Unlawful Credit Agreements – Section 89(5)(b) of the NCA declared Constitutionally invalid

In a unanimous judgment the Constitutional Court has upheld the judgment of the Western Cape High Court declaring section 89(5)(b) of the National Credit Act constitutionally invalid.

Previously Section 89(5)(b) provided that

“[i]f a credit agreement is unlawful in terms of this section, despite any provision of common law, any other legislation or any provision of an agreement to the contrary, a court must order that—(b) the credit provider must refund to the consumer any money paid by the consumer under that agreement to the credit provider, with interest calculated—

(i) at the rate set out in that agreement; and

(ii) for the period from the date on which the consumer paid the money to the credit provider, until the date the money is refunded to the consumer”.

The matter came before the High Court prior to the operation of the National Credit Amendment Act, which provides that a court should make a just and equitable order when faced with unlawful credit agreements.

As the Amendment Act had not yet come into operation at the time the matter was in the High Court the Constitutional Court has in the interim clarified the position by echoing the words of the Amendment Act as follows:- To remedy the defect, from 5 June 2014 to 13 March 2015, section 89(5) of the National Credit Act is deemed to read as follows:

“(5) If a credit agreement is unlawful in terms of this section, despite any other legislation or any provision of an agreement to the contrary, a court must make a just and equitable order including but not limited to an order that:
(a) The credit agreement is void as from the date the agreement was entered into.”

Read the judgment here:- http://www.saflii.org/za/cases/ZACC/2015/15.html

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