National Credit Bill: deliberations

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
16 September 2005
NATIONAL CREDIT BILL: DELIBERATIONS

Chairperson:

Department suggested amendments to National Credit Bill as of 16 September 2005
Department's responses to public comments on Credit Bill, 2005
COSATU submission

SUMMARY
The Department of Trade and Industry clarified the role of the tribunal and the court. Justifications for allocating functions to tribunals rather than the court were public convenience and efficiency and improved access. The Department agreed with the Department of Justice on the need for this dual system. The Department also gave their views on the issue of credit listing and blacklisting. The Department proposed inserting an enabling clause in the Bill so that any issue related to credit bureaux could be dealt with in the Regulations. The Department then continued presenting its possible amendments to the National Credit Bill.

Members asked how the Department would deal with the issue of access as there were courts in virtually every district, but this was not the case with tribunals. They were concerned that the new structures created more administrative and procedural hurdles for poor consumers. The Committee also wanted to see the Regulations before they were passed.

MINUTES

Department briefing: Role of Courts and Tribunal
Ms Astrid Ludin (DTI Deputy Director-General: Corporate Consumer Regulation Division) began by addressing the issue of the role of the tribunal and the courts which had been a contentious one. The Constitution contemplated the existence of independent tribunals to perform certain similar functions. Justifications for allocating functions to tribunals rather than the court were public convenience; efficiency or improved access; as well as the desirability of a less formal process, having regard to the nature of the parties and the relatively routine, procedural nature of a dispute. The Department agreed with the Department of Justice to have a dual system. Courts dealt with the application or interpretation of law and exclusive areas of jurisdiction as per the Bill. The tribunal would deal administrative matters, findings of fact and consumer rights.

The Department proposed inserting an enabling clause in the Bill so that any issue that related to credit bureaux could be dealt with in the Regulations. The Minister may within four months of the coming into force of the Bill set the timeframe, form and manner in which consumer information could be reviewed, verified or removed. Bureaux had to undertake an independent audit of all their information to assess its accuracy. This report had to be passed on to the Regulator to assess it.

Discussion
Mr M Stephen (DA) welcomed the principle of having a division between the functions of the tribunal and the courts. He asked how the Department would deal with the issue of access as there were courts in virtually every district, but this was not the case with tribunals.

Ms Ludin said that the Department had been aware of the issue of access. That is why the Bill allowed single tribunal members to hear a matter, and that member could go directly to where the matter was. She did not envisage a large institution. Many of these matters would be dealt with by the Credit Regulator and other Alternative Dispute Resolution (ADR) methods.

Mr P Nefolovhodwe (AZAPO) was concerned that the new structures created more administrative and procedural hurdles for poor consumers.

The Chairperson hoped that the National Credit Regulator was an efficient structure, and engaged sensitively with the consumers.

Credit Bureaux
Mr Peter Setou (Education and Communication Manager: Micro Finance Regulatory Council) said that the Department proposed inserting an enabling clause in the Bill so that any issue that related to credit bureaux could be dealt with in the Regulations. The Minister may within four months of the coming into force of the Bill set the timeframe, form and manner in which consumer information could be reviewed, verified or removed. The Minister had to consider the predictive nature of the information and the socio-economic impact of the removal of that information.

This was not granting a ‘blank cheque’ to the Minister but was merely an enabling clause. The Department proposed the deletion of default debt information of amounts of under R100 within three months of the Bill coming into force. Information of debts older then three months had to be deleted as a once-off measure. Bureaux had to undertake an independent audit of all their information to assess its accuracy. This report had to be passed on to the Regulator to assess it.

Discussion
Mr Stephen said that nothing in the proposed clause prescribed to the Minister what information must be removed and what could be retained.

Mr J Strydom, Department Legal Advisor, said that the clause seemed to be very clear about the form of the information that had to be removed, and s/he could prescribe the manner in which that information could be removed.

Mr Stephen was still not convinced by this argument. The clause had to be rephrased. It had to be clear that the Minister could prescribe the "nature" of information that had to be removed.

Professor B Turok (ANC) said that the clause was too open for abuse by credit providers as too many experts would have differing opinions about what was predictive. The Committee had to able to review the Regulations. He also said that there had to be some clauses for enforcement in the Regulations.

Mr Setou said that the clause that compelled bureaux to undertake an audit went some way to enforce the provisions.

Ms F Mohamed (ANC) said that the R100 ceiling was too optimistic. Credit bureaux were unfeeling, statistical machines. The Minister had to be compelled to insist on consumer help-desks for consumers to help educate them.

Ms B Ntuli (ANC) said that it was wrong that only the information held by the bureaux was regulated while credit providers were not affected by this proposed clause.

Mr S Rasmeni (ANC) said that the clause was a ‘blank cheque’ as it did not give the legislature the power to make the Minister accountable for this issue.

The Chairperson said that the Committee wanted to see the Regulations before they were passed. The job of the Committee was to oversee all legislation, and it was the responsibility of the Committee to ask questions of all Departments about their work as the Committee could not merely rely on the goodwill of the Minister.

Ms Ludin cautioned against all Regulations being placed before the Committee as the Department had to make provision for about two or three months for consultations and did not want to unduly prolong the process. However, with regards to these Regulations, the Department had no problem placing them before the Committee.

Mr Setou said that these proposed amendments were a starting point for the Regulations. There had to be a lot more consultation with relevant parties before the final Regulations were complete.

Mr Gabriel Davel, Chief Executive Officer of the Micro Finance Regulatory Council, said that the information that the bureaux held had an economic value for them. The Regulations had to be formulated in a way that did not unduly affect their rights to economic activity. It had to be drawn up so as not to undo the level of co-operation and consensus that had been established with the industry.

Proposed Department amendments

Clause 122
The only change here was the deletion to the reference to ‘non-returnable goods’.

Clause 123
This clause was corrected due to an incorrect cross-reference. Reference to Clause 131 was replaced with Clause 129.

Clause 124
There was a technical amendment here as a result from a request from the National Treasury.

Clause 125
Some of the commentators suggested that cancellation fees be allowed in fixed rate contracts. This fee and its calculation should be disclosed up front. Ms Ludin said that the Department was concerned about the extent of the risk passed onto consumers. It was not clear that the absence of a penalty had been the major reason why fixed rate agreements had not been successful in South Africa. The Department inserted a clause as sub-clause (d) to allow a for an early termination charge at a fixed rate of interest for large agreements.

Discussion
Mr Stephen said that there had to be a lot of consultation before the Department took a fixed position.

Clause 127
Ms Ludin said that this clause needed adjustment. The Department suggested that the clause be adjusted to compel credit consumers that terminated an agreement to be registered as reckless consumers and subsequently warn credit providers so that they could take precautionary measures before entering into further credit transactions with those consumers. There was also a concern that the Bill overlooked the fact that in many cases the credit provider in asset-based finance was a bank as opposed to a motor dealer. They had to take possession of vehicle at short notice but this was not feasible. The results were the deletion of sub-clauses (1), (4)(b), and (5)(b).

Discussion
Ms Mohamed asked what the situation would be in a case where an asset that appreciated like property was voluntarily returned.

Ms Ludin replied that the clause allowed the consumer to be paid the amount of that appreciation if the sale of the asset garnered more money than the consumer owed.

Mr Stephen asked if would not work to have a substitution of debtors so that no-one was disadvantaged. Ms Ludin replied that the Department would have to draft such a clause as this was a good idea.

Professor Turok asked who decided on the value of the asset. Ms Ludin replied that the credit provider had an obligation to sell the asset at the best possible price, and if the consumer was unhappy with the valuation, they had the right to appeal to the tribunal. Also, nothing prevented consumers from finding buyers by themselves.

Ms Mohamed suggested that a reasonable compromised settlement would be a possible solution.

Clause 129
There was a correction here due to an incorrect cross-reference. There had been a suggestion that the credit provider should be entitled to select the ADR process and that had to be clarified in the Bill. This was accepted by the Department and inserted in the Bill.

Discussion
Professor Turok was worried that the word "may" in the Bill was too discretionary. It was better to say "must."

Mr Strydom said that they would consider this construction.

Clause 134
Ms Ludin said that this clause created the framework for ADR. Treasury was of the opinion that the alternatives to consumers had to be limited. Department replaced sub-clause (4)(ii)(bb) with (4)(b)(ii)(bb).

Discussion
Professor Turok asked what an ‘ADR agent’ was, and said that it was helpful to place examples of who qualified to be such an agent.

Mr G Davel said that ADR agents were not regulated entities but could be officials at provincial consumer desks who referred matters to ADR. In the banking sector such a person could be the Banking Ombud. Ms Ludin added that the clause was purposefully broad. The consumer still had the option to go to the Credit Regulator.

Clause 136
Changes had to be made to this clause to clarify the power of the National Credit Regulator to initiate complaints of its own accord. This power was explicitly allowed with a new sub-clause (2).

Clause 143
The reference in this clause should be to Clause 27(c) and not 24(c).

Clause 148
Ms Ludin said that it had been unclear why there was a general right of review and appeal to the High Court against the decisions of the Full Tribunal, but no right of appeal to the High Court against the decision by a single member of the tribunal. This was a serious curtailment of rights to access to the courts and had to be reconsidered. The Department substituted "Supreme Court of Appeal" with "High Court" in sub-clause (2)(b) and deleted the restrictions on appeals of single member hearings.

The meeting was adjourned.