The Department of Trade and Industry said the aim of the National Credit Amendment Bill was to shift the focus so that the consumer was at the centre. The key policy and legislation changes included:
- The need to strengthen the power of the National Credit Regulator to ensure more efficient regulation
- Addressing the implementation challenges and gaps in the current legislation
- The interpretation difficulties found in Section 129 and changes due to judgement that declared Section 89(5)(c) to be unconstitutional
- Enhancement of the National Consumer Tribunal’s mandate and practical functioning
- Tightening the requirements for people practicing as debt counsellors or as credit providers
- Set in place strict guidelines for affordability assessments as well as strict criteria
- Ensuring only trained, qualified, registered debt counsellors were employed.
Members’ concerns included:
- Why the complete deletion of Section 89(5) rather than an amendment
- Not enough coverage in the Bill about reckless lending
- De-registration of individuals versus the registration/de-registration of companies
- Automatic credit increases
- Bureaus with incorrect information
- Consumers whose debt counsellors were withdrawn
- Selling of debt
- Difference between payment distribution agencies and debt counsellors
- High charge for credit – should be decreased
- The definition of total cost of credit
- Relationship between the National Tribunal and the courts within the realm of the Department of Justice
- High accrual of interest.
National Credit Amendment Bill: briefing by Department of Trade and Industry (dti)
Ms Zodwa Ntuli, dti Deputy Director General: Corporate and Consumer Regulation, expressed great happiness that the Bill had been introduced and it would soon be in a position for implementation. The role of the dti was very clear - to create a fair regulatory environment that enabled investment, trade and enterprise development in both an equitable and socially responsible manner. Further, the dti had a responsibility to ensure that consumers were protected alongside business to build the confidence of both business and the consumer that the South African market was a trustworthy one. While the National Credit Act (NCA) had proven some success, there were implementation challenges experienced along the way. This had thus led to a policy review. The required legislative amendments had to have a policy basis. The dti had developed policy where it was lacking and had amended existing policy where necessary. The University of Pretoria conducted an analysis of the existing policy and submitted its report in December 2012. The draft policy review document was finalised during March 2013 followed by a drafting of the Bill by the DTI with the proposed amendments. On 17th April 2013, Cabinet approved both the policy framework and the amendment Bill and on 29th May 2013, the draft policy framework was published for public comments. Following a deadline extension, the DTI had received written submissions/comments from 45 stakeholders. By 31st July 2013, the final draft policy framework and amendment Bill were approved by the Minister and tabled before Cabinet. However, the documents were later withdrawn from Cabinet at the request of the National Treasury in order to hold bilateral discussions between the DTI and the National Treasury.
Ms Ntuli said that the dti had held various meetings with the National Treasury on the NCA to discuss:
- Co-ordination between the dti and National Treasury: It was agreed that a formal binding agreement should be added in the Bill to ensure that co-ordination was compulsory in accordance with proper provisions.
- Removal of credit information: It was agreed that this process would be done through prescribed regulations to ensure checks and balances. Lastly, an agreement was also reached with regards to the de-registration of credit providers.
- De-registration of credit providers: The dti and the National Treasury agreed that the power to de-register credit providers would remain with the National Consumer Tribunal (NCT).
Mr Andisa Potwana, Director: Consumer Law and Policy, Policy and Legislation Unit, spoke about the key issues and challenges in the NCA. He indicated that the draft policy framework highlighted several key policy and legislative issues. Amongst the policy issues was the need to strengthen the power of the National Credit Regulator in order to ensure more efficient regulation. There was also a significant policy challenge with regards to dealing with reckless lending and enhanced ways of dealing with this type of lending were needed alongside effective penalties. Implementation challenges and gaps in the current legislation were also addresses. He stated that this particular policy issue was of importance to matters such complaints handling and determination of a fit person. Also amongst the policy issues identified was interpretation difficulties as can be found in Section 129 as well judgements such as the most recent judgement that declared Section 89(5)(c) to be unconstitutional. He also stated that an enhancement of the NCT’s mandate and practical functioning was required and that the NCT had the possibility for repositioning as an appeals/reviews body. Other policy issues were also raised (see document).
As for key legislative issues, Mr Potwana indicated that there was a need to tighten the requirements for people practicing as debt counsellors or as credit providers, as there were several issues raised about their quality. There was also a need to set in place strict guidelines for affordability assessments as well strict criteria. He indicated that this legislative issue was a result of extreme reckless lending and over crediting. Within the same area, another legislative issue identified was the empowering of the NCT to be able to adjudicate and rule on applications for the suspension of reckless credit agreements. Furthermore, legislation was required that ensured that debt counsellors employed trained and qualified staff that also did not allow unregistered persons to be employed as debt counsellors. Provisions were also required that ensured that applicants were and proper persons to be debt counsellors as well as procedural provisions for the cancellation of registration of debt counsellors (for the other key legislative changes, see document).
Ms Ntuli concluded that the presentation demonstrated the importance of the proposed amendments to the NCA. There was a great need to increase the efficacy of the policy and the legislation in order to better serve the South African economy. The focus had to shift from business to the needs of the consumers.
Mr G Hill-Lewis (DA) referred to the confidential judgement document with regards to Section 89(5)(b)&(c) and asked why the decision was made to delete it in its entirety rather than to rewrite it to meet the constitution. He commented that he did not believe the Bill went far enough to address the issue of reckless lending and over debt. He argued that this was the perfect opportunity to reshape the formula for how interest rate was calculated. Furthermore, he stated that the Bill dealt with the de-registration of individuals but did not provide for neither the registration or de-registration of companies of debt counsellors. This was of particular importance as several complaints had been received about companies at large that were infringing the Act. As such, was there any provisions that enforced the de-registration of companies?
Mr Potwana, with regards to the deletion of Section 89(5), replied that currently, there was no substitute for the Section but agreed that it was indeed quite important that there should be implementation of the relevant constitutional requirements. He explained that Section 89(5) dealt in particular with de-registration, but there were more significant negative consequences for this matter in other parts of the NCA. The dti felt that it was more constitutional to remove that particular Section without any direct substitution but rather reliance on other sections of the Act.
Ms Nomsa Motshegare, CEO at the National Credit Regulator, replied that the Act did provided for the registration of counsellors as individuals and not companies; however, companies did register the individuals they employed, as companies were not regulated but the individuals were.
Mr D Swanepoel (ANC) asked if anything was being done to deal with automatic credit increases performed by credit card companies. He also asked if there were any consequences for credit bureaus that were giving out incorrect information.
Ms Motshegare replied that credit card companies were in fact allowed to conduct a credit limit increase on annual basis; however, they were required to do an assessment of the financial abilities of the individual. As for the incorrect information, there were certainly consequences set in place for such an action but also, the Regulator worked to correct the information in order to avoid such circumstances.
Mr N Gcwabaza (ANC) asked how consumers would be assisted in their payment arrangement if their debt counsellors were de-registered. Furthermore, how did de-registration prevent the debt from being sold to someone else? Lastly, what were the difference roles of payment distributions agencies and debt counsellors? Did having the two place any additional costs to the consumer?
Mr Potwana replied to the question on the selling of debts. He stated that the complaints received from consumers had indicated that the issue was not the actual sale of the debt but rather what happened when the debt was sold. The case was often that if the debt was sold, consumers found that either their debt or interest rates had increased. He explained that there should be provisions of what would take place if a debt counsellor were withdrawn.
Mr Lesiba Mashapa, Company Secretory - National credit Regulator, replied on the difference between a debt collector and a payment-distributing agency (PDA). He explained that debt collectors operated under different legislation within the realm of the Department of Justice and were normally contracted to collect debt. Whereas the PDAs acted as intermediaries between a consumer and a credit provider and were responsible to collect credit from the consumer and deliver it to credit providers.
The Chairperson expressed concern with respect to the high cost of credit and stated that the charge for credit should be less than it was currently.
Mr Potwana replied that the calculation of interest was based on a very complex formula that included several aspects such as secured lending and micro loans. Currently, the interest rate was not part of the research conducted for the Bill.
Ms Ntuli agreed that the formula was an area that needed to be looked at.
Mr Gcwabaza asked for further clarity between the debt collectors and the PDAs. In his understanding, debt counsellors were not necessarily allowed to collect money and distribute it to service providers. If that was the case, then the consultation between the consumer and the debt counsellor could be a once off discussion and then the PDA would take over. What, therefore was the relationship between the debt counsellors and the PDAs in that sense?
Mr Potwana replied that there was no real relationship between the counsellors and the PDAs. He explained that counsellors were strictly prohibited from distributing any money and this prohibition created the distinction between the counsellors and the PDAs. Furthermore, the work of the counsellor began much earlier than that of the PDA, as it began once the consumer approached them for the possibility to work on the debts.
Mr Hill-Lewis commented that he understood that the legislation could not place a cap on credit but in Section 92, it stated that the agreement must indicate the total cost of credit; however, many credit providers incorporate that in a very sneaky matter. He stated that credit providers inform the consumer of how much the debt would cost them but they had the habit of leaving out the cost of the credit insurance. As such, he suggest that Section 92 should be amended to state that the total cost of credit must include all service fees and life credit insurance in order for the consumer to know the exact amount due each month. On the issue of registration, he was concerned that the poor service may not be from the individual but rather from the company. As such, he suggested that registration should also be required of companies so that they could also be de-registered if they were ill behaving.
Mr Potwana took note of the comment on the total cost of credit and stated that the dti was also aiming to achieve that. On the matter of the registration of companies, he replied that there had been issues with the matter because there were often many loopholes on that scale. It was difficult to differentiate between who should be accountable: the individual or the company. Furthermore, it was found that holding the company accountable did not really help to ensure that the consumer received the best service possible.
Mr Z Wyile (ANC) asked to what extent alignment existed between the National Tribunal and the processes of the courts within the Department of Justice. He stated that there was a constant struggle in the balance of power between the two. Secondly, he asked if the concept of bonds was worthwhile in the long run for individuals?
Mr Potwana replied that the way that the National Tribunal was operating was different to the courts in that the Tribunal conducted its business in a consumer friendly fashion as it sought to seek a balance. The Tribunal sought to make a decision based on the administrative justice provisions that required equal and fair opportunity as well as fair adjudication.
The Chairperson commented on a statement made in the attached document with regards to the Private Member’s Bill by the Mr Orinai-Ambrosini. She stated that the Committee found that Bill undesirable because it was not comprehensive. However, the Committee was in agreement over the issue of accrual of interest, which in some regard was relevant to some of the points made but she was surprised that stakeholders did not raise this issue. As such, was that issue explored in any sense by the dti or was it one of the issues that were still to be studied?
Mr Potwana stated that when this matter was raised within the dti team, there was no view that supported this particular proposal and stakeholders were not able to provide any comment on the matter. The question was raised in discussions of how this would benefit the consumer.
Lastly, Mr Hill-Lewis asked if either the Legal Advisor or the Department could come up with an amendment to Section 89(5), which would render it constitutional instead of deleting it entirely. Secondly, he made reference to the one-page graph that he distributed to the Committee. This was an attempt to visually illustrate the current environment of interest. The red line on the graph represented the prime interest rate, which was paid by majority of South Africans on their debts or bonds. The green line was the interest rate paid on unsecure credit and the difference between the red and the green was obvious as unsecure credit carried with it a much greater risk. However, the point of emphasis from the graph was the way in which the gap grows as the interest rate increased. Therefore, because of the way the formula was designed, poor South Africans suffered more so than anyone else did from an increasing interest rate.
NCOP Amendments to Broad-Based Black Economic Empowerment (BBBEE) Amendment Bill
The Chairperson said that the NCOP had proposed the following changes to the B-BBEE Bill:
On page 4, in line 32, after “effective: to insert “economic participation and”.
On page 6, in line 13, to omit “of Parliament” and to substitute “an”.
On Page 6, in line 36, to omit, “of Parliament” and to substitute:
“of the National Assembly and the relevant Select Committee of the National Council of Provinces”.
On page 7, in line 26, after “staff” to insert “member with suitable qualifications and experience”.
The Chairperson commented that these were not substantive matters in any way but were purely technical.
Mr G McIntosh was concerned that he was unable to compare the amendments to the Bill and was unsure that he supported the amendments.
The Chairperson informed him that according to the rules, it was up to her to make the final decision. She found that the amendments were not substantive in any way and as such, the Committee could approve them.
The meeting was adjourned.
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