Marketing of Credit

Marketing content and to whom such content may be marketed to is now regulated by the National Credit Act. Such regulation is limited to the advertising and marketing of any credit products, the cost of such products and any goods or services that are advertised for purchase on credit. All advertisements concerning the granting of credit must stipulate the applicable interest rate and any other credit costs involved in the granting of such credit. In addition to the content of advertising and advertising being regulated, the format of advertising is also regulated. For instance, all information that must be disclosed in print must be in the average font size of the advertisement. If the advertisement is in any other form, then the information that must be disclosed must feature prominently in the advertisement and must be displayed together.

*** Advertisements for the granting of developmental credit are excluded from the requirements of stipulating applicable interest rates and information relating to other credit costs, provided the National Credit Regulator has pre-approved the advertising form used by the credit provider of developmental credit and such a provider has used this pre-approved form.

What are they not allowed to do?

A credit provider cannot advertise or market that a credit agreement will automatically come into existence unless the consumer declines the offer for goods or services. This marketing is known as negative option marketing and it was previously used in the credit market industry to extend to credit to persons who had never in fact applied or requested such credit. The credit would be offered to you, and if you failed to decline the offer, you were deemed to have accepted the offer with the ensuing effect that a credit agreement would automatically come into existence.

The Department of Trade and Industry recognized that unsolicited credit, be it in the form of unsolicited mail offerings for loans and credit or coercive sales techniques such as negative option marketing, often results in consumers incurring more debt than they should. It is with the aforementioned in mind, that the National Credit Act now provides that if you enter into a credit agreement as a result of negative option marketing, such an agreement is unlawful and unenforceable. This means that the credit provider in such an instance shall not be able to collect or enforce the terms of the agreement.

Credit providers must not harass a person, or try and coerce or persuade any person, to enter into a credit agreement or to apply for credit. Credit sales at a person’s work or home are strictly prohibited. However, a credit provider may enter into a credit agreement at a private dwelling during a visit pre-arranged by the consumer for that purpose or if a credit provider visited the private dwelling for the purpose of offering goods or services for sale, and incidentally offered to provide or arrange credit.

Direct solicitation for consumers to enter into a credit agreement may not include statements such as “pre-approved” or “loan guaranteed” unless no further credit checks are required in the event of the credit being granted. Advertising statements such as “no credit checks required”, “blacklisted people welcome”, “free credit” are prohibited.

The National Credit Act now monitors the extent of disclosure that is necessary in the marketing and the advertising of credit. The mere reference to the availability of credit does not require further disclosure. The reference only to the interest rate of maximum and minimum rates as a range does not require further disclosure, except for initiation and service fees. If monthly installments or any other costs credit are referred to, then the following must be disclosed:

  • The installment amount
  • The number of installments
  • The total cost of all installments including interest, fees and compulsory insurance
  • The applicable interest rate

Advertisements must also not be misleading, fraudulent or deceptive. Statements of comparison, for example, “the cheapest credit card facility” must also be accompanied with the above information. Statements such as “low cost credit” also require full disclosure of the above information. Costs of credit that are advertised must feature prominently in the advertisement or if the advertisement is in print, then the costs must be in average font size. Common practices of having credit costs printed in very small print so as to be hardly noticeable are now a thing of the past.

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