TRANSACTIONS TO WHICH THE CREDIT AGREEMENTS ACT AND THE USURY ACT APPLY
1. It is important to know to which transactions the Credit Agreements Act 75 of 1980 and/or the Usury Act 73 of 1968 apply. For example, section 11 of the Credit Agreements Act prohibits a claim for the return of goods on account of the breach of a sale or lease regulated by that Act, unless 30 days’ written notice has been given to the credit receiver to remedy the breach, and the Usury Act materially limits the amount of finance charges that may be claimed in terms of an agreement to which it applies.
Credit Agreements Act
2. The Credit Agreements Act came into operation in South Africa by Proclamation 30 of 1981 (SA) on 2 March 1981, and was made applicable to South West Africa by section 1 of Proclamation AG 17 of 1981 (SWA) with effect from 27 May 1981.
3. The Credit Agreements Act may apply to the following transactions in respect of movable goods, provided the Minister responsible for the administration thereof makes it applicable thereto:
3.1. the genus of credit agreements consisting of two species:
3.2. leasing transactions; and
3.1.2.1. the sale of movable goods in terms of instalment sale transactions;
3.1.2.2. the sale of movable goods in terms of credit transactions other than instalment sale transactions;
3.1.2.3. the rendering of services in terms of credit transactions.
4. A credit transaction is defined as meaning the sale of movable goods, or the rendering of services, against payment of a stated or determinable sum of money at a stated or determinable future date or in whole or in part in instalments over a period in the future.
5. An instalment sale agreement means a transaction in terms of which:
5.1. movable goods are sold as mentioned in paragraph 4 above; and
5.2. the purchaser does not become the owner of the goods sold merely by the delivery to, or the use, possession or enjoyment by, the purchaser thereof; or
5.3. the seller is entitled to the return of the goods if the purchaser fails to comply with any term of that transaction.
6. A leasing transaction is a transaction in terms of which movable goods are leased against payment of a stated or determinable sum of money at a stated or determinable future date or in whole or in part in instalments over a period in the future, but excludes a transaction by which it is agreed at the time of conclusion thereof that the lessee shall:
6.1. become the owner of the goods:
6.1.1. during or after expiry of the lease; or
6.1.2. after termination of the lease; or
6.2. after such expiry or termination retain the possession or use or enjoyment of the goods.
7. According to the proviso in section 2(1) of the Credit Agreements Act the Minister lacks the power to make it applicable to credit agreements in terms of which:
7.1. the goods are purchased or hired for the sole purpose of:
7.1.1. selling them; or
7.1.2. leasing them; or
7.1.3. using them in connection with:
7.1.3.1. mining;
7.1.3.2. engineering;
7.1.3.3. construction;
7.1.3.4. road building; or
7.1.3.5. a manufacturing process; or
7.2. the State is the credit grantor.
8. By Notice AG 67 of 1981 the Administrator-General on 27 May 1981 in terms of section 2(1) of the Credit Agreements Act made it applicable to:
8.1. the sale of goods listed in the Schedule thereto in terms of credit transactions, including instalment sale transactions;
8.2. leasing transactions in respect of goods listed in the Schedule thereto, in terms of which the cash price is N$100 000 or less.
9. The Schedule lists 20 items in three broad categories:
9.1. machines and equipment (items 1-6);
9.2. durable household goods (items 7-18); and
9.3. motor vehicles (times 19-20).
10. Simultaneously with AG 67 the Administrator-General published Regulation AG 68 of 1981 in terms of section 3 of the Credit Agreements Act, prescribing the minimum initial payment and maximum payment period in respect of the credit and leasing transactions to which that Act was made applicable by AG 67, with reference to goods listed in the Schedule thereto, which contained 20 items corresponding identically to the items in the Schedule to AG 67.
11. AG 67 was never amended. But AG 68 was amended several times:
11.1. dropping the following items from the Schedule thereto:
11.1.1. crankshaft grinding equipment;
11.1.2. reboring and honing equipment;
11.1.3. line boring machines;
11.1.4. connecting rod conditioning machines;
11.1.5. automotive surface grinders;
11.1.6. engine dynamometers;
11.1.7. venetian and other blinds, irrespective of the material from which these articles are manufactured;
11.1.8. camping equipment, including tents but excluding caravans;
11.1.9. sporting and pleasure vessels of all kinds, including inboard and outboard engines for such vessels;
11.1.10. television receivers and accessories therefore, but excluding close circuit television equipment;
11.1.11. television aerial systems and accessories therefore, but excluding communal television aerials systems;
11.1.12. video cassettes and video tapes;
11.1.13. electronic television games; and
11.2. adding the following:
11.2.1. laser disc players;
11.2.2. video cameras, recorders and decoders.
12. The upshot of the circumstances mentioned in the paragraphs 10 and 11 above is in my view this:
12.1. The Credit Agreements Act continues to apply to the goods mentioned in paragraphs 11.1.1 to 11.1.13 above sold or leased according to credit transactions at a cash price of N$100 000 or less, but no minimum initial payment or maximum payment period is prescribed therefore.
12.2. The Credit Agreements Act does not apply to the sale or lease of goods mentioned in paragraphs 11.2.1 and 11.2.2 above, for that Act has never been made applicable thereto.
12.3. The minimum initial payment and maximum payment period purportedly prescribed in respect of the sale and lease of the goods mentioned in paragraphs 11.2.1 and 11.2.2 above are void, for lacking the constitutional essential for validity of rationality, because it makes nonsense to attempt to prescribe minimum initial payments and maximum payment periods in terms of section 3 of the Credit Agreements Act for transactions to which that Act does not apply.
13. Currently GN 177 of 1 December 1992 prescribes, for example, in respect of the sale or lease of household furniture at a cash price of N$100 000 or less the minimum initial payment at 10% of the cash price and the maximum payment period at 54 months.
Usury Act
14. The Usury Act came into operation in South Africa on 1 April 1969. Its application was extended with effect from 23 October 1974 to South West Africa by Act 62 of 1974 (SA) by the insertion of the following two definitions:
14.1. “Republic” includes the territory; and
14.2. “territory” means the territory of South West Africa.
15. The administration of the Usury Act has never been transferred to the Administrator-General of South West Africa. Thus South African amendments thereto up to the Usury Amendment Act 91 of 1989 apply in Namibia, and South African Notices and Regulations promulgated thereunder which applied on 21 March 1990 apply in Namibia, subject to Namibian amendments thereto thereafter.
16. The Usury Act applies to:
16.1. credit transactions;
16.2. leasing transactions; and
16.3. money lending transactions, unless exempted from that Act.
17. In terms of the Usury Act a credit transaction means any transaction by which:
17.1. movable property is sold or supplied, or services are sold or supplied, on credit against payment of a sum of money; or
17.2. the use and enjoyment of movable property or services is transferred or granted on credit against payment of a sum of money.
18. The Usury Act defines a leasing transaction as any transaction by which:
18.1. a lessor leases movable property to a lessee; and
18.2. the amount which is owing or will be owed in connection with the transaction is payable or will be payable after the date of the conclusion thereof.
19. A money lending transaction is defined by the Usury Act as a transaction which is substantially one of money lending, and includes:
19.1. any agreement in terms of which goods are sold under a condition of repurchase of such goods at a higher price, in which case the lower price is deemed the sum of money lent;
19.2. any transaction under which goods are purchased, services are rendered or cash is obtained by a credit card, in which case the price at which the goods are purchased or such services are rendered or the cash obtained is deemed the sum of money lent;
19.3. any transaction under which immovable property is sold against payment of a sum of money at a stated or determinable future date or in whole or in part in instalments over a period in future, in which case such sum, excluding finance charges, is deemed the sum of money lent;
19.4. any transaction in terms of which a sum of money owing for alternations or improvements to immovable property is to be paid by a debtor at a stated or determinable future date or in whole or in part in instalments over a period in future, in which case such sum of money is deemed the sum of money lent.
20. The Usury Act does not apply to:
20.1. a money lending transaction, credit transaction or leasing transaction in terms of which the principal debt on the date of the transaction exceeds N$500 000 (section 15(g) of the Usury Act read with regulation 5 of Regulation R943 of 5 May 1988 (SA));
20.2. a sum of money deposited with a bank or building society;
20.3. a leasing transaction expiring within three months, which is not renewed on expiry and in respect of which the principal debt and finance charges are payable before or on the date of expiry of the lease;
20.4. debentures quoted on a stock exchange in Namibia;
20.5. leasing transactions in terms of which the cash price or market value of the goods, less any deposit and less the present value of the book value of the goods, exceeds N$100 000 and the lessee waives the protection of the Usury Act;
20.6. leasing transactions according to which the lessee is entitled to terminate the lease by giving written notice of 90 day or less, without being held responsible for the payment of any increased or additional lease payments of any amount as compensation resulting from such termination;
20.7. credit and leasing transactions in terms of which movable property representing assets of a business is sold or leased with all the assets of the business as a going concern;
20.8. leasing transactions in terms of which:
20.8.1. the lease payments are wholly or partially deductible from the income of the lessee for income tax purposes;
20.8.2. the ownership of the leased goods shall not pass to the lessee at any time during or after the expiry of the lease period or after termination of the transaction; and
20.8.3. the lessee is not liable for or guarantees any amount in respect of the value of the leased goods at any time during or after the expiry of the lease period or after termination of the transaction.
21. Micro loan transactions are exempted by section 2 of GN 189 of 25 August 2004 from the Usury Act, save sections 2, 13, 14 and 17 thereof, on condition that the micro lender (a) is registered as such with the Registrar and (b) at all times complies with that notice. GN 189 defines a micro lending transaction as a money lending transaction in respect of which the loan amount:
21.1. does not exceed N$50 000;
21.2. together with finance charges must be repaid, whether in instalments or otherwise, within 60 months after advance;
21.3. is not paid in terms of a credit card scheme or withdrawn from a cheque account with a bank so as to leave that cheque account with a debit balance.
Credit Agreements Act v Usury Act
22. The Credit Agreements Act applies only to credit and leasing transactions to which it has been made applicable, whereas the Usury Act applies to the sale and lease of all goods.
23. The Usury Act governs the provision of services, while the Credit Agreements Act may be made applicable to the provision of services, which the Minister has not done.
24. The Credit Agreements Act does not cover transactions in terms of which the cash price exceeds N$100 000. The application of the Usury Act is restricted to principal debts of not more than N$500 000.
25. The Credit Agreements Act applies only to movables, while the Usury Act governs, in addition, improvements and alternations to immovable property as well as the sales of immovable properties.
26. A credit transaction is only subject to the Credit Agreements Act where the duration of the transaction exceeds three months. There is no minimum period in the case of credit transactions governed by the Usury Act.
27. In addition to credit and leasing transactions the Usury Act applies also to money lending transactions. The Credit Agreements Act does not apply to money lending transactions.
28. The Credit Agreements Act cannot be made applicable to contracts in terms of which goods are purchased or hired for the sole purpose of selling or leasing them or of using them in connection with mining, engineering, construction, road building or a manufacturing process. The Usury Act does not have such limitation.
29. Various leasing transactions and a particular credit transactions were exempted from the application of the Usury Act as mentioned above, but are still subject to the Credit Agreements Act.
(Compare: Otto, Credit Law Service, Service Issue 13 (April 2004), 3-2 to 3-3)