The Namibian Credit Agreements Act 75 of 1980 (the Credit Agreements Act) recently underwent some substantial changes. The amendments as contained in the Credit Agreement Amendment Act 3 of 2016 (the Amendment Act) came into force on 1 August 2016.
The Credit Agreements Act regulates certain transactions in terms of which movable goods are leased or purchased on credit, or certain services are rendered on credit, and imposes restrictions on the amount of deposit payable and the duration of the repayment period in respect of selected credit lease or credit sale transactions.
The Amendment Act was promulgated in order to achieve an overall reduction in credit transactions of ordinary Namibian citizens, many of whom are living above their financial means and thus incurring debts with credit agreements. It aims to do so by amending (i) the definition of “leasing transaction”; (ii) the application of the Act; and (iii) potential penalties to be imposed in case of a contravention.
Amendments as per the Amendment Act
The definition of “leasing transaction” was amended as follows:
“'leasing transaction' means a transaction in terms of which a lessor leases goods to a lessee against payment by the lessee to the lessor of a stated or determinable sum of money-
(a) at a stated or determinable future date;[was: or] and (b) in whole or in part in instalments over a period in the future,
[was: but does not include] and includes a transaction by which it is agreed at the time of the conclusion [was: thereof] of the transaction that the debtor or any person on his behalf, shall at any stage-
(i) during or after the expiry of the lease; or (ii) after the termination of [was: that] the transaction;
become the owner of those goods or [was: after such expiry or termination] retain the possession or use or enjoyment of those goods.”
Previously, under the Credit Agreements Act, the stated or determinable amount was considered a leasing transaction if payment was to be effected at a stated or determinable future date or if payment was to be performed in instalments. In terms of the Amendment Act, both of these requirements are to be met in order for the transaction to be considered a leasing transaction.
In addition, whereas the Credit Agreements Act previously excluded agreements in terms of which the debtor became the owner of the goods or retained possession or use of the goods from the definition of "leasing transaction", the Amendment Act expressly includes these types of credit agreements in the definition. This means that the categories of credit agreements that fall under the definition of "leasing transaction", and therefore the application of the Act, have been expanded to include these types of transactions.
The application of the Credit Agreement Act as per section 2(1)(a) has been amended as follows:
“The provisions of this Act shall apply to such credit agreements or categories of credit agreements as the Minister may determine from time to time by notice in the Official Gazette: Provided that the Minister shall not have any power to apply such provisions to credit agreements in terms of which-
(a) a person purchases or hires goods for the sole purposes of [was: selling or leasing them or using them in connection with mining, engineering, construction, road building or a manufacturing process] business activities;”
In the past, the provisions of the Credit Agreements Act did not include agreements relating to specific industries, namely mining, engineering, construction, road building or manufacturing. In terms of the Amendment Act, the Act will not apply to credit agreements relating to any business activities. Although the scope and meaning of the term "business activities" is not defined in the legislation, when taking into consideration its normal, everyday meaning, we are of the view that henceforth the Act will only apply to credit agreements for the lease or purchase of personal assets (i.e. non-business activities).
Furthermore, previously under Notice AG 67 of 27 May 1981 (the 1981 Notice), the provisions of the Credit Agreements Act only applied to credit transactions in terms of which the cash price was N$100,000 or less. However, the Amendment Act has withdrawn the 1981 Notice in its entirety, including the provisions limiting the cash price to N$100,000 or less. Henceforth, the provisions of the Credit Agreements Act will therefore apply to all credit agreements, regardless of the cash price.
The offences and penalties as per section 23 of the Act have been amended as follows:
“Any person who contravenes or fails to comply with any provision of this Act, [was: shall be guilty of] commits an offence and is liable [was: upon conviction] to a fine not exceeding [was: N$5,000] N$50,000 or an amount equal to the deposit payable as required by the Act, whichever amount is higher or to imprisonment for a period not exceeding two years, or to both such fine and such imprisonment.”
Whereas previously under the Credit Agreements Act a person first had to be convicted in order to be liable to pay a fine, in terms of the Amendment Act, a conviction will no longer be a prerequisite and the person who contravenes the Credit Agreements Act or fails to comply with its provisions shall be obliged to pay the fine. It is not clear, however, whether such determination of a contravention or failure will be made by the Minister of Finance (or a person delegated to do so by the Minister) or a court of law.
The penalty amount has been increased from not higher than N$5,000 to not higher than N$50,000 or the amount that was payable as a deposit, whichever is the higher. This may mean that, for example, if the deposit was N$80,000, a person who has contravened or failed to comply with the provisions of the Act can be liable to pay a penalty of N$80,000, but where the deposit was, for example, N$35,000, such a person can be liable to pay a penalty of N$50,000.
Dentons would like to thank Nawala Kamati-Unger of Engling, Stritter & Partners for this month’s contribution to the Africa section of the Dentons South Africa Newsletter. In this article, Nawala provides an overview of recent amendments made to the Namibian Credit Agreements Act