Amendments to the Financial Intelligence Centre Act, 2001 ("FICA") have changed the definition of accountable institutions, raising important considerations for credit providers, including those of offer incidental credit.
Schedule 1 to FICA now lists a person who carries on the business of a credit provider as defined in the National Credit Act, 2005 ("NCA") as an accountable institution and certain credit providers excluded from the application of the NCA.
An incidental credit agreement is defined as an agreement, irrespective of its form, in terms of which an account was tendered for goods or services that have been provided to the consumer, or goods or services that are to be provided to a consumer over time and either or both of the following conditions apply:
- a fee, charge or interest became payable when payment of an amount charged in terms of that account was not made on or before a determined period or date; or
- two prices were quoted for the settlement of the account, the lower price being applicable if the account is paid on or before a determined date, and the higher price is applicable due to the account not having been paid by that date.
In an incidental credit agreement, the agreement becomes an incidental credit agreement 20 business days after the supplier first charges a late payment fee, interest, or a higher price for a full settlement. This applies to goods or services provided to the consumer unless the consumer pays the settlement value before that date. By way of a typical example:
X concludes a sale agreement with Y and Y affords X the convenience to pay at a later stage without charging interest to the owed amount. If X fails to settle the amount on the determined date and Y charges interest for the late payment, the agreement would become an incidental credit agreement 20 days after the late payment fee is first charged by Y.
The question for consideration is therefore whether providers of incidental credit constitute accountable institutions. If so, they would be obliged to register with the Financial Intelligence Centre and roll out FICA compliance.
The deadline for registration as an accountable institution has lapsed and the Financial Intelligence Centre has warned that those accountable institutions that have failed to register are currently non-compliant and must register as a matter of urgency.
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