On 13 August 2025, the High Court held that the acknowledgement of debt under consideration was a credit agreement under the National Credit Act due to the deferral of the payment to a future date and interest charged on all overdue amounts until final payment. The court dismissed an application for payment of the debt because the creditor was not a registered credit provider, with costs.
The applicant and the first respondent concluded a loan agreement in 2023 in terms of which the applicant advanced an amount of R500 000 to the first respondent. In terms of the loan agreement, the loan amount would attract administration fees and interest at an unspecified rate but capped at R200 000. Additionally, the loan amount would attract daily penalty interest of 20%.
The first respondent failed to make payment under the loan agreement and as a result, the first respondent through the second respondent, acknowledged indebtedness to the applicant for an amount of R 1 209 600 which was to be paid before 31 May 2023, through the conclusion of an acknowledgement of debt (AOD). The failure to pay by 31 May 2023, would attract interest of 20% per month on amounts due until the final payment is made. The respondents did not make payment in accordance with the acknowledgement of debt.
In response to the applicant’s application, the respondents raised a preliminary point that the acknowledgement of debt was a credit agreement under section 8 of the NCA, the loan advanced exceeded the amount of R500 000 as per the Minister’s determination and therefore the applicant should have been a registered credit provider. The applicant’s failure to be a registered credit provider rendered the acknowledgement of debt unlawful and void.
A credit agreement is unlawful if it is concluded with an unregistered credit provider. This requirement becomes applicable when the prescribed threshold is reached, irrespective of whether the credit provider is involved in the credit industry and whether the credit agreement is a once off agreement. The acknowledgement of debt was held to be unlawful and declared void.
This judgment is not authority that all acknowledgments of debts giving time to paying an existing debt fall within the ambit of the NCA. This process involves examining the relationship between the underlying cause and acknowledgment of debt.