The Financial Intelligence Centre (FIC) published an updated version of the draft public compliance communication 23A (PCC 23A) on Credit Providers, for a second round of consultation which closed on 7 February 2025. The first round of consultation on the draft PCC took place during December 2022 to January 2023. The updated draft version provides clarity on concerns that were raised during the first consultation such as terminology, the scope of credit providers in terms of the FIC Act, and matters relating to incidental credit agreements.
Interpretation of the Credit Provider definition
Credit Providers are defined in item 11 of Schedule 1 of the FIC Act. The definition essentially relates to two categories of credit providers.
The first category includes persons who carry on the business of a credit provider as defined in the National Credit Act (NCA) and are required to register as a credit provider with the National Credit Regulator (NCR).
The second category of credit providers refers to all persons who carry on the business of providing credit in terms of any credit agreement that is excluded from the application of the NCA, by virtue of section 4(1)(a) or (b) of the NCA.
Terminology
The meaning of the terms, including “credit agreement”, in the updated draft PCC have been aligned with the definitions in the NCA for both categories of credit providers. “Credit agreement” includes, inter alia, a credit facility, credit transaction, credit guarantee, or any combination of these.
Scope of credit providers under the FIC Act
Commentators sought clarification on the scope of “credit providers” under the FIC Act, particularly regarding those not registered under the NCA. The original interpretation seemed to focus on NCA-registered providers. In response, the draft PCC 23A has been updated to clarify which entities fall within the ambit of the second category of credit providers as per item 11 of Schedule 1 to the FIC Act. This category is broad, encompassing all credit agreements between legal persons, regardless of whether the credit agreement is not specifically excluded from the application of the NCA.
The updated draft PCC clarifies that the definition of credit agreement for purposes of the application of the second category of credit providers includes instances where: the agreement is at arm’s length, clients are juristic persons (regardless of their asset value or turnover), the agreements are large (as per the determined threshold) where the client is a juristic person, the credit provider is registered or operational in South Africa, and the creditor is the state or an organ of state. Exclusions relate to insurance policies, lease of immovable property, and transactions within stokvels.
Exclusion of incidental credit
The NCA includes parties supplying goods or services under incidental credit agreements as credit providers. However, section 40 of the NCA exempts those that only enter into incidental credit agreements from registering as credit providers with the NCR. Consequently, the FIC has clarified its view in the updated draft PCC that entities that are solely involved in incidental credit agreements, and which are not required to register with the NCR – are not considered to be conducting the business of providing credit. Therefore, these entities are not classified as accountable institutions under item 11 of Schedule 1 to the FIC Act.