Prior to the introduction of the NCA I had written an article explaining the legal and credit management concept of an acceleration clause.

Last month a comment was posted by Eugene Opperman asking my opinion on the effect of the NCA on acceleration clauses.

“Question: What is commonly referred to in credit management, as an acceleration clause is a clause in which a creditor granting a debtor the right to repay a debt in instalments agrees the right to proceed for the full debt in the event of the debtor defaulting in the payment of any instalment. Could a credit provider in terms of the National Credit Act still make use of such a provision in their agreement with a consumer?”

In retrospect I have revised my answer to Eugene and it is set out below.

On reflection my opinion on the issue is that, Section 123 – which states the grounds upon which a credit provider can cancel a credit agreement ” provides that the agreement must be terminated in accordance with Chapter 6 Part C. The crux of the termination in Chapter 6 Part C is in Sections 129 and 130.

• Section 129(1) provides that if a consumer is in default then the credit provider can send a letter advising the consumer of the consumer’s rights to various forms of relief in terms of the NCA, including debt rescheduling and various other relief ;

• Section 130 (1) allows a credit provider to approach a court to enforce a credit agreement if:

- the consumer is in default
- 20 business days have elapsed from the default
- 10 days have elapsed since a letter has been sent in terms of Section 129(1) or Section 86 (9) ( which appears to be a wrong reference to Section 86 (10) where a debt review has stalled for a period of 60 days or more and the credit provider wishes to proceed with legal action )
- The consumer has not responded to the Section 129 (1) notice or has responded by rejecting the credit provider’s offers in terms of Section 129(1)

• Section 129 (3) affords the consumer the right at any time before the credit provider has cancelled the agreement to pay any arrears and have the agreement “re-instated” ( this terminology is legal nonsense as an agreement that has not been cancelled is still in existence and can not be re-instated, but there is much that is legally nonsensically in the NCA).

One therefore has to try make some sense of the poor drafting of these sections and it would appear that the intention of the legislature is that the consumer gets “one last bite of the cherry” before a credit provider can cancel the credit agreement and/or enforce its rights, including any acceleration clauses. The Section 129 (1) notice is a prerequisite to any legal action and therefore if the consumer avails themselves of the rights in terms of the notice or brings the outstanding payments up to date then the credit provider cannot invoke the acceleration clause and claim full payment of the outstanding balance.

I would therefore say that while Section 129 is not explicit, it is implicit in terms of the rights afforded to a consumer in a Section 129 (1) notice in that it cannot contain an immediate acceleration notice to the consumer nor can such an acceleration clause be exercised by a credit provider before the expiry of the 10 day notice period after the notice.