The National Credit Regulator (NCR) has advised credit providers to take heed of this week's judgement against the use of child support and foster care grants as income on credit applications.
"Credit providers are warned to observe this judgement and ensure that they do not allow consumers to use child support and foster care social grants as income in credit applications," said NCR Chief Executive Officer Nomsa Motshegare.
On Wednesday the National Consumer Tribunal (NCT) handed down judgment in favour of the NCR against Aristoscan CC, a micro lender trading as JMK Cash Loans.
JMK Cash Loans was found guilty of various contraventions of the National Credit Act, including reckless lending.
The evidence presented by the NCR showed that JMK Cash Loans extended credit to consumers who received child support and foster care social grants.
The National Consumer Tribunal, which is an independent adjudicative entity, was established in terms of the National Credit Act 34 of 2005 (the NCA). The Tribunal derives its mandate from the NCA and as such, hears all sides of a case before making a decision. A decision by the Tribunal has the same status as one made by a High Court.
In its judgement, the NCT made a finding that child support and foster care social grants are income to be used for the benefit of third parties and cannot be deemed to be the consumer's income.
"This judgement clarifies that child support and foster care social grants are not to be used as consumer income in credit applications. They are intended to be used for the care and support of the children," said Motshegare on Thursday.
The National Consumer Tribunal and the National Credit Regulator -- which is responsible for the regulation of the South African credit industry -- are entities of the Department of Trade and Industry.