Maximum Interest Rates and Fees to Fall!
The new Maximum Interest Rates and Fees regulations for credit of all kinds have finally been published in the Government Gazette by the Minister of Trade and Industry, Dr Rob Davies.
According to the new regulations, signed off by the Minister on 21 October and published on 6 November, a far more reasonable formula is to be used to calculate maximum interest rates and fees charged on credit are to be limited more strictly.
In June 2015, the DTI published a notice about altering the formula used to calculate maximum interest rates. The regulations are scheduled to take force 6 months after the final publication date. So we can’t expect lower maximum interest rates and fees just yet, irrespective, here they are:
New Maximum Interest Rate Limits:
| Mortgages/Bonds | Credit Facilities | Unsecured Credit | Incidental Credit |
|---|---|---|---|
| Repo Rate + 12% yearly | Repo Rate + 14% yearly | Repo Rate + 21% yearly | Repo Rate + 2% monthly |
Maximum Initiation Fees
Creditors charge a once-off initiation fee when you take out credit. This fee is supposed to cover the costs involved with providing you with credit, such as staff wages, credit checks and affordability assessments. But, these steep initiation fees also allows creditors to make a profit.
| Mortgages/Bonds | Credit Facilities | Unsecured Credit |
|---|---|---|
| R1100 + 10% of amount over R10 000 | R165 + 10% of amount over R1 000 | R165 + 10% of amount over R1 000 |
| Maximum charge of R5250 | Max charge of R1050 | Max charge of R1050 |
MFSA Sparked Fees Review
Micro Finance South Africa (MFSA) sparked this regulation overhaul by compelling the government to review credit fees and interest rates in the well-publicised court case. Though monthly account fees being increased from R50 up to R60 may sting a touch. Any progress is good progress and, in the current economic climate, South African consumers are grateful for even slight relief.
You can download the Government Gazette Maximum Interest Rates and Fees Regulations here:
https://www.greengazette.co.za/notices/national-credit-act-34-2005-review-of-limitations-on-fees-and-interest-rates-regulations_20151106-GGN-39379-01080