Question

NOTE: This written report is based on characters and events in the movie "Confessions of a Shopaholic" that was shown in class during November 2019. 1. National Credit Act (10 Marks) 100D CREDIT TACT The National Credit Act was passed to ensure that consumers are protected from unscrupulous lenders and to ensure that all credit lenders follow fair lending practices. 1.1 (4) When Rebecca Bloom originally applied for credit from "The Fab Store", she would have needed to provide certain documents so that her creditworthiness could be assessed. Identify TWO of these documents and provide a reason why the creditor would ask for them. Document Reason 1.2 According to the National Credit Act, consumers have certain rights regarding their credit. List FOUR of these rights. (4) 1.3 Do you personally feel that there is a need for such legislation to be in place? Give a reason for your answer. (2)

Answer 1

Answer to question number 1.1:

Credit worthiness encompasses the borrowers ability and willingness to pay. Two documents asked by the creditor while giving credit are:

A) Borrower's Balance Sheet :-Creditor ask for borrower's balance sheet to study the borrower's ability to repay the credit. It also helps the creditor to consider the likelihood of credit recovery if the borrower goes into bankruptcy.

B) Cash Flow Statement:- Creditor may ask for borrower's Cash Flow Statement to understand the creditor's liquidity movements. Cash flow statement and ensures that the borrower has a steady influx of cash and that he is eligible for extending credit.

Answer to question number 1.2:

Consumers have certain rights regarding their credit as per the national Credit Act. 4 of these rights are as follows:

1) Right to information:

consumers have the right to information which must be provided to them for free of cost if such information is given every 12 months aur for a fee if the consumer request for information more than once within 12 months.

2) Right to apply for credit:

Consumers have the right to apply for the credit and to receive a copy of the credit agreement for free.

3) Right to protection:

Consumer has a right to be protected against discrimination in granting of credit.

4) Right to apply for debt counselling:

Consumers have the right to apply for debt counselling. They have a right to be counselled that they need to be overwhelmed by debt or not.

Answer to question number 1.3:

Yes, I do personally feel that there is a need for such legislation to be in place. This is so because of the following reasons:

A) It includes greater disclosure of the cost of credit.

B) IT results in automatic credit increase bi prohibition of negative option marketing.

C) It prohibits unlawful terms and conditions or clauses that may be adopted in the market.

D) It helps to regulate the market and also the advertisement whether it be the home or the work place.

Hence, so there is a need for such legislation to be in place.