Constitutionalisation and Transformation of Credit Law Practices such as Set-Off: An Analysis of National Credit Regulator v Standard Bank Ltd of South Africa Ltd

• Jurisdiction: South Africa
• Date: 20 September 2020
• Published date: 20 September 2020
• Author: Mupangavanhu, B.
• Pages: 417-434

CONSTITUTIONALISATION AND

TRANSFORMATION OF CREDIT LAW

PRACTICES SUCH AS SET-OFF: AN

ANALYSIS OF NATIONAL CREDIT

REGULATOR v STANDARD BANK LTD OF

SOUTH AFRICA LTD*

BRIGHTON MUPANGAVANHU

†

Senior lecturer in Mercantile and Labour Law,

University of the Western Cape

Abstract

Often there is a gap between the black letter of the law, or the

aspirations for law reform enunciated by a statute, and how the law

actually transforms practices in relevant industries. This was the case

in the credit industry, specifically with respect to the practice of set-off

by banks who are in a credit agreement with a customer. Sections

90(2)(n) and 124 were inserted into the National Credit Act 34 of

2005 to introduce a new system of set-off that represents a complete

break from set-off at common law. The common-law set-off practices

resulted in injustices to consumers and favoured credit providers who

could apply it without consultation with, or notice to, customers. The

relevant purpose of the NCA in this regard was to address and to

correct imbalances in negotiating power between consumers and credit

providers. A relevant way of achieving this is through protecting

consumers from deception and unfair conduct by credit providers. To

address such deception and unfair conduct, the Act, through sections

90(2)(n) and 124 intended to exclude the common law from applying

to credit agreements governed by the Act. Yet despite the existence of

the new set-off provisions in the NCA, banks in South Africa, between

2007 and 2019, continued to apply the common-law rules even to

credit agreements governed by the Act, contrary to the spirit, purposes,

and objects of the Act. This all changed after the National Credit

*[Ed:for a different perspective, see Reddy, ‘National Credit Regulator v Standard Bank of

South Africa Limited: Common-law Right of Set-off Excluded from Credit Agreements Under

the National Credit Act’ (2019) 31(2) SA Merc LJ 341.]

†

LLB (Fort Hare) LLM (UKZN) PhD (Cape Town).

417

(2019) 31 SA Merc LJ 417

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Regulator approached the court to seek a declaration by the court that

the bank’s right to apply common-law set-off was ousted by the NCA.

The court issued such a declaration in 2019. This article analyses

National Credit Regulator v Standard Bank of South Africa Ltd

2019 (5) SA 512 (GJ). It looks at the facts, the legal question(s)

answered by the court, the judgment, reasons for the judgment and the

impact of the judgment on the development of credit law

jurisprudence. Under impact, the note looks at the important role of

contextual interpretation and the teleological interpretation of statutes

in the transformation and constitutionalisation of credit law, and how

the effective enforcement of the NCA can bring to life the aspirations of

statutes and contribute towards transforming unconstitutional

practices to align them with the spirit, purport and objects of the Bill of

Rights. The case note also argues for improved clarity of some

provisions of the NCA, and for the provision of an express ouster of the

common law in section 124.

IINTRODUCTION

The National Credit Act

1

seeks, in a nutshell, to attempt to achieve a

delicate balancing of the interests or rights of credit consumers and those

of credit providers.

2

The challenge of achieving this diff‌icult balance has

been the subject of many Constitutional Court and High Court judg-

ments.

3

At the centre of the arduous task of balancing these interests or

rights has been the interpretation of the provisions of the Act.

4

In

National Credit Regulator v Standard Bank Ltd, the High Court had to

interpret sections 90(2)(n) and 124 of the NCA to answer chief‌ly the

question whether the bank’s common-law right of set-off is ousted by

the NCA, in particular by these two provisions.

5

How the court

answered this question is important for the development of jurispru-

dence in the area of credit law in South Africa. The signif‌icance of

1

Act 34 of 2005 (NCA). See GN 230 in GG 28619 of 15 March 2006.

2

Section 3 of the NCA describes the general purpose of the Act as to ‘promote and advance

the social and economic welfare of South Africans, promote a fair, transparent, competitive,

sustainable, responsible, eff‌icient, effective and accessible credit market, industry, and to

protect consumers ...’.

3

The latest is the case under review — the National Credit Regulator v Standard Bank of

South Africa Ltd 2019 (5) SA 512 (GJ). See also Sebola v Standard Bank of South Africa &

another 2012 (5) SA 142 (CC); Du Bruyn NO & others v Karsten 2019 (1) SA 403 (SCA).

4

It should be pointed out that while balancing the interests of both credit providers and

consumers is an important purpose of the Act, its main objective is to protect consumers: see

Sebola para 40.

5

National Credit Regulator para 1.

(2019) 31 SA MERC LJ

418

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