SCA Ruling: Personal Loans and the NCA
- Hanekom Attorneys
- Mar 26
- 1 min read
The Case
The Supreme Court of Appeal (SCA) ruled in Allied Steelrode (Pty) Ltd v Dreyer and Another that informal, interest-free loans between individuals aren't subject to the National Credit Act (NCA), overturning a High Court decision.
The High Court's Error
The High Court had decided that a personal loan and its Acknowledgement of Debt (AOD) were credit agreements under the NCA because it included provisions for deferred payment and interest on default.
SCA's Key Findings
The SCA disagreed. It found:
The loan was informal, stemming from personal ties (not a commercial arrangement).
No interest was charged, except in the case of default (mora*), which is not enough to make it a credit agreement under the NCA.
Why It Matters
The SCA clarified that the NCA only applies to commercial transactions, not personal, interest-free loans between individuals. The presence of interest on default doesn't automatically bring it under the NCA.
Conclusion
The SCA ruled the loan was not a credit agreement under the NCA, setting an important precedent for informal loans between parties with personal relationships. Parties entering into personal financial arrangements should carefully consider whether their agreements meet the criteria set out in the NCA.
*Mora interest is compensation for late payments on a contract.
🚨 Legal Update: The SCA has ruled that informal, interest-free personal loans are NOT subject to the National Credit Act! ⚖️💡 This overturns a High Court decision and clarifies that the NCA only applies to commercial transactions.
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