The National Association of Automobile Manufacturers of South Africa said the implementation of the new Act caused "broad consternation" in the motor industry as it impacted on sales of new and pre-owned vehicles. The association's new passenger car sales figures for June dropped by 19 percent to 30 839, compared with 2006.
Brian Riley, chief executive officer of WesBank, said increases in prime lending rates and fuel prices had contributed to the slowdown. He said the impact of the Act was going to take a while to settle, but it seemed to have had a greater influence than expected.
"We will only be able to see the true effects over the next six months," said Riley.
Mike MacMillan, the Head of Retail Credit at First National Bank, said consumers and credit providers were learning to adapt to the new processes and were getting wiser on how best to approach assessment.
"Within the next two months the affordability process will have been streamlined in most cases," said MacMillan.
He said the Act required far greater detail for the bank to assess affordability.
Louis von Zeuner, Absa Group Executive Director, said the National Credit Act required changes to the process of applying for credit.
"New industry-standard quote forms have been introduced. Put simply, the consumer will be made aware of the full cost of the credit. When assessing a customer's credit application, we look at both the customer's credit history, as well as the customer's ability to repay debt comfortably.
"In addition to existing credit obligations, the bank will also look at all of a customer's monthly expenses, including things like school tuition, investment contributions, insurance payments, groceries, utility bills and service agreements (for example, DStv payments). Therefore, a customer who may have previously qualified for a large home loan, for example, may now qualify for a smaller loan," said Von Zeuner.
Banks said there had been a decline in the number of credit approved.
MacMillan said FNB was also seeing a gradual decline in the credit standing of the population, as the impact of higher interest rates started impacting on household cash flows.
"So at the same time as affordability is preventing some consumers from obtaining credit, so is their creditworthiness."
Property investors are in for a boom time as more people will be forced to rent accommodation as the ripple effect of the National Credit Act (NCA) is felt. The Act is making it more difficult for people with heavy debts to have access to loans.
Jeanne van Jaarsveldt, Marketing and Finance Director of Re/Max Southern Africa, said the changes required to the system and the processes were not as alarming as had been projected in some areas, but they had experienced a 20 percent decline in approved applications in June.
He said the rise in interest rates also had an impact.
The initial impact of the Act on home loans was "settling down", he said, but the rental market was picking up. Van Jaarsveldt said the Act did not affect landlords and the demand for rent in the R4 500 to R6 500 bracket was on the increase.
Although the turnaround time for loan approval was significantly longer, banks and financial service providers were catching up.
"The banks took a conservative stance during the first 30 days, but the approval process is now much quicker," said Van Jaarsveldt.
In June, Pam Golding Properties said the residential property market was slowing down, but welcomed the Act.
Dina Soukop, Durban Pam Golding franchise holder, said although it took slightly longer for loans to be approved and processed, the Act was "clearing" a lot of people who knew they would not qualify for a loan.
"We have fewer cancelled sales or sales that drag on. A lot is being said about the Act, but give it a couple of months and people will be used to it," Soukop said.
She said the average time for a final grant was 21 days (compared with about four days previously) and the application included an affordability calculation.
The new regulations also stipulated that potential buyers had to go through a call centre where the details of the contract were explained.
"The process is taking longer, but banks like Absa and Standard are the most in control," Van Jaarsveldt said.
He said the industry expected an upward trend in the approval rate in the next two months when the finance industry had settled down.
"A home is still a basic need and people will continue to apply, but may have to look at the rental market if they do not qualify for a home loan in the price bracket they hoped to buy in," said Van Jaarsveldt.
He said the implementation of the Act by banks would be closely monitored. He said Absa's latest House Price Index found that the market was still recording good growth.
Year-on-year growth in the middle segment of the market in April was 15.5 percent with an average price of R911 800. In the first four months of the year, house price growth was 15.6 percent compared with the same period last year.
Van Jaarsveldt said the Act was designed to protect the rights of the consumers. "Ultimately this will lead to more stability in the credit environment and, we think, in the property market."
It is not only banks and estate agents that are affected. In terms of the Act, insurance companies may access consumer credit information to assess applications for insurance. However, consumers must give their consent.
This is according to Angelo Haggiyannes, director of Auto & General Insurance, who said it had been common practice in the past four years for insurance providers to request credit information to assess an application for insurance.
"However, up to now they haven't been required to get the applicant's consent before doing so. They are required to notify the applicant that their credit data would be part of the assessment and could affect their premium."
Randolph Samuel of Lucid Legal Services said the Act created stronger awareness of consumers' rights.
"While the National Credit Act is not intended to touch on insurers, they have been permitted to access credit data, which is obviously valuable in assessing risk. Insurance companies are legally required to submit the payment profiles and information on their policyholders on a monthly basis. What this means is that any defaults on payment of premiums will end up being recorded with the credit bureau," said Samuel.
He said up to now the insurer would simply notify the finance institution concerned when the policyholder had not paid the insurance premiums on a vehicle that had been financed, for example.
"This is no longer allowed and the financier would need to get consent of the client before adding the outstanding insurance premium to the costs of the credit agreement," said Haggiyannes.
The advertising industry is also severely affected. The Advertising Standards Authority of South Africa said it was vital for advertisers and marketers to have a clear understanding of the Act's requirements. Gail Schimmel, the head of legal and regulatory affairs for the authority, said, "The National Credit Act has major implications for the way that credit providers advertise".
Offers of credit with no reference to cost, interest rate or monthly instalments are no longer allowed. Advertisements must disclose the instalment amount, number of instalments, total amount, including interest, fees and compulsory insurance, interest rates and the final instalment payable. Financial service providers cannot insist on a customer using that provider's insurance options.
Phrases like "no credits checks required", "blacklisted consumers welcome" and "free credit" are no longer allowed. There are also restrictions on the use of the words "cheap, affordable or low cost" credit.
Under the Act, small print is also a thing of the past and information about costs and interest rates must be printed in the same font size as the rest of the advertisement. Radio and television advertising must provide equal prominence to all the elements of the cost of credit advertised.