If there is ever a sector that understands the weight of regulatory obligations, it is the motor sector. Currently, the FIC Act is the maestro of mayhem in the motor industry and classified as a high-priority-high-risk compliance area.
In addition, confusion around various FICA requirements remains widespread within the motor industry resulting in FICA fatigue influencing its compliance level. One such area is identifying the type of Accountable Institution that certain players in the motor space are.
The first step is to determine the actual activities fulfilled within a business purely because the business activities of an entity, will qualify it as an Accountable Institution. Registering as such, purely confirms it.
Under Item 20 of Schedule 1, motor dealerships clearly fall within the definition of a High Value Goods Dealers (HVGDs). This is not up for debate — every dealership that sell vehicles or parts valued at R100,000 or more per single item, or service vehicles using single parts of that value to complete a service, qualifies and must comply.
In addition, it is not news that dealerships that offers credit life insurance to customers, falls under Item 12 as a Financial Services Provider that offers financial services on long-term insurance products. Again, compliance with our anti money-laundering legislation, is not negotiable. It qualifies and must comply.
Where confusion still lingers, however, is around Item 11 of Schedule 1. Many dealerships mistakenly believe that they fall outside this category, especially where their credit arrangements fall outside the scope of the National Credit Act.
The FIC has made it unequivocally clear that the interpretation of Item 11 is inclusive, not restrictive. It specifically captures any business that provides credit, even if that credit agreement is excluded from the National Credit Act (NCA) under section 4(1)(a) and (b). Being exempt from the NCA does not exempt the dealership from FICA. Where a dealership offers credit arrangements like deferred payments, instalment sales, or any form of credit outside the NCA, it qualifies and must comply. Whether interest or costs is payable on any of these ‘pay later’ arrangements or not, has no bearing on the dealership’s qualification as an Item 11 Accountable Institution.
While the opinions of some legal advisors may clash with the guidance provided by the regulator, the regulator’s view will prevail. Following a contradicting legal opinion will not be an acceptable defence. It would be wise to follow the guidance of the establishment that can issue crippling financially administrative.
In summary, simply registering does not make a business an Accountable Institution; it is the business's activities that do and the linked FICA obligations should not be underestimated.
Upcoming articles will discuss the shift in compliance attitudes needed to transform the industry from experiencing FICA fatigue to being FICA focused.