National Credit Amendment Bill [PMB1-2012]: briefing by Dr Oriani-Ambrosini & Department input

Meeting report

National Credit Amendment Bill as introduced by Dr Oriani-Ambrosini

Due to the absence of Mr Ambrosini-Oriani at the start of the meeting, the Committee heard the dti’s comments on this Bill first and this was followed by Mr Ambrosini-Oriani’s presentation. 

Ms Zodwa Ntuli, dti Deputy Director General, said the Department had been in the process of monitoring and reviewing the implementation of the National Credit Act (NCA) and had engaged the services of the University of Pretoria in this respect. A number of amendments had been suggested in the course of this process, which had included consultation with stakeholders and input from the Banking Association of South Africa (BASA). The Department was in the process of assessing the challenges raised by the review process, especially around debt counselling and the court processes related thereto. BASA had been given an opportunity to make an input but their proposed solution would not necessarily address all the issues. The five year review had been completed and some amendments would be processed, however any amendments had to be preceded by a policy review. This policy review would be presented shortly to the Committee and would be part of an entire process rather than only as a response to the proposed amendments.

Mr Andiswa Potwana, Director of Consumer and Corporate Law, said the first part of the proposed amendments concerned what the definition of a consumer was. The legislation had been designed to assist small businesses which were considered to be vulnerable to unscrupulous lenders. The Department had reviewed why certain juristic bodies had been excluded from the definition, for example in the case of small businesses the Minister had prescribed a threshold of R1 million. The Act was meant to ensure that there was an easy and accessible redress mechanism available to consumers and the proposed amendments had not made a case for the exclusion of small businesses from the Act.

Mr Ambrosini-Oriani’s second proposed amendment also did not make a case and no benefit to the consumer was visible were the accumulation of interest be suspended. Section 103(5) prohibited the accumulation of interest, credit fees and charges beyond the balance of the unpaid debt in any case. The National Credit Regulator shared the same view.

Ms Ntuli added that the policy decision to include small businesses in the definition of consumers was in recognition of their vulnerability and the weak bargaining power of small business. The suspension of interest in a debt review prolonged the rehabilitation period when the aim was to get people out of debt and therefore no motivation was seen for this proposal.

The Chairperson asked if most of the stakeholders had been engaged.

Ms Ntuli said the Department had engaged with BASA on a number of matters and that stakeholders were aware of the monitoring and review being undertaken by the University of Pretoria. Once the policy document had been finalised, it would once again engage with stakeholders.

Mr Potwana said areas of interest were where the Credit Regulator had challenges as well as the areas raised as a result of court decisions (which had noted aspects which had been regarded as incomprehensible or incongruous). These were sections relating to the debt review process in Sections 86 and 89. The definition of words needed to be clarified for better application of the Act in court. It wanted to review the role of debt counsellors and was looking at other role players such as payment distribution agencies. It felt that credit life assurance took a huge chunk out of repayment policies and would review that also. Another area of concern was the cost of credit.

Mr B Radebe (ANC) said that Mr Ambrosini-Oriani’s absence to introduce his private member’s bill undermined the institution of Parliament and a strong letter needed to be written to him. Notwithstanding this, the Bill had to follow all due processes.

Mr Mackintosh (COPE) said that it appeared that the consensus of the inputs he had read was that the amendments would not necessarily enrich the legislation and in some cases be superfluous and complicate matters.
 
At this point Mr Ambrosini-Oriani (IFP) arrived and made his presentation. He said one of the amendments he proposed was a policy issue and the other was of a technical nature. He said people who could not pay their debts made use of intermediaries and this process lengthened the period to repay. He was proposing that the accrual of interest be stopped for a maximum period of five years at the discretion of a judge or magistrate.

The other amendment was of a technical nature; that Section 6 apply only to individuals and persons but not to businesses. He himself had experienced problems with the legislation and wanted to prevent others from having to suffer from the legislation. It was important that a clear distinction be made as to what the criteria was, whether the distinction was on the basis of the size of the business or on the nature of the contract. 

Mr Potwana said other provisions in the Act would allow for what Mr Ambrosini-Oriani wanted to achieve. Magistrates and judges already had the ability to make orders of the court, including interest conditions. The Department felt that the threshold level of R1m was appropriate and valid.

Adv Charmaine van der Merwe, Parliamentary Legal Advisor, said she felt that what Mr Ambrosini-Oriani regarded as a technical matter was also a policy matter, that is, should the size of the business or the nature of the transaction hold sway. She said the Act did not provide for the interest to be stopped. This was a policy matter and how it affected creditors needed to be understood. She herself could not see how stopping the interest would prolong the debtor’s repayment period.

Mr Radebe asked what Mr Ambrosini-Oriani’s position was on the policy review being undertaken by the Department.

Mr Ambrosini- Oriani felt that contrary to the Department, the first part of the proposed amendment was not taken care of by the existing legislation. Regarding the second part of the proposed amendment, magistrates had no power to give debt holidays. The dti could not point out where in the Act this was and the Department could not point out any cases where judges had done so.

Regarding Mr Radebe’s question, he said that the Bill was no longer his as once it had been introduced in Parliament it belonged to Parliament. He said that waiting for an overhaul of the Act when immediate change could be done, would be giving up the power inherent in private member’s bills.

He said the Bill was tagged as section 75, which dealt with aspects of lending and banking on a national level. If this was wrong then the entire NCA was also tagged inappropriately.

The Chairperson said that the issues had to be tackled in a comprehensive approach rather than piecemeal and that the amendments had to take into account policy, which in this case was in the process of being reviewed by the Department. The Committee would follow its normal practise and bring in an expert to assist in the matter.

The meeting was adjourned.