LML4807 PORTFOLIO MEMO - MAY/JUNE 2023 - SEMESTER 1 - UNISA (DETAILED MEMO - DISTINCTION GUARANTEED!)

LML4807 PORTFOLIO MEMO - MAY/JUNE 2023 - SEMESTER 1 - UNISA (DETAILED MEMO - DISTINCTION GUARANTEED!) QUESTION 1 (Your answer should not exceed 2 pages) Briefly explain or discuss the following: 1.1 A creditor’s rights in terms of a stop order. (3) 1.2 The concept of safekeeping by banks. (4) 1.3 A bank’s common-law duty of confidentiality. (5) 1.4 The concept of mutuum. (4) 1.5 The operation of tripartite credit cards. (4) [20] QUESTION 2 (Your answer should not exceed 2 pages) Answer the following questions with reference to Schulze WG “The Bank’s right to cancel the contract between it and its customer unilaterally Bredenkamp v Standard Bank of South Africa Ltd 2010 (4) SA 468 (SCA)” (2011) 32 Obiter 211: ABC Bank decided to unilaterally terminate its bank-customer contract with Sipho in terms of an express cancellation clause in their contract. ABC Bank is of the opinion that retaining Sipho as a customer poses a reputational risk to the bank as Sipho is listed as being involved in illicit business activities by an international criminal investigation authority. 2.1 Advise whether ABC Bank was obliged to give Sipho reasonable notice of the termination of the bank-customer contract, and if so, discuss what would be regarded as “reasonable notice” before Sipho’s bank accounts may be closed. (6) 2.2 Sipho argues that ABC Bank’s decision to terminate their bank-customer contract will result in him becoming unbanked as other banks have indicated that they are unwilling to enter into a bank-customer contract with him. Advise ABC Bank whether it has an obligation towards Sipho in this regard. (4) [10] Page 7 of 10 Confidential LML4807 May/June 2023 QUESTION 3 (Your answer should not exceed 4 pages) At present, an electronic funds transfer (“EFT”) is probably the most common type of payment method used. Answer the following questions in relation to an EFT: 3.1 Briefly explain what is meant by an EFT. (5) 3.2 Mr Peter Smith has a current account with Trust Bank Ltd. This current account had a credit balance. The Centurion branch of Trust Bank Ltd acted upon the instruction of Peter Smith and transferred funds to an account of one of its other clients, Mr. John Smith, who coincidently appears to be the son of Peter Smith. However, earlier that day, the South African Revenue Services (“SARS”) informed the head office of the Trust Bank Ltd to collect funds on behalf of SARS in terms of the provisions of section 99 of the Income Tax Act 58 of 1962 from the account of Peter Smith. The Centurion branch did not receive notice of this collection notice before making the requested transfer to the account of John Smith. Upon receiving such notice from their head office, the Centurion branch reversed the earlier transfer which was made to John Smith, but without first obtaining consent from John Smith for the reversal to take place. Answer the following question with reference to the above set of facts. Advise John Smith fully on whether the Centurion branch of Trust Bank Ltd was legally allowed to reverse this EFT. In your answer refer to relevant case law and other sources to explain the current legal position to John Smith. (15) [20] QUESTION 4 (Your answer should not exceed 2 pages) 4.1 Paul plans to apply for credit to buy a new car. He reads on the internet that before concluding a credit agreement, the credit provider must give the consumer a pre- agreement statement and quotation. Paul wants to know what the quotation must contain and for how long the quotation remains valid. Advise Paul. (5) 4.2 Paul entered into a credit agreement with ABC Bank. The monthly installment due under the credit agreement is R500. The monthly interest is R290 and the remaining R210 is used to reduce the amount of the principal debt. Paul decides to pay R700 at the end of this month. Paul, therefore, wants to know if a prepayment is a requirement that the consumer must make under a credit agreement. He also wants to know in which order the payment will be credited if he pays R700 at the end of this month. Advise Paul. (5) 4.3 Paul reads on the internet that ABC Bank has entered into several reckless credit agreements with consumers. He, therefore, wants to know what the effect of a reckless credit agreement is. Advise Paul. (5) [15] Page 8 of 10 Confidential LML4807 May/June 2023 QUESTION 5 (Your answer should not exceed 2 pages) 5. 1 Indicate whether the following persons/juristic persons should, in each specific scenario, register as a credit provider under the National Credit Act 34 of 2005 and substantiate your answer: (a) Lesego, an unrehabilitated insolvent, lends R50 000 to a well-known businessman in the Western Cape. (2) (b) Rian, a 17-year old entrepreneur, lends R10 000 to an aspiring entrepreneur. (2) (c) Finance Galore (Pty) Ltd, a company specialising in short-term bridging finance and which has entered into 110 other credit agreements, lends a property developer R510 000. (2) (d) Rodrigo, a convicted fraudster, lends R5 000 to a teacher who is in financial distress. (2) (e) ESJ Printing (Pty) Ltd, a company selling copiers on credit, which has entered into 50 other credit agreements, sells a copier to Vincent on credit. (2) Assume that Loans-in-Hand (Pty) Ltd must register as a credit provider under the National Credit Act 34 of 2005 but has failed to do so. A consumer, who has entered into a credit agreement with Loans-in-Hand (Pty) Ltd now challenges the credit agreement entered into in a court. What is the sanction where a credit agreement is concluded by Loans-in-Hand (Pty) Ltd, which should have registered as a credit provider but failed to do so? Also, give an example of the order the court may make. (5) [15] 5.2 QUESTION 6 (Your answer should not exceed 3 pages) 6.1 What is meant by a “Twin Peaks model” of financial regulation? Briefly discuss. (5) 6.2 Explain how the Twin Peaks model differs from South Africa’s previous model of financial regulation. (5) 6.3 The purpose of the market conduct regulator is to oversee consumer protection and promote confidence in the financial system. Briefly explain how the market conduct regulator attempts to achieve its objective to protect financial customers. (5) Page 9 of 10 Confidential LML4807 May/June 2023 6.4 Briefly discuss the extent to which the regulator established to oversee the market conduct under the Twin Peaks model is allowed to regulate and supervise matters related to credit agreements. (5) [20] TOTAL: [100]