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Fees and Charges Guide


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FEES and CHARGES – HOW MUCH SHOULD YOU PAY?

- Introduction

- The NCA

- Fees and Charges

- What the Act Dictates

• Home loans

• Vehicle loans

• Credit cards

• Personal loans

Introduction There are strict rules about the amount of fees and the cost of charges you should pay on your borrowing via facilities such as home loans, credit cards and even your bank overdraft. Some providers may try and charge you too much, whilst you might be able to negotiate lower fees with other providers, so it is important to know what you should be paying. This guide will help you understand your rights. The National Credit (NCA) was introduced in 2007 and was designed to provide consumers with more safeguards in terms of credit – the loans and borrowing they take out – by ensuring that providers, such as banks and lenders, take greater steps to ensure that consumers can afford to make their loan repayments and do not end up over-indebted; in other words having more debt than they can afford to pay. The NCA is complicated and even some credit providers do not fully understand the rules and how they should be applied to consumers. Check out our Guide to the National Credit Act for more information about the NCA, or visit the National Credit Regulator’s website at www.ncr.org.za This guide, however, will help you better understand the fees and charges you should pay for credit facilities, and whether you can try and reduce those costs.
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The NCA The Act “aims to protect consumers taking credit or entering into consumer credit transactions.” It not only regulates all institutions that provide consumer credit but “makes provision for the control and regulation of all credit transactions, including mortgages, credit cards, overdrafts, micro-loans and pawn broking transactions.” The National Credit Regulator (NCR) was created under The Act and “is tasked with carrying out education, research, policy development, registration of industry participants, investigation of complaints, and ensuring enforcement of the Act.” Perhaps most importantly, the Regulator is required to “promote the development of an accessible credit market, particularly to address the needs of historically disadvantaged persons, low income persons, and remote, isolated or low density communities.”
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Fees and Charges The NCA and NCR are essentially there to help and protect the consumer in what is a complicated and fierce credit world. One of the ways it has done this is by setting maximum limits on the interest rates and fees that credit providers can charge so as to make it easier and less expensive for consumers to enter into credit agreements. However, since The Act was passed some credit providers have used it as an excuse to charge the maximum rates, claiming that they are required to do so. This is not the case. By making yourself aware of The Act you will be in a stronger and more informed position to negotiate better rates with credit providers. Before entering into a credit agreement make sure your provider makes clear what you will be paying and what for If you are given just one figure then ask to have it broken down so that you can see what you will be paying in fees, charges and interest payments There are limits to what you can be charged but you should by no means settle for paying these maximums If you think the fees and rates are too high then negotiate for a better deal or look elsewhere
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What The Act dictates
Home loans
Interest rates -	the maximum interest rate you can be charged on a mortgage bond is the repo rate multiplied by 2.2, plus 5 percent. The repo rate is the rate at which the South Africa Reserve Bank lends money to commercial banks.
Initiation fees -	institutions offering home loans can charge a maximum initiation fee of R1,000 plus 10% of the amount of the loan in excess of R10,000 plus VAT. This is capped at a maximum fee of R5,700 inc. VAT.
Monthly fees -	the maximum monthly administration fee you can be charged is R57 inc. VAT.
Valuation fees -	you can no longer be charged a valuation fee. The cost of valuing your property must be included in the initiation fee.
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Vehicle loans
Interest rates -	the maximum interest rate you can be charged on vehicle loans is the repo rate multiplied by 2.2, plus 10 percent.
Initiation fees -	the maximum initiation fee you can be charged for a vehicle loan is R150, plus 10% of the amount in excess of R1,000. This is capped at a maximum fee of R1,140 inc. VAT. Furthermore, the initiation fee may not be more than 15% of the principal debt.
Monthly fees -	the maximum monthly administration fee that lenders can charge is R57 inc. VAT.
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Credit cards
Interest rates -	the maximum interest rate you can be charged on the outstanding balance of a credit card is the repo rate multiplied by 2.2, plus 10 percent.
Initiation fees -	the maximum initiation fee you can be charged for a credit card is R150, plus 10% of the agreement in excess of R1,000. This is capped at a maximum fee of R1,140 inc. VAT.
Monthly fees -	the maximum monthly administration fee that lenders can charge is R57.
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Personal loans
Interest Rates -	the maximum interest rate that lenders can charge on a personal loan is the repo rate multiplied by 2.2, plus 10%.
Initiation fees -	the maximum initiation fee that you can be charged for a personal loan is R150, plus 10% of the agreement in excess of R1,000. This is capped at a maximum fee of R1,140 inc. VAT. Furthermore, the initiation fee may not be more than 15% of the principal debt.
Monthly fees -	the maximum monthly administration fee that lenders can charge is R57.
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For more information on the National Credit Act and the National Credit Regulator, go to www.ncr.org.za

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