Johannesburg - The Constitutional Court on Monday upheld a judgment by the Western Cape High Court that a provision of the National Credit Act is unconstitutional.
The Constitutional Court found in a majority judgment that section 89(5)(c) of the Act was inconsistent with the right to property.
The section provides that a credit provider loses his rights to reclaim money lent to a consumer if he is not a registered credit provider in terms of the Act.
The Act requires a credit provider to register if more than R500 000 is lent out. If one fails to register as a credit provider, the credit agreement is unlawful and void.
The case arose after Filippus Opperman lent Jacobus Boonzaaier R7m in 2009. Opperman was not registered as a credit provider.
When Boonzaaier admitted he could not repay the debt, Opperman applied for the sequestration of Boonzaaier's estate.
The High Court found the provision denied the credit provider any claim against the consumer for repayment of the money without leaving discretion to a court to decide otherwise.
The National Credit Regulator and the minister of trade and industry both opposed the High Court order.
The majority ruling by the Constitutional Court found that by removing the unregistered credit provider's restitution claim, it deprived the person of property.
The court further held that the deprivation was not a reasonable and justifiable limitation of the right to property as there were less restrictive means to achieve the purpose of the provision.