Implementation of Home Loan and Mortgage Disclosure Act 63, 2000: Departmental briefing; Rental Housing Amendment Bill: deliberations continued

Meeting report

The Chairperson said that financial institutions played a critical role in ensuring that South Africans received proper services that were fair and just. That was the objective of the legislation.

Briefing by the Department of Human Settlements on the progress made in the implementation of Home Loan and Mortgage Disclosure Act, 63, 2000 (HLAMDA)
Ms Thebi Moja, Chairperson of the Disclosure Board, said the Home Loan and Mortgage Disclosure Act (Act 63 of 2000) (HLAMDA) had been enacted in 2000. The Act aimed to promote fair lending practices.  This required disclosure by the financial institutions of the information regarding the provision of home loans, and for the establishment of an Office of Disclosure to provide for matters connected therewith. The Act also gave the office a mandate to monitor the financial institutions’ lending practices and patterns through receiving and analyzing information.

Functions of Office of Disclosure were to receive, analyse and interpret the required information; to receive and investigate public comments on financial institutions relating to home loans; to make  available to the public information that indicated whether or not financial institutions were serving the housing credit needs of their communities, and rating such financial institutions in accordance with such information; to assist in identifying possible discriminatory lending patterns and assisting any statutory regulatory body in enforcing compliance with anti-discriminatory legislation; to report to the Minister annually in respect of its work during the preceding year, with such a report including an analysis of the  performance of each financial institution in complying with the terms of the Act; and to make recommendations to the Minister on any matter falling within the scope of the Act.

Required to comply with the Act were all financial institutions that were registered in terms of the Banks Act, 1990 (Act No. 94 of 1990), all those registered in terms of the Mutual Banks Act, 1993 (Act No. 124 of 1993) and any registered financial institution whose business is, in full or in part either the acceptance of deposits from the general public, the advance of credit to persons or both such acceptance and advance,  with the security of a registered mortgage bond or any other form of accepted security for the purpose of providing home loans.

There had been workshops with all stakeholders (financial institutions, the Banking Association of South Africa (BASA), the Independent Regulatory Board for Auditors (IRBA) and the South African Institute of Chartered Accountants (SAICA). Challenges relating to disclosure of information to the Office had been identified and resulted in the establishment of a task team. The task team had been mandated to further identify challenges and propose workable solutions both technical and legislative. It was also tasked with the development of the draft annual return format.

There were risks inherent to the home loan application processes.  Financial institutions received applications from mainly two sources - their walk-in customers and from intermediaries/brokers. The loan originators/brokers submit initial loan applications received to all financial institutions to increase the chance of an applicant being approved for funding by at least one Financial Institution. This resulted in more than one financial institution reporting the same applicant in their reported applications. Therefore there were multiple duplications in numbers submitted to the Office. This applied to the number of approved/declined applications and related amounts as well.

Since the implementation of the legislation, the Board could count among its accomplishments the appointment of the members of the Office of Disclosure (OoD), engagement with all stakeholders (and other interested parties) that were required to disclose and submit information to the Office in terms of Section 2, and the production of an annual return form which had been approved by the Minister in December 2010 for implementation with effect from 1 January 2013. A detailed report on HLAMDA had been prepared for the Minister in terms of the Act.  Amendments to legislation had been identified and forwarded to Legal Services and State Law Advisors. Audit assurance standards had been agreed upon between the Independent Regulatory Board for Auditors, BASA and financial institutions auditors, in line with audit standards.  Regarding information received from financial institutions, a common reporting period of 1 January to 31 December for all financial institutions had been established and reports were due on 2 March annually. Risk impact assessments, with recommendations, were being finalized for purposes of statutory HLAMDA amendment.  Amendments to the legislation were at an advanced stage and the Department was awaiting certification. Engagements with provincial Human Settlements Departments and municipalities regarding the mandate of the Office had been successfully carried out. There had also been distribution of information brochures (Complaints Procedure Manuals and OoD Profile) to the public through the provincial departments and municipalities on the functions and responsibilities of the Office.
Among its challenges, the Board said it had struggled with the accounting standards which were an impediment to financial institutions to comply with Section 2 of HLAMDA, which required disclosure of the required information in their financial statements. The readiness of financial institutions systems to accurately capture data for disclosure in terms of the reporting categories was a problem. Often financial institutions were reluctant to provide raw data to the Office. There were also inadequate financial resources for further engagements with local authorities (provincial departments and municipalities). There were inadequate resources to support the Office to facilitate public community outreach programs nationally.

The Office would work towards finalising the amendments of the Act, and the amendment of the regulations. It would keep working on the enhancement of the reporting format – for example, to include Finance Linked Individual Subsidy Programme (FLISP) funded loans.  There would also be public outreach through consumer education sessions and engagements with local authorities.  The Office would continue working on strengthening relations with housing institutions and other relevant entities, and also have stronger engagements with the financial sector, such as the African Bank and Capitec. Most importantly it would improve analysis of information from financial institutions, which would enhance recommendations to the Minister.

Discussion
The Chairperson said the Department and the Board had to be commended.  They had done a remarkable job. The fact that the Act had also been scrutinised and come with amendments should be commended.  The Board had been proactive to ensure there was a shift with the Act and the manner in which they had worked with other stakeholders.

Mr S Mokgalapa (DA) asked for the impact of FLISP and the Mortgage Default Insurance on the whole subject of home loan applications.

Ms Moja said the impact of FLISP would be from January 2013 as that was when they were asked to report on.  If there was a need to make comparison, the report could include 2012 as well.

Mr C Mathale (ANC) asked what was meant by lack of political will.

Mr Tshepiso Mphahlane, Member of the Office of Disclosure, said given the time lapse, stakeholders were under the impression that there was lack of political will. From 2000 to 2014 there had not been a lot of political activity around the Act. There had even been statements that the legislation was out-dated - that it had been relevant then but was not anymore.

The Chairperson said even the Committee had concerns in 2011 regarding the implementation of the Act, as there had still been no movement since it was promulgated in 2002.

Formal consideration of the Rental Housing Amendment Bill [B56 – 2013] (clause by clause)
Mr Khwezi Ngwenya, Acting Chief Director: Legal Services, Department of Human Settlements, read into record the Rental Housing Amendment Bill [B56 – 2013].

Section 1
The definition of “arbitrary eviction” was inserted in subsection (a).

Mr Mokgalapa said the Committee had agreed that either the Constitutional definition was used or it was removed as there was no reference to “arbitrary evictions” in the text of the Bill.

The Chairperson said that in the Bill there was reference to the landlord not having the right to evict a tenant, so there was reference to the term. However, the definition had to be in line with that of the Constitution.

Mr Nathi Mjenxana, Parliamentary Legal Advisor, said they had advised that the definition be removed and all references to eviction to be counter-referenced to Section 4 of the Prevention of Illegal Eviction (PIE) Act, which provided for the procedure.

The Chairperson said eviction matters were already dealt with in Section 13 (14) of the principal Act; also it was dealt with in Clause 11 (c). Cross referencing would be made in the Bill relating to eviction procedures as set out in Section 4 of the PIE Act, in order to align the Bill with other Acts. The A-list had to reflect what the Committee had discussed and agreed on.

Subsection (b) substituted the definition of the “head of department”.

Subsection (c) inserted the definition of “local municipality” and “maintenance”.

Subsection (d) substituted the definition of “Minister”

Subsection (e) was amended by the definition of “prescribed”

A new definition of “habitability” that had been omitted, would be inserted as well.   Mr Ngwenya read it into the record.

Section 2
Mr Ngwenya said as per the direction of the Committee, amendments to Section 2 did not have to be inserted. The A-list would include Section 2.

Mr Ngwenya read the Section into the record.

The Chairperson said the Section could be modified, but not deleted, as the Department previously had.

Mr Mokgalapa said the big issue was about the responsibility and accountability to report on the impact of the legislation, coming back to Parliament.

Section 3
Section 3 of the Principal Act was amended by the addition of the subsection (5) and (6).

Chapter 3
The Principal Act was amended by the substitution for the heading of “relations between” to “rights and obligations of”.

Section 4
Section 4 (as amended by Section 2 of Act 43 of 2007) of the Principal Act was amended by the deletion of subsection (2), (3), (4) and (5).

Section 4A was inserted to address the “rights and obligations of tenants”, and Section 4B dealt with the “rights and obligations of landlords”.

Mr Mokgalapa asked what would happen if there were a search and the police had to be involved. There had to be a provision made for such instances.

The Chairperson asked if the issue of sub-letting had been addressed in the principal Act, and if not, it needed to be addressed. A tenant could not sub-let without the permission of the landlord, as there was the question of basic services.

Mr Mjenxana said the subject of sub-letting was one of the key clauses in the lease agreement.  Instead of putting it in the Act, it could be provided for in detail in the drafting of the pro-forma lease agreement.

Mr Mathale said the legal provision should drafted in a way that it did not criminalise sub-letting, but made it clear that the landlord should be informed or consulted regarding the matter.

Mr Mokgalapa said a problem that would arise would be the need for secondary leases in writing as well.

The Chairperson and Mr Mjenxana said the nifty-gritty should be dealt with in the regulations.

The Chairperson said when the regulations were being drawn up, they needed to be aligned to the Bill regarding the routine inspections (to be provided for in the pro-forma lease agreement) and refund of deposits.

Mr Mokgalapa asked if the tenant would remain liable for the remainder of the contract if he/she left before the lease expired.

The Chairperson asked what the Consumer Protection Act (CPA) prescribed.  Contracts could be terminated for various reasons.

Mr Mathale said the lease agreement should deal with the issue.  If a tenant left before the lease expired, then the penalties should be detailed.

The advisors gave clarity on subsection (7).  The tenant should give notice to terminate the contract to the landlord, and failing to do so would result in the tenant being liable for the remainder of the lease.

Section 5
Section 5 dealt with leases, including the length of the lease agreement, the enforceability of the lease in a tribunal or competent court, information on the rights and responsibility of both the tenant and the landlord, and the Minister developing a pro-forma lease agreement.

Mr Mokgalapa said this was where the link to the CPA should come in.   During the public hearings it had been brought up that the CPA required that leases be bulky and the Committee proposed a standard pro-forma lease agreement.

Mr Ngwenya said the issue to bear in mind was that the CPA superseded any other legislation that dealt with consumer matters. However, if the Rental Housing Act provided better protection for consumers than the CPA, that legislation would apply.  If the CPA also happened to have better protection of the consumer, then it would be applicable.  It was therefore a matter of strengthening the Rental Housing Act so that it would not be superseded by the CPA.

The Chairperson asked why the pro-forma lease agreement could not be brought into this clause.

Ms Bongi Lufundo, Principal State Law Advisor, said the pro-forma lease agreement may be used as a guideline to follow when they were crafting their own agreement. It was not a requirement for every landlord to follow it. The CPA was a law of general application - it could not supersede the Rental Housing Act, as this Act dealt specifically with rental housing.

Section 6
This Section substituted Section 6 in the principal Act and now dealt with “Application of Chapter” which read “This Chapter applied to all provinces in the Republic of South Africa.”

Section 7
The Section now dealt with the establishment of Rental Housing Tribunals.

Section 9
Section 9 of the principal Act was amended by;

(a) The number of Tribunal members and their areas of expertise.

(b) Insertion of subsection (1B), which dealt with the broad representativeness of the Tribunal.

(d) Substitution of subsection (3), which dealt with the appointment of “up to six” persons to serve as alternate members of the Tribunal.

(e) Insertion of subsection (4A), which dealt with the terms of Tribunal members.  (4B) dealt with the succession plans of the Tribunals.  (4C) dealt with keeping the existing members of Tribunals for not more than 18 months, to ensure continuity.

Ms P Duncan (DA) and Mr Mokgalapa asked that (1B) include language as well. Thus the provision would read: “The members of the Tribunal must be broadly representative in terms of gender, race, disability and language.”

Mr Mjenxana said with access to courts, where people spoke different languages, the court provided for interpreters. That was a provided right by the Constitution.

Ms Lufundo referred to how other legislation would have a bearing on the matter -- “…broadly representative in terms of gender, race and disability; having regard to the demographics of the province concerned.”

Mr Mjenxana referred the Committee to Section 30 of the Constitution.  It was the prerogative of the Committee to include or exclude “language”.   However, the matter was covered by the Constitution.

Ms Lufundo said language could be a requirement when the posts were advertised.

The Chairperson said the provision should be left as it was.

Section 10
Section 10 of the principal Act was amended to deal with the meetings of the Tribunals and the quorum of the meetings.

The Chairperson reminded the Committee that they had agreed to look into the issue of the decisions made by the Tribunal Committees, as brought up in the public hearings.

Mr Mjenxana said the decision was for the decision of the Tribunal committees to be deemed the decision of the Tribunal.

The Chairperson confirmed that that would be included in the A-list.

Section 13
Section 13 of the principal Act was amended to address the rulings of the Tribunals, and the referral of complaints to competent courts and timeframes.

Section 14
Section 14 of the principal Act was amended to change “authority” to “municipality” and their obligation to establish a Rental Housing Information Office (RHIO), and the appointment of officials for the duties in the RHIO.

Section15
The Section was amended with a grammatical insertion regarding the role of the Minister in making regulations in consultation with the relevant parliamentary Committees and MECs.

The Chairperson proposed that it be specified that the norms and standards would be per geographical area in (fB), and not (fA).

Mr Mathale proposed that the reference to “geographical area” not be included in both subsections.

Mr Mokgalapa said norms and standards were universal.

Chapters 4 and 5
The Chapters of the principal Act were amended by removing section 15 from Chapter 4 and inserting it under Chapter 5.

Section 16
Section 16, as amended by Section 8 of Act 43 of 2007 was amended again with the substitution of paragraph (a), the insertion of (aA) and (aB).

Section 17
Section 17 was amended to say reviews and appeals could be brought under review before the High Court within its area of jurisdiction.

Section 17A
The Section dealt with appeals.

Mr Mjenxana said the matter considered in this section was the appointment of adjudicators.  It was thought that the adjudicators would be a higher authority than the Tribunal.  During the public hearings, it was brought up that there had to be an authority higher than the secretariat to appoint the adjudicators. However, it had been explained by the Department that the secretariat was a directorate within the Department that supported the Rental Tribunal.  As discussed by the Parliamentary Legal Advisor, the State Law Advisor and the Legal Advisor of the Department, it should be the MEC who had the higher and most competent authority to appoint the adjudicators with regard to issues of human settlements. Therefore the reference to the secretariat would be removed, and replaced with MEC.

Section 18
The principal Act was amended by the substitution of “local authority” with “local municipality”.

Section 19
The transitional provision provided that additional or amended obligations imposed on a landlord or tenant by the Rental Housing Act, 2013, should be effective six months from the date of commencement of the Act.
The meeting was adjourned.