Micro finance is a broad term used to describe money lending on a small scale.

Registered Lenders

Micro-lenders are encouraged to register with the Micro Finance Regulatory Council (MFRC). The MFRC is an independent, non-profit organisation that has been empowered by government to regulate the micro-lending industry and protect the interests of consumers. All lenders registered with the MFRC should have a registration certificate displayed at their business.

Micro-lenders registered with the MFRC operate under different rules to lenders who are not registered. Most importantly, they qualify for the exemption in terms of the Usury Act which means they may charge you any interest rate.

For services, advice and information, visit the MFRC website. Information includes details on:

• rights
• unfair practices
• registered lenders
• complaints.

You can also contact them at

Toll-share: 0860 100 406

info@mfrc.co.za or complaints@mfrc.co.za

Unregistered Lenders

Micro-lenders who are not registered with the MFRC, are regulated by the Usury Act. This Act prevents lenders from charging excessive interest rates. These rates vary from time to time and the rate applicable depends on the date the loan agreement was entered into. Currently, these lenders cannot charge interest of more than 23% per year on a loan of less than R10,000, and cannot charge interest of more than 20% per year on a loan of more than R10,000 .

Unregistered lenders are controlled by the Department of Trade and Industry and can lend you an amount of up to R50,000. Your agreement will set out how long you have to pay back the loan.

You can only cancel a contract with an unregistered lender if you and the lender agreed to this before you signed the contract.

If you want to complain about an unregistered lender, you can contact the National Inspectorate of Consumer Affairs at 011 355 8008.

Tips

• You have three days in which to cancel a micro-loan agreement with a registered micro-lender, if you change your mind.
• Get a written contract setting out all costs and charges.
• Lenders must use legal mechanisms for collecting loans. The lender is not allowed to:
• ask to keep your bank card
• ask for your bank card number (PIN number)
• ask you to leave your ID book with him
• ask you to leave a grant payment card
• ask you to sign blank documents or documents with blank spaces
• use violent means to collect the money owed.
• No lender should charge an up-front fee with the application, in other words, a fee when you sign the agreement.
• Do not sign a ‘Consent to judgement’ when you take a loan.
• You have a right to ask for a statement at any time showing how much you have paid and how much you still owe.
• You must also receive your copy of the contract within 14 days of signing it.

Grants and Micro-Lending

You cannot use a social grant (for example a pension or child care grant) as surety for a loan. Lenders are not allowed to hold onto your grants payment card, as security for a loan.

If you are a recipient of a social grant, you will be required to sign a declaration saying that you will keep your grants payment card (also called an Allpay Card) safe and will not give it to a micro lender.