The interaction between the CPA and the NCA caused headaches from the start. Section 5(2)(d) provides that the CPA will not apply to ‘transactions’ which are ‘credit agreements’. The section contains the important proviso that ‘the goods and services that are the subject of the credit agreement are not excluded’.
The confusion created by the qualified exclusion of credit agreements was evident in MFC (a division of Nedbank Ltd) v Botha. The bank purchased a vehicle from a car dealership in order to sell it to Botha in terms of an instalment sale agreement, which is a credit agreement for purposes of the National Credit Act. The credit agreement provided that the bank does not make any warranties in relation to the condition of the goods. Botha returned the vehicle to the bank, because the vehicle was defective. The question before the court was whether the bank could sell the vehicle in terms of s 127 of the National Credit Act in order to credit the amount owed by Botha or whether Botha was entitled to return the vehicle in terms of s 56(2), which would entitle him to a full refund.
So, the question before the court was whether the credit provider was a supplier for purposes of the CPA. The judgment criticised the lack of clarity created by s 5(2)(d) by pointing out that ‘[i]t is not plainly evident how a consumer in the position of the respondent [Botha] would be able to avail of the protection offered to consumers in terms of s 56(2) of the CPA.’ In short ‘[h]e could not return the vehicle to the supplier [the dealership] against a refund of the purchase price because ownership of the car vested in the credit provider; and it was the credit provider, and not he, that had paid the purchase price.’ This, as well as the solution proffered by the judgment in paragraph 9 is not correct. Botha would be able to return the vehicle directly to the dealership as s 56(2) can be enforced against the producer, importer, distributor or retailer regardless of whether a contract exists between the consumer and one of those parties.
It was also held that the six-months window of opportunity for appropriate action to be taken had passed. This is a reference to the six-month period mentioned in s 56(2). However, the effect of the six-month period deserves further discussion. Section 55(2)(c) provides that consumers are entitled to goods which ‘will be useable and durable for a reasonable period of time’. In the case of a car, that period will almost certainly be longer than six months and it is possible to argue that the s 56(2) remedies will still be available to consumers.
Ultimately, it was held that the consumer could not rely on s 56(2) against the bank, because of the exclusion of the credit agreement in s 5(2)(d) and because the applicant was not a ‘supplier’ in terms of the CPA. It was held that the proceedings should be adjourned to enable the bank to take the appropriate steps in terms of s 129(1); in other words, the court held that the appropriate steps would be to treat the consumer as if he were in default. This conclusion is as unfair to the consumer as it is incorrect (as discussed above).
In summary, the consumer should have been able to return the vehicle as it is a supplier in terms of the CPA as well as the common law. It would then be for the bank to pursue a claim against the dealer. The exclusion of liability will also not avail the bank. The court failed to note that in terms of the NCA it is unlawful for a bank to insert a provision in a credit agreement which ‘purports to exempt a credit provider from liability, or limit such liability for’… (ii) any guarantee or warranty that would, in the absence of such a provision be implied in a credit agreement’. Given that the law of sale as well as the CPA applies, which both protect the consumer against defective goods, the bank cannot exclude liability.
Published by Juta on http://www.jutalaw.co.za/