Although the Act does not provide specifically for fixed interest rate agreements, it does provide for the following, which lead us to conclude that one can have a fixed interest rate agreement:

Section 103(4) A credit agreement may provide for the interest rate to vary during the term of the agreement only if the variation is by fixed relationship to a reference rate stipulated in the agreement, which reference rate must be the same as that used by that credit provider in respect of any similar credit agreements currently being issued by it.

Section 90(2) A provision of a credit agreement is unlawful if— (o) it states or implies that the rate of interest is variable, except to the extent permitted by section 103(4).

Even though it is accepted that the agreement between a credit provider and a consumer may provide for either a fixed or a variable interest rate, is was never clear how a fixed interest rate is affected by a change in the prescribed maximum interest rate. The question relates to the treatment of fixed interest rate agreements when the fixed interest rate exceeds the prescribed maximum interest rate as determined in terms of Regulation 42 . . . . . Read the full article

If you have any questions or require a more detailed discussion, contact Johan Erasmus at

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David Graham

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