In short
Lending your own money in South Africa is lawful. There is no permission to seek before you may do it.
What the law does is impose duties on the credit provider — the party granting credit under the agreement. So two questions, in order. First: is the credit provider you, or a business you are funding? Second: if it is you, does the National Credit Act reach this agreement? Only if both point at you does registration arise, and then it arises at any amount.
01Yes, it is legal
There is no licence to lend money in South Africa. Nothing stops a private person or a company from lending its own capital to a borrower on agreed terms.
What exists instead is a set of duties that attach once you are the credit provider on an agreement the Act reaches. Those duties are real and they are enforced. But they are duties of conduct, not a gate you must pass before starting.
02Whose duty is it?
Before anything about thresholds: the registration duty belongs to the credit provider. That is the party on the lender's side of the credit agreement.
| If you are | The credit provider is | The registration is |
|---|---|---|
| Funding a lender — the agreement is between that business and the borrower | That business | Theirs. Check they hold it. |
| Lending yourself — your name on the agreement, the borrower owes you | You | Yours, if the Act reaches the loan |
| Buying the rights to a loan somebody else wrote | Possibly you — see section 05 | Conditional. Two questions, in order. |
03Does the Act reach the agreement?
Start from the right place. The Act covers your loan. That is the default, and most lenders who believe they are outside it have never actually checked.
There are then two ways out, and both are about the borrower being a business.
- The borrower is a big business. Then the Act does not cover the loan at all, whatever the amount.
- The borrower is a small business and the loan is a big one. Then the Act does not cover that particular loan — though it would cover a smaller loan to the same borrower.
Everything else is covered. That includes every loan to an individual, however large, and every ordinary loan to a small business.
What counts as a big business
Two things both have to be true. Fail either and the borrower is not a big business.
- It has to be a business rather than a person. A company or close corporation counts. A sole proprietor trading under a business name does not — they are still an individual, so lending to them is always covered. A trust counts only if it has three or more individual trustees, or a trustee that is itself a juristic person. A family trust with two individual trustees is therefore not a business here.
- Its assets or its turnover have to reach R1 million. Either one alone is enough. The test looks at the group, so a small company owned by a large one is counted with its owner.
What counts as a big loan
This matters only where the borrower is a small business.
- It is R250 000 or more. That is the figure fixed under section 7(1)(b) for a large agreement.
- Or it is secured by a mortgage over property. A mortgage agreement is a large agreement whatever the amount.
Family loans are narrower than people think. A loan between family members falls outside the Act as a non-arm's-length arrangement only where the parties are natural persons in a familial relationship who are co-dependent, or one is dependent on the other. Kinship alone is not enough.
04If it is yours, must you register?
Yes. At any amount.
The threshold determined under section 42(1) has been R0 since 2016. Before that there were two commonly cited escapes, and both are gone:
- The trigger that required registration once you were the credit provider under at least 100 credit agreements was deleted in 2014.
- The words requiring the threshold to be set at not less than R500 000 were also deleted in 2014, which is precisely what allowed the threshold to be set at nil two years later.
You apply to the National Credit Regulator, in the manner and form it prescribes. If the application is in order and you meet the criteria, the Regulator must register you.
That is not quite a formality. It may attach conditions, and some people may not be registered at all. Lesson nineteen sets out who.
05Buying somebody else's loan
The Act's definition of a credit provider includes any person who acquires the rights of a credit provider under a credit agreement after it has been entered into.
Read the whole phrase. The rights have to be rights under a credit agreement — which means one the Act reached in the first place. So buying a loan book is not a way around registration, and it is not an automatic way into it either.
06What being inside the Act actually does
Lenders often hear covered by the Act as protection. It is the opposite. The Act's stated purpose is to promote a fair credit market and to protect consumers — and the consumer is the borrower.
It also states a balancing purpose, so it is wrong to call it purely one-sided. But a lender gains nothing from being inside it that they would not have had at common law, and takes on duties they would not otherwise have had. Among them:
- You must take reasonable steps to assess the borrower before entering into the agreement. The failure to assess is itself what makes an agreement reckless, whatever the assessment would have shown.
- A court may suspend a reckless agreement. While suspended, the borrower need pay nothing, no interest or fee may be charged, and your rights under it are unenforceable.
- You may charge only the items on the closed list in section 101(1), most of them capped by regulation.
- You cannot draft around any of this. A clause purporting to waive or deprive a borrower of a right set out in the Act is unlawful.
That is the honest account. Part two and part three work through what it means in practice; today the point is only that covered means regulated, and the regulation runs the borrower's way.