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Acknowledgements of Debt under the National Credit Act

13 July 2007 4 Comments

The drafting of an Acknowledgement of Debt (AOD) in the new world that creditors have to face under the National Credit Act (NCA), has to be carefully done or there is a possibility that the AOD will constitute a credit facility, even though the original debt was an incidental credit agreement.

As has been previously discussed the onus and obligations of a credit provider on credit agreements, other then incidental credit agreements is very heavy. A poorly drafted AOD could novate what was originally an incidental credit agreement and make the debt a credit facility in which one would have to comply with pre-agreement disclosure and the AOD would have to include all the required clauses prescribed and face the hurdles of reckless credit granting.

So creditors have your standard AOD checked over by your attorneys and take advice on the issue before you fall foul of the NCA.


  • gideon van den berg said:

    i am still not sure about the process that will be followed with regard to AOD. if the AOD makes no provision for any interest only charges and collection commission will this suffice to fall out side the ambit of the NCA?

  • Brett Bentley (author) said:

    Gideon I think one has to draft the AOD with reference to the definition of incidental credit agreement, taking the original agreement into account and take care not to novate it in a way that pushes it in a full blown credit agreement as defined in Section 8 of the NCA.

  • Mishane Swartz said:

    When an AOD has been drawn up in respect of R 100 000,00 borrowed from the other party, who is not a credit provider, and the debt is payable in full before a certain date. The interest on the debt is levied at the current interest rate applicable to bond repayments. Will the NCA be applicable to such a transaction.

  • Linda said:

    Is it necessary to have a signed AOD to be able to charge interest on an incidential credit agreement?

    I buy repossessed properties and home owners associations and sectional title managing agents charge interest on arrear levies at 2% compounded per month. They claim they are entitled to charge this under the NCA – even if this is not contained in their rules.

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