The electronic signature of credit agreements is problematic! Electronic signatures are taking off across all kinds of industries in South Africa. The credit industry is often an early adopter of emerging technologies – and electronic signatures are no exception. Credit providers are keen to reduce the amount of physical paperwork between themselves and their credit consumers when it comes to cash loans, vehicle financing and other kinds of credit agreements. But, there’s a catch: electronic signatures on credit agreements have special requirements in terms of the NCA (National Credit Act 34 of 2005) that don’t apply to other kinds of transactions.

The catch

s2(3) of the NCA about ‘Interpretation’ says that:

If a provision of this Act requires a document to be signed or initialed by a party to a credit agreement, that signing or initialing may be effected by use of—
(a) an advanced electronic signature, as defined in the Electronic Communications Act, 2002 (Act No. 25 of 2002); or
(b) an electronic signature as defined in the Electronic Communications Act, 2002 (Act No. 25 of 2002), provided that—
(i) the electronic signature is applied by each party in the physical presence of the other party or an agent of the party; and
(ii) the credit provider must take reasonable measures to prevent the use of the consumer’s electronic signature for any purpose other than the signing or initialing of the particular document that the consumer intended to sign or initial.

[our emphasis in bold]

So, there are two options for signing credit agreements electronically:

  1. Use an advanced electronic signature (you can read more about advanced electronic signatures here); or
  2. Use an ordinary electronic signature, provided that:
    • the credit consumer is in the physical presence of the credit provider when they use it; and
    • the credit provider secures the credit consumer’s electronic signature against being used to sign documents related to any other transaction.

The problem with the Electronic Signature of Credit Agreements

These special requirements are problematic, because they affect the ease and accessibility of electronic signatures when it comes to credit agreements. The credit consumer will either have to get an advanced electronic signature, which requires face-to-face verification, or use an ordinary electronic signature face-to-face with a representative of the credit provider. It would seem that you cannot sign a credit agreement electronically without the credit consumer appearing before someone in person at some point in the process.

Questions arising

This problem raises many questions, including:

  • Is there a way around the NCA?
  • What transactions does the NCA not apply to?
  • What does the physical presence requirement mean anyway?
  • Do the benefits of concluding credit agreements electronically outweigh the risks?

More information

If you would like more information about this and other issues related to electronic signatures, why not: