The Most a Lender May Legally Charge You

There is a list of things a credit agreement may charge you for. It is short, it is closed, and anything not on it is not chargeable.

That is not a principle or a guideline. The National Credit Act says a credit agreement must not require payment by the consumer of any money or other consideration, except — and then names seven items. Interest. An initiation fee. A service fee. Credit insurance. Default administration charges. Collection costs, which is where a debt collector's charges have to fit. And the principal debt itself.

Each of the first six is capped. And once you fall into default, there is a further rule that puts a ceiling on the entire pile at once — a ceiling most people have never heard of, and which is considerably more generous to them than the common law it replaced.

The maximum interest rate, by credit type

Interest is capped by formula rather than by a fixed number, so the caps move whenever the Reserve Bank moves the repo rate. The formulas were set in November 2015 and took effect on 6 May 2016.

Writing RR for the repo rate, the maximum prescribed interest rate is:

The right-hand column uses the repo rate of 7.00%, effective 29 May 2026 — the same repo rate that puts prime at 10.50%. If the repo rate has moved since you read this, recompute from the formula; our prime rate history records every change and the repo rate behind it.

Two of the rows are worth pausing on.

Short-term transactions are the payday-style loans, and the cap is expressed per month, not per year, because the loans are short. Five per cent a month on a first loan is not five per cent a year. It is also the only row where the cap falls on repeat borrowing — 3% a month on subsequent loans within the same calendar year — which is a deliberate discouragement of rolling one loan into the next.

Incidental credit agreements are the 2% per month row, and they are not loans at all. That is the charge added when an ordinary account — a doctor's bill, a municipal account, a retailer's invoice — goes unpaid past its due date. It has its own cap, and no initiation fee may be charged on it at all.

The initiation fee, and when it may not be charged

An initiation fee is a once-off charge for setting up the agreement. It is capped in rands, on a two-part formula, and the caps differ by credit type:

Note the hard rand ceilings in bold. On an unsecured loan the initiation fee cannot exceed R1 050 no matter how large the loan is — the 10% component stops mattering above about R9 850 of principal.

Then there are two rules about when the fee may be charged, and both are commonly breached.

An initiation fee must not be applied unless the application results in the establishment of a credit agreement with you. A fee for an application that was declined, or that you did not proceed with, is not permitted by the Act.

And the regulations add: an initiation fee must only be charged when a new credit agreement is established with a consumer, and must not be charged on a transactional basis where there is no new credit agreement. That closes the practice of levying a setup fee every time a facility is drawn on.

The service fee is R60 a month

The monthly service fee is capped at R60. It covers the operational cost of administering the agreement — rent, labour, communication, banking, processing your repayments and related administration.

It must be charged pro rata in the calendar month in which the agreement was concluded, so a loan taken out on the 20th does not attract a full month's fee for those eleven days.

One thing the notice setting these amounts does not do is say whether the figures include VAT. Since it is silent and secondary sources contradict each other, the sensible move is to ask your lender directly whether a fee it has quoted is inclusive or exclusive, and to get the answer in writing.

There is also a specific carve-out worth knowing if your credit facility is attached to a bank account. A service charge on that account is subject to the cap if it would not have been levied but for the credit facility. If the charge would have been there anyway — an ordinary monthly account fee — it falls outside the cap. So a bank cannot dress a facility fee up as an account fee, but it is not obliged to bring genuine account fees under the R60 ceiling either.

The rule that caps everything at once

This is the provision worth knowing before any other, and it applies from the moment you fall behind.

Despite any provision of the common law or a credit agreement to the contrary, the amounts contemplated in section 101 (1) (b) to (g) that accrue during the time that a consumer is in default under the credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under that credit agreement as at the time that the default occurs.

Take it slowly, because each part carries weight.

"(b) to (g)" is everything except the principal itself — the initiation fee, the service fee, the interest, the credit insurance, the default administration charges and the collection costs. Not interest alone. The old common-law rule capped interest; this one captures the whole stack of charges.

"may not, in aggregate, exceed the unpaid balance of the principal debt... as at the time that the default occurs" fixes the ceiling at a specific moment. If you owed R20,000 in capital on the day you fell behind, then everything that accrues while you remain in default — every rand of interest, every service fee, every collection charge — is capped at R20,000 in total.

"Despite any provision of the common law or a credit agreement to the contrary" means the contract cannot contract out of it.

The practical consequence is that a debt cannot quietly triple while nobody is paying it. If you have been handed a settlement figure that is more than double the capital outstanding when you first defaulted, that figure needs explaining, and this is the section to ask about.

Default interest, and changes to your rate

Two more limits sit alongside.

Default interest cannot be a penalty rate. The interest rate applicable to an amount in default or an overdue payment may not exceed the highest interest rate applicable to any part of the principal debt under that agreement. A lender may not switch you to a punishment rate because you missed a payment.

Your rate and fees cannot be raised unilaterally. A credit provider must not unilaterally increase the periodic or incidental service fees, or the method of calculating them, or the interest rate — except on an agreement that genuinely has a variable rate. And a variable rate is only permitted where it moves by a fixed relationship to a reference rate stated in the agreement, which must be the same reference rate the lender uses on similar agreements it is currently issuing. That is what stops "variable" meaning "whatever we decide".

You must be told. At least five business days' written notice is required for a change to the interest rate, the amount of a fee or charge, or the frequency or timing of a fee. On a variable-rate agreement, where the change follows the reference rate, notice must come no later than 30 business days after the change takes effect.

How to check your own agreement

The exercise is short and it is worth doing once on every credit agreement you hold.

1. Identify the credit type. Mortgage, credit facility, unsecured, short-term or incidental. The cap depends entirely on which one it is, and the gap between rows is wide.
2. Check the rate against the formula, using the repo rate on the day the agreement was made rather than today's.
3. Check the initiation fee against the rand ceiling for that type — and check that a fee was not charged on a transaction that established no new agreement.
4. Check the monthly service fee against R60, and ask whether the figure quoted is inclusive of VAT.
5. List everything else you are being charged and test it against the closed list. If a charge is not the principal, interest, an initiation fee, a service fee, credit insurance, a default administration charge or collection costs, ask under which paragraph of section 101(1) it is levied.
6. If you have defaulted, apply the aggregate cap. Establish the capital outstanding on the day of default, then compare that figure to the total of everything charged since.
7. Put queries in writing and keep the replies. Every remedy here depends on a paper trail.

If the numbers do not add up, the routes are the National Credit Regulator, the relevant ombud scheme, or — where the position is genuinely bad — a debt counsellor, whose costs are themselves regulated and set out in our guide to what debt counselling costs. Where the charges have found their way onto your credit record, our guide to reading your credit report explains what you are looking at.

And before borrowing at all, the caps above are a ceiling rather than a going rate. Plenty of credit is priced well below them; our comparison of loan apps in South Africa is a starting point for seeing the spread.

For everything else, start at our money guides.

Frequently asked questions

What is the maximum interest rate a lender can charge in South Africa? It depends on the credit type, and each cap is a formula on the repo rate: mortgages repo + 12% a year, credit facilities repo + 14%, unsecured credit repo + 21%, developmental credit repo + 27%, other agreements repo + 17%. Short-term loans are capped at 5% a month on a first loan and 3% a month on later loans in the same calendar year, and incidental credit at 2% a month.

What are those caps in actual percentages right now? At a repo rate of 7.00%, effective 29 May 2026: 19.00% on mortgages, 21.00% on credit facilities, 28.00% on unsecured credit, 34.00% on developmental credit and 24.00% on other agreements. Recompute from the formula whenever the repo rate changes.

What is the maximum initiation fee? R165 plus 10% of the amount above R1 000, capped at R1 050, for unsecured, short-term, credit facility and other agreements. Mortgages are R1 100 plus 10% above R10 000, capped at R5 250. Developmental credit is R275 (small business) or R550 (low income housing) plus 10% above R1 000, capped at R2 600. No initiation fee may be charged on incidental credit.

Can I be charged an initiation fee if my application is declined? No. An initiation fee must not be applied unless the application results in the establishment of a credit agreement with you, and it may not be charged on a transactional basis where no new agreement is created.

What is the maximum monthly service fee? R60 a month, charged pro rata in the month the agreement was concluded. The instrument setting the amount does not address VAT, so ask your lender whether a quoted fee is inclusive.

Can my debt keep growing indefinitely while I am in default? No. The fees, interest, credit insurance, default administration charges and collection costs that accrue while you are in default may not in aggregate exceed the unpaid balance of the principal debt as at the time the default occurred — despite anything in the common law or the agreement.

Does that cap include collection costs? Yes. It applies to the amounts in section 101(1)(b) to (g), which includes collection costs and what a debt collector may add, not interest alone.

Can a lender charge me a higher rate because I missed a payment? No. The rate on an amount in default may not exceed the highest interest rate applicable to any part of the principal debt under that agreement.

Can my lender raise my interest rate or fees? Not unilaterally, except on a genuine variable-rate agreement whose rate moves by a fixed relationship to a reference rate stated in the agreement. Changes to the rate, a fee amount, or the timing of a fee need at least five business days' written notice; a variable-rate change must be notified within 30 business days after it takes effect.

What may a credit agreement charge me for at all? Only the principal debt, an initiation fee, a service fee, interest, the cost of credit insurance, default administration charges and collection costs. The Act says an agreement must not require payment of any money or other consideration except those.