In duplum rule and reckless lending under National Credit Act, its impact on credit agreement.
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Date
2019
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Abstract
This research deals with the common-law principle namely in duplum rule, maximum limit of interest that is charged for credit transactions. Customer’s protection has been a relatively recent development in the law sphere; the charging of the interest, however, has not. From compound interest, to simple interest, to no interest, the history of usury is lengthy. It is important, and more significantly, the dialog over how it should most effectively be regulated is equal in length and still a most contemporary topic discussion. Credit customer’s protection, being an obvious hybrid of this development, also had a fair share of academic literature devoted to it. Generally translated, in duplum means double the amount. It has been part of the South African legal system since the 1800s. It is a common law principle stating that interest on a debt will stop to run when the total amount of the arrear interest has increased to an amount equal to the outstanding principal debt. In a community where credit has become so easily accessible, the courts and legislature became obliged to develop the common law to afford more protection to the customers. For this very mission, the legislature promulgated the National Credit Act No 34 of 2005. The research also highlights reckless lending, which reckless credit lending that is used to be a new term introduced in the credit or lending market to increase customer spending, but it is currently a popular practice in the credit industry. The National Credit Act must protect customers, specifically against ever-present increasing reckless credit practices. Certain sections relating to reckless credit, however, are mostly unclear.
In South Africa, the legislature failed to make the statutory in duplum rule understandable and easy to apply, and instead complicated it by adding the costs of credit to the interest so that a need to calculate and determine which amounts would be considered in the "double" arose. The South African judiciary and legislature are obliged to educate the populace of the existence of the rule, as most transactions will not come to court and this may leave most debtors still over-indebted.
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Masters Degree. University of KwaZulu-Natal, Durban.