The compliance assumption that mobile phone contracts are service agreements, and therefore outside the NCA's credit framework, persists in telco operations teams despite being wrong as a matter of statute. The handset advance component of a postpaid contract is a credit agreement under the National Credit Act. Not arguably. Not depending on structure. The NCA's definition of credit agreements is broad, the device finance model sits squarely within it, and there is no telco exemption.
The practical consequence is that telcos, handset finance companies, and fintech lenders bundling device finance must conduct a Regulation 23A-compliant affordability assessment before entering into the credit component of any contract. What that assessment must contain, what exemptions do and do not exist, and what the August 2025 draft amendments change: that is what this article covers.
Is a phone contract a credit agreement? The NCA answer
NCA Section 8(4) defines credit agreements broadly to include any transaction where a consumer receives goods and the obligation to pay for those goods is deferred to a later date. A handset advance in a postpaid contract fits this definition precisely: the consumer receives the device immediately, and the repayment obligation is spread across 24 monthly instalments at a disclosed monthly cost.
The argument that "it is a service contract, not a credit agreement" misunderstands how the NCA handles bundled products. The Act looks at whether any component of the transaction constitutes a credit arrangement. A postpaid contract that combines airtime, data, and a device advance bundles a service component with a credit component. The service component (airtime and data) may be treated as incidental credit or a service agreement depending on how the billing is structured. The device advance is not incidental credit; it is deferred payment for goods, which the Act captures directly.
Importantly, the Act does not contain an exemption for telecommunications providers. The NCR has made clear in its guidance that credit providers are defined by the nature of the transaction, not by the industry sector of the company providing the credit. A telco extending a handset advance is a credit provider for that transaction. The affordability assessment obligation applies.
The CDH November 2023 alert on affordability obligations, which explicitly covers all consumer credit providers including device finance, sets out the position plainly: the duty to conduct proper affordability checks applies regardless of whether the credit provider's primary business is telecommunications, retail, or financial services. Disregarding information indicating financial stress at origination constitutes reckless lending.
What Reg 23A requires for device finance
Regulation 23A under the NCA sets out the minimum affordability assessment standard for all consumer credit providers. For device finance, the requirements are identical to any other consumer credit product:
Verified gross income. Regulation 23A(4) specifies the acceptable verification documents: the consumer's latest three payslips, three months of bank statements, or income statements. A self-declared income figure without documentary verification does not satisfy the obligation. For consumers who are self-employed, informally employed, or on variable income, a significant proportion of the postpaid upgrade market, bank statements become the primary instrument, not the fallback.
All current monthly obligations. The regulation requires identification of all monthly debt repayment obligations, not just those visible in a bureau report. This includes obligations from lenders who do not report to credit bureaus, informal debit orders, and BNPL repayments. For device finance providers who conduct only a bureau check, this obligation is systematically under-met.
Minimum living expense norms. Applicable expense norms must be applied as a floor in the discretionary income calculation. A credit provider cannot accept a consumer's declared living expenses below the minimum norms even if the consumer signs a declaration form to that effect. This is the requirement that the August 2025 draft amendments tighten significantly.
Documented discretionary income calculation. The assessment must produce a documented, retrievable record showing gross income, obligations, expense norms applied, and the resulting discretionary income figure. This record must be available to the NCR on inspection. "We ran a bureau check and the score was acceptable" is not an affordability assessment record.
Practical compliance for device finance looks like this: income from payslips or a three-month bank statement, existing debit order obligations identified from the statement, minimum expense norms applied, discretionary income calculated and documented. At scale, that workflow requires automation. Manual review at 200 handset upgrades per day is not economically viable without structured tooling.
What "developmental credit agreement" does and doesn't cover
The NCA Section 10(1)(b) and Section 78 "developmental credit agreement" category is occasionally cited as a potential exemption for device finance, particularly where the device is sold bundled with an educational service. This exemption does not apply.
The developmental credit agreement category is narrow and specific: it covers school loans and student loans where the funds are paid directly to the educational institution. CDH's June 2019 analysis of this provision is unambiguous: "Section 78 does not provide for a blanket exclusion for developmental credit agreements from affordability assessments... only expressly excludes developmental credit agreements from affordability assessments insofar as they are school loans or student loans." A device finance arrangement, even one sold to a student, even one marketed as educational technology, does not qualify unless the funds go directly to an educational institution, which device finance funds do not.
This matters for EdTech lenders and BNPL providers offering course financing bundled with device loans. The course payment component may or may not qualify depending on its structure. The device component does not. Both are better treated as fully NCA-subject credit agreements pending specific legal advice on the individual product structure, rather than assumed to be exempt.
The August 2025 draft amendments: raising the bar
The DTIC published draft amendments to Regulation 23A in August 2025, with a comment deadline of 13 September 2025 and promulgation expected in 2026. The amendments most relevant to device finance providers are in proposed sub-regulation 23A(9).
The draft introduces a mandatory minimum expense norms table keyed to income band. Credit providers must apply the table when calculating the consumer's necessary living expenses for the affordability assessment. If the table specifies minimum living expenses of R4,800 per month for a consumer in the R15,000–R25,000 income band, the credit provider cannot use R2,500 in the calculation even if the consumer declares that their monthly living expenses are R2,500.
For device finance providers who have historically used either consumer-declared expense figures or flat-rate estimates, the draft amendment requires a methodological change. The income band table approach makes the expense floor variable by income, which is operationally more complex than a single flat estimate but materially more accurate.
Device finance companies using loose living expense estimates face increased NCT exposure under the amended framework. The NCT pattern on inadequate affordability documentation, where missing or unsupported expense norms are a common finding, will be more readily applicable once the norms table is promulgated and a legally prescribed floor exists.
The NCT enforcement pattern: what inadequate documentation costs
The NCT's enforcement record on affordability documentation failures is consistent: missing or inadequate documentation is the common thread across findings against credit providers, regardless of whether the consumer actually could or could not have afforded the credit extended. The standard is not "the consumer ultimately defaulted, therefore the credit was reckless." The standard is "did the credit provider conduct and document a proper affordability assessment at origination?"
NCR v Tsoelli (Pty) Ltd t/a Tswelopele Cash Loans [2023] ZANCT 26 is the most-cited recent enforcement precedent, a micro-lender whose registration was cancelled after systematic affordability assessment failures were found in sampled files. The case does not require the consumer to have defaulted; it requires the credit provider to have failed the documentation standard. The NCR's inspection approach, random file sampling without advance notice, applies equally to micro-lenders and to device finance providers.
CDH's November 2023 alert explicitly extends the "disregarding information indicating financial stress" standard to all consumer credit providers. A device finance originator who obtained a bank statement (as Reg 23A requires), saw existing loan obligations and a pattern of dishonoured debit orders, and proceeded with the agreement has not just made a bad credit decision. They have potentially made a reckless credit agreement under NCA Section 80.
Practical compliance: what device finance providers need to do
The compliance workflow for device finance is not dramatically different from any consumer credit origination process. The components are: income verification, obligation enumeration, expense norm application, and documentation. The difference for telcos and handset finance companies is that these requirements need to be met within the time frame of a retail transaction or online checkout, which requires automation rather than manual review.
At a point-of-sale handset upgrade, the workflow looks like: consumer provides bank statement (or banking app access for digital statement retrieval), statement is processed in under three seconds, verified income and obligation summary is added to the credit file, expense norms are applied, discretionary income is calculated, and the documented assessment is stored with the origination record. The consumer experiences no additional friction beyond the document submission. The credit provider has a retrievable, timestamped affordability record for the NCR inspection file.
AffyScore provides this complete affordability assessment workflow for device finance providers: income from payslip or statement, existing debit order obligations extracted from transaction data, minimum Reg 23A expense norm application, and a documented decision pack that satisfies the record-keeping requirement. For the structural distinction between device finance and the different regulatory treatment of BNPL products, which may still fall outside full NCA capture, the contrast is worth understanding before building a compliance programme that conflates the two.
