National Credit Act obliges businesses to communicate in plain language

All businesses that give credit must comply with the National Credit Act (NCA). One of its purposes is to correct imbalances in negotiating power between consumers and credit providers. It aims to do this by:
- educating consumers about credit and consumer rights
- giving adequate disclosure of standardised information so they can make informed choices
- protecting consumers from deception and from unfair conduct.

So how does the NCA intend to achieve this purpose? It places several onerous obligations on credit providers to change their current business models and to change their credit agreements.

One of the new consumer rights set out in the NCA is the right to receive information in plain and understandable language. While other laws passed before the NCA have also required certain information to be given to consumers in plain language (most notably the Financial Advisory and Intermediary Services Act, 2002), this is the first law to give a definition of plain language. In section 64, the NCA provides:

"A document is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the document is intended, with average literacy skills and minimal credit experience, could be expected to understand the content, significance and import of the document without undue effort, having regard to:
- the context, comprehensiveness and consistency of the document
- the organisation, form and style of the document
- the vocabulary, usage and sentence structure of the text
- the use of any illustrations, examples, headings, or other aids to reading and understanding."

Frances Gordon, co-founder of plain language consultancy and training company, Simplified, points out that, according to this definition, plain language is not just about the words. "For a document to be in plain language the novice borrower must be able to understand the purpose of the document – in other words, why is the document important to the borrower; why must the borrower sign it?," Gordon explains.

"The definition also highlights comprehensiveness – have you given the borrower all the information they need to make an informed decision: for example, the amount of principal debt, any initiation fees, the interest, and taxes?"

Gordon believes that to comply with this definition of plain language, businesses may have to do user testing.

The right to receive information in plain and understandable language cannot be contracted out of by a consumer. This means that a business cannot merely insert a clause to the effect that the consumer declares that they understand and appreciate the purpose of the contract.

Section 81 of the NCA requires credit providers to assess whether the borrower does in fact understand and appreciate the risks and costs of the proposed credit, as well as their rights and obligations under the contract.

To ensure compliance with the plain language requirements of the NCA, businesses must:
- Write for the ordinary consumer – put yourself in the mind of the reader and ask if they will understand the contract
- Use plain, familiar words and include a glossary for difficult words
- Keep sentences and paragraphs short
- Write informative headings
- Use pictures, design techniques and examples to help readers understand important concepts.

Businesses must view the plain language requirements as an opportunity to build customer loyalty. The more a customer understands, the more likely they are to want to do business with you.