In short
Start with a question people skip: are you the credit provider at all? The duty to register falls on the party extending the credit under the agreement. In South Africa most people who put capital into private lending are not that party — they fund an administrator, originator or platform that lends, and the registration is that business's duty rather than theirs. Check it holds one. If you are the lender on the agreement, the duty is yours, and then it turns on who is borrowing. Every loan to an individual is covered by the National Credit Act, whatever the size, and registration is required at any amount — since 2016 the threshold has been R0. A loan to a business whose assets or turnover reach R1 million is outside the Act, as is a loan of R250 000 or more to a smaller business. One trap: buying the rights to a loan somebody else wrote makes you a credit provider too.
Lending your own money is lawful in South Africa. Registration is not a general licence to be a lender. It is a duty that attaches only where the National Credit Act covers the particular agreement. Whether it does depends mostly on who is borrowing, with the size of the loan mattering in one situation. So the first question is never whether lending is legal. It is whether the Act reaches the loan in front of you.
Only once that is answered yes does the registration threshold come into it. And then there is no number of loans, and no size of loan, that keeps a lender below it, because it is R0.
01 — First of allAre you the credit provider at all?
This question comes before every other one on this page, and it is the one most often skipped. The duty to register falls on the credit provider — the party extending the credit under the agreement. Not on everybody whose money is involved.
In South Africa most people who put capital into private lending are not the credit provider. They fund a business that lends: an administrator, an originator, a platform, a fund. The agreement is between that business and the borrower, the business is the credit provider, and the registration is its duty rather than yours. Which position you are in sets out the ways capital reaches a borrower.
| What you are doing | Who the credit provider is | Whose registration |
|---|---|---|
| Funding a lender — your capital, their agreement with 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 | You, as well | Yours. See the note below. |
Funding a lender does not mean you have no agreement. Where capital reaches a borrower through a vehicle there are at least two: the one between you and the vehicle, and the one between the vehicle and the borrower. They are assessed separately, and somebody else in the chain holding a registration says nothing about the position of yours. How the money actually moves works that through.
If the credit provider is somebody else, the rest of this page is about them, and your job is to check they hold the registration — the NCR's register of credit providers is public. If the credit provider is you, read on.
02 — The orderThen two questions, in order
Almost every wrong answer on this subject comes from running these two together. They are separate, and the second only arises if the first is answered yes.
- Does the National Credit Act apply to this agreement? Section 4 decides that, and the answer depends almost entirely on who the borrower is.
- If it applies, must you register? Section 40 decides that, and since 2016 the answer is yes at any amount.
So a lender who says I only do one or two loans a year, so registration cannot apply to me has answered the second question with a rule that no longer exists, and never asked the first one at all.
03 — Section 4Is your loan covered by the Act?
Start from the right place. The Act covers your loan. That is the default, and most lenders who think they are outside it have simply never checked.
There are then two ways out, and both of them are about the borrower being a business. If neither applies to you, the Act covers your loan and you can go to the next section.
- The borrower is a big business. Then the Act does not cover the loan at all, whatever you lend.
- 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, no matter how large, and every ordinary loan to a small business.
What counts as a big business
Two things both have to be true. Fail either one and the borrower is not a big business.
- It has to be a business rather than a person. A company or a close corporation counts. Someone trading under a business name does not — a sole proprietor is still an individual, so lending to them is always covered. A trust counts only if it has three or more trustees who are individuals, or a trustee that is itself a company. A family trust with two individual trustees is therefore not a business here, and lending to it is covered.
- Its assets or its turnover have to reach R1 million. Either one on its own is enough. And you measure the whole group rather than just the borrower in front of you, so a small company owned by a large one is counted together with its owner.
What counts as a big loan
This only matters if the borrower is a small business. A loan is a big one if either of these is true.
- It is secured by a mortgage over property. The amount makes no difference. A mortgage is always a big loan.
- It is R250 000 or more. Below that figure an ordinary loan is not a big one.
Both figures — R1 million and R250 000 — come from a 2006 notice and are still current. The figure that changed is the separate registration threshold in section 40, dealt with in the next section. Mixing the two up is the single most common mistake made on this subject.
The same rules, as examples
Most people recognise their own situation faster in an example than in a rule.
| The loan you are making | Covered by the Act? | Because |
|---|---|---|
| R3 million to an individual, secured over their house | Yes | They are a person. The size of the loan changes nothing, and neither does the mortgage. |
| R2 million to a plumber trading as Botha Plumbing | Yes | A sole proprietor is an individual. Borrowing for a business does not change that. |
| R80 000 to a company turning over R40 million | No | A big business. Turnover alone puts it over R1 million, so nothing about the loan matters. |
| R150 000 to a two-person start-up company, unsecured | Yes | A small business borrowing an ordinary amount. Being a company is not enough on its own. |
| R900 000 to that same start-up, secured by a mortgage | No | Small business, but a mortgage is a big loan. Same borrower, different answer. |
| R400 000 to a family trust with two individual trustees | Yes | A two-trustee trust is not treated as a business here, so neither way out is available to it. |
One more way a loan can fall outside the Act
The Act only covers loans made at arm's length — meaning each side was bargaining for itself. It then names the arrangements that are not at arm's length:
- A loan between a company and someone who controls it, either way round. Lending to your own company is the everyday example.
- A loan between family members who depend on each other financially, or where one depends on the other.
- Any arrangement where the parties are not independent and so are not each trying to get the best deal they can.
The family one is narrower than people assume. Being related is not enough on its own — there has to be dependency. A loan to a financially independent adult relative can be at arm's length and covered like any other. Calling a commercial loan a family arrangement does not make it one.
04 — Section 40The threshold is R0
If the Act covers the loan, section 40 requires the credit provider to register with the National Credit Regulator. That is usually the lender who made the loan. It is also anyone who buys the loan afterwards: taking over a lender's book puts you in the same position as the lender who wrote it.
Until 2016 that obligation was triggered by thresholds: a credit provider had to register once it had a certain number of credit agreements, or once the total principal debt owed to it passed a set figure. Both of those triggers are gone. The 2014 amendment removed the agreement-count trigger, and the threshold prescribed in 2016 is R0.
In practice this means a single ordinary interest-bearing loan to which the Act applies can require the lender to be a registered credit provider. Being an occasional lender is not an exemption. Neither is lending to just one borrower, lending only to people you know, or lending money you happen to have spare.
05 — If you got it wrongWhat happens if you should have registered and did not
This is the part that makes the question worth getting right before the money moves rather than afterwards.
Lend without being registered when you should have been, and the credit agreement is unlawful under the Act. What happens next is decided by a court under section 89.
The court has to make an order that is just and equitable. That wording matters, and it is where most published material on this subject is out of date. Until 2014 the consequences were automatic and fixed by the Act. Since 2014 they are not: the court decides what is fair on the facts in front of it.
- The outcome is not certain in advance. A court may set the agreement aside. It may order something less drastic. What it may not do is apply a fixed penalty, because the 2014 amendment removed the fixed penalties from the Act.
- The risk sits with you, not the borrower. The point of the section is to protect a borrower from an unregistered lender, not to punish them for having borrowed.
- Registering afterwards does not fix it. What matters is whether you were registered when the loan was made.
So the honest summary is that you do not know what a court will do, and that is the problem. An unenforceable loan and a loan enforceable on terms a court thinks fair are both worse than a loan you can simply call up.
Weigh the two sides properly. Register when you did not have to, and you have lost a fee and some paperwork. Fail to register when you should have, and a court decides what your loan is worth. Those are not the same size of risk.
06 — RegisteringWhat registration actually involves
You apply to the National Credit Regulator. It is a real application, not a form you file. You have to say who you are and who stands behind you, satisfy the Regulator that you are fit to hold a registration, and pay the fees it sets.
Then the work starts. People underestimate this part badly. Once you are registered you carry duties that do not stop, and each of these is a rule you can breach:
- You report to the Regulator. Returns are due whether or not you lent anything that period.
- You tell borrowers things in a set form. The Act prescribes what you disclose and how.
- You may not charge what you like. Interest and fees are capped.
- You have to check that a borrower can afford the loan before you make it. Skipping that is reckless lending, and it has its own consequences.
- You keep records. For years, and in a form the Regulator can inspect.
Registration is not a certificate you get once and put in a drawer.
The Regulator publishes a searchable register of registered credit providers. Anyone dealing with a lender who should be registered can, and should, check it.
07 — The boundaryWhat this page does not decide
Whether the Act reaches your agreement is a question about your facts: the borrower's legal form, its turnover and asset value, whether related entities aggregate with it, the type and size of the agreement, and whether the parties dealt at arm's length. Those facts are not knowable from a web page.
What this page can do is tell you which questions decide it, in what order, and which widely repeated answer is out of date. Take your own legal advice on the arrangement in front of you rather than reasoning from the general case — and be particularly wary of advice, from anyone, that leads with a rand threshold.
- If you are lending your own money directly to a borrower
- You are the credit provider, and this question is yours to answer.
- If you are providing capital to someone else who lends it on
- You may not be the credit provider at all — the registered lender may be. That is a different legal position with different consequences, set out on what you would actually hold.