Financial Institutions act within the scope of the law when they proceed to re-price certain facilities in terms of the relevant clauses of the credit agreements/products entered into.

In terms of the judgement in NBS Boland Bank Ltd v One Berg River Drive CC 1999 b(4) SA 928 (SCA), which is the most recentl authority on this matter, that discretionary interest rate clauses in agreements are valid in principle.

Thus, a clause which empowers a bank to unilaterally amend the rate at any stage in its discretion is perfectly valid even though no basis rate is stipulated in the contract, as long as the bank exercises the discretion reasonably. In order to determine what is “reasonable” under the circumstances, various factors have to be taken into consideration by the creditor, such as the type or class of credit agreement, prevailing rates in the market, rates charged by competitors, general economic movements and the rates applicable to similar clients with similar accounts or facilities.

The above is in terms of financial matters where the National Credit Act No 34 of 2005 does not apply.