National Credit Amendment Bill [B47-2013]: adoption

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Trade and Industry

20 February 2014
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Committee members did a clause by clause adoption of the Bill. Discussion was focussed on the insertion of section 71A which addressed the removal of adverse credit information and whether seven days was sufficient time for a credit provider to send settled debt information to the credit bureau and whether the bureaus had the capacity to effect those changes on the system within seven days of receipt of information.

COPE said the concern was subsection (4) which spoke to the deletion of adverse credit information. It suggested that the record should reflect that the person paid off all the debt, but the record should remain. The outcomes would be that credit bureaus would find other ways or systems to show that this person had indeed been through the court system or had judgements. It would reduce the quality of credit records of which South Africa had a global reputation. The credit bureau and a credit record helped lenders to reduce risk and if people needed money, they would find a way to borrow even if they had to turn to loan sharks.

The Department of Trade and Industry said the payment profile would remain that would show how a consumer kept their payment obligations and the affordability regulations would compel proper affordability assessments by credit providers. Risk could not be determined by credit bureau information alone and most credit providers included a calculated risk amount in their instalments regardless of whether a specific consumer carried a risk. If a debt had been paid, it should be removed, because consumers with the means could go to court and have the judgment rescinded. The clause was adopted, with a record of COPE’s objection to clause 22(4).

The National Credit Amendment Bill [B 47B-2013] was adopted.

 

Meeting report

The Chairperson welcomed everyone.

Mr G McIntosh (COPE) asked if there was a quorum for the adoption of the Bill.

The Chairperson said there were five members from the ANC and two members from the opposition and the Committee would proceed with the clause by clause deliberations.

Mr N Gcwabaza (ANC) referred to the introduction of the Bill which stated that the aim was to ‘to empower the National Consumer Tribunal to declare a credit agreement reckless’, and he asked if the role of the courts had been raised.

Parliamentary Legal Advisor, Adv Charmaine van der Merwe said currently the Act stated that only a court could declare a credit agreement reckless and the amendment expanded that power to the National Consumer Tribunal (NCT).

The Chairperson said it should be clarified that it did not remove the power of the court, it simply expanded that same power to the NCT.

Clause 1, Amendment of section 1
The Chairperson asked if Members were satisfied with the amendments this clause.

The clause was adopted.

Clause 2, Amendment of section 17
Mr McIntosh referred to subsection (2)(e) that read the ‘National Credit Regulator must notify the Registrar of Banks designated in terms of the Banks Act, 1990 (Act No. 94 of 1990), within the agreed time frame, of its intention to investigate a bank as defined in the Banks Act, 1990’. He said National Treasury and the Financial Services Board (FSB) expressed some discomfort about this law unintentionally entering a field not known to the Department of Trade and Industry (DTI).

NCR CEO, Ms Nomsa Motshegare, said in the current Act it only required the NCR to notify or consult with the Registrar when a compliance notice was issued and this amendment was merely an extension of that provision.

The Chairperson said this issue came up when National Treasury Deputy Director General, Mr Ismail Momoniat, was present and it was agreed that legislation could not be conceptualised based on future predictions or developments. At present there was a Registrar of Banks and National Treasury needed to take cognisance of their legislation and how it would be drafted to take into consideration those future developments.

Mr W James (DA) asked if the Banks Act provided guidelines of what it meant to conduct an inquiry into a bank or was ‘inquiry’ undefined?

The Chairperson said the Committee could not presume to comment on the preserve of what the Governor of the South African Reserve Bank (SARB) or the Minister of Finance was up to. This issue was raised in the presence of the Deputy Governor of the SARB and National Treasury and it became clear it was a future development or plan that could not be considered in terms of this Bill.

Adv van der Merwe said the issue was that if the NCR needed to investigate a bank, the Registrar of Banks needed to be notified because of the systemic risk issue.

The clause was adopted.

Clause 3, Repeal of sections 19, 20, 21 and 22
The clause was adopted.

Clause 4, Amendment of section 23
The Chairperson said this clause generated a lot of discussion because of the change in the governance structure of the NCR.

The clause was adopted.

Clause 5, Amendment of section 25
The clause was adopted.

Clause 6, Amendment of section 26
Mr McIntosh referred to subsection (5)(b)(i) that read ‘A person may not be a member of the Tribunal if that person personally or through a spouse, partner or associate has or acquires a direct or indirect financial interest in a registrant’. He asked what would happen if you were to acquire shares on the Stock Exchange which could be interpreted as having an indirect financial interest in a registrant.

Adv van der Merwe said subsection (6) said a financial interest did not include an indirect interest held in any fund or investment if the person contemplated in subsection (5)(b) had no control over the investment decisions of that fund or investment.

The Chairperson asked how many members the Tribunal should consist of according to law.

NCT Chairperson, Ms Diane Terblanche, said the Tribunal should consist of at least ten members and the chairperson and currently the NCT consisted of thirteen members and the chairperson.

The Chairperson asked what happened if people had to recuse themselves and the number dropped to eight or nine.

Ms Terblanche said matters were being heard by panels that could consist of one member that heard less complicated matters or three-member panels that were needed to form a quorum.

Adv van der Merwe referred to subsection 11 that stated that decisions made at a meeting remained binding despite a member attending who should not be there or failed to disclose an interest. This needed to be assessed on a case to case basis, because the basis was that if such a member attended the meeting, but did not partake in the discussion or decisions, the decisions or outcomes of that meeting should remain binding, although certain steps needed to be taken against that person. The word ‘valid’ was substituted with ‘binding’, because if the Tribunal heard a matter that stretched over days and if a member suddenly based on evidence given realised that he or she may have an interest in the outcome of the case, the time and resources already spent on the case would not be lost. The fact that the decision was binding, was a ground for review of the decision.

The clause was adopted.

Clause 7, Amendment of section 29
The clause was adopted.

Clause 8, Amendment of section 32
The clause was adopted.

Clause 9, Substitution of section 34
The clause dealt with remuneration and benefits of members of the Tribunal which could be determined by the Minister in consultation with the Minister of Finance.

The clause was adopted.

Clause 10, Amendment of section 40
Subsection (1) stated a person could apply to be registered as a credit provider if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeded the threshold described in section 42(1).

The clause was adopted.

Clause 11, Amendment of section 42
Subsection (1) stated the Minister, by notice in the Gazette, should determine a threshold for the purpose of determining whether a credit provider was required to be registered in terms of section 40(1).

The clause was adopted.

Clause 12, Insertion of section 44A
This section dealt with the registration of payment distribution agents.

Adv van der Merwe said the use of the word ‘Chapter’ in subsection (2)(a) aligned the Bill with the terminology in the Act.

The clause was adopted.

Clause 13, Amendment of section 45
Mr McIntosh referred to subsection (3) and asked for examples of ‘other compelling grounds’ that could disqualify an applicant from being registered.

DTI Chief Director: Legislative Drafting, Dr Maria Nonyana-Makobane, said there were too many circumstantial grounds to be noted in the Act, but these were accommodated for by the phrase ‘other compelling grounds’.

Ms Motshegare gave an example, saying there were instances when the NCR did investigations to register an entity and the director of that entity was involved in fraudulent activities elsewhere and that could be classified as ‘other compelling grounds’.

Mr McIntosh said if people were to look for loopholes in law, ‘other compelling grounds’ could be contested in court if the NCR did not have a clear definition of what those grounds could be.

State Law Advisor, Ad. Mongameli Kweta, said there were Constitutional Court judgments that stated that drafting should be as clear as possible, but some phrases could be incorporated so that nothing fell through the cracks and ‘other compelling grounds’ was sufficient.

Ms Motshegare said in instances where applicants were not satisfied with the reasons given for disqualification, they were entitled to appeal to the NCT.

DTI Chief Director: Policy and Legislation, Mr Macdonald Netshitenzhe, said the NCR, NCT and even the courts were compelled to give reasons if applicants were denied registration and there were higher bodies to appeal to if they were not satisfied.

Mr Gcwabaza referred to subsection (5) and asked if the sentence was grammatically correct.

Adv van der Merwe proposed moving the phrase ‘as well as’ so that the provision read: ‘The Minister may prescribe the criteria for registration, the duties of the registrant, the obligations of the registrant, as well as the fees that may be charged by a registrant’.

Adv Kweta proposed the criteria for subsection (5) be listed to remove any grammatical confusion and the Committee agreed.

The clause was adopted with amendments.

Clause 14, Amendment of section 46
The clause was adopted.

Clause 15, Amendment of section 48
This clause dealt with the affordability assessments and the Chairperson said the section was dealt with substantively because it spoke to the core issue of the Bill which was combating over-indebtedness.

The clause was adopted.

Clause 16, Insertion of section 48A
The Chairperson said the Committee had thoroughly unpacked this section that dealt with the roles of the NCR and the Minister with regards to the code of conduct.

The clause was adopted.

Clause 17, Amendment of section 17
The clause was adopted.

Clause 18, Amendment of section 51
The section dealt with penalties and the Chairperson asked Members to take note that the penalty for late registration would be imposed within 30 days, and not the 21 business days as was previously suggested.

The clause was adopted.

Clause 19, Amendment of section 22
The clause was adopted.

Clause 20, Insertion of section 58A
The clause dealt with registrants who voluntarily requested cancellation of registration and included credit providers, payment distribution agents and debt counsellors. The Chairperson said subsection (2) was an important provision because it stated that a registrant whose cancellation had been cancelled should, in the prescribed manner and form, submit an affidavit to the NCR, stating that consumers had been transferred to another registrant chosen by the consumer.

Mr McIntosh referred to subsection (4) and said the phrase should read ‘for the handover and transfer of records’ or ‘for handing over and transferring of records’.

Adv Kweta said either of the proposed phrases would be correct.

The Chairperson proposed ‘for the handover and transfer of records’ and the Committee agreed.

Mr Netshitenzhe asked if alternative dispute resolution agents were included in ‘registrants’.

Adv van der Merwe replied alternative dispute resolution agents were included.

Content Advisor, Ms Margot Herling, said clause 35 dealt with the accreditation and registration of alternative dispute resolution agents.

The clause was adopted with amendments.

Clause 21, Amendment of section 71
The Chairperson emphasised the importance of this section and referred to the submission by National Treasury and the concerns expressed over the primary residence of the consumer and the debt review process.

Adv van der Merwe said the Committee did not accept the proposal from National Treasury, because it initially sounded as if they proposed the mortgage loan be excluded from the debt review process and they subsequently said they wanted the mortgage agreement to be preferentially treated in the process, because it was a secured debt. DTI’s response was that the amendments would provide for the consumer to be able to access credit even though the mortgage loan was still being paid off.

Mr McIntosh referred to subsection 4(a) that stated ‘A debt counsellor must within seven days after the issuance of the clearance certificate, file a certified copy of that certificate, with the national register established in terms of section 69 of this Act and all registered credit bureaus. He asked if registrants had the capacity to get the information to the credit bureaus and whether credit bureaus had the capacity ‘to clean a record’ within seven days.

Mr Netshitenzhe said it could be done and DTI met with credit bureaus to discuss the issue and the challenge of capacity was raised. The biggest challenge was with the credit providers that did not submit the information in time.

Mr McIntosh asked what about the capacity of credit providers in remote or rural areas to get the information to the credit bureaus.

Ms Motshegare said the Committee could extend the days, because it could be a challenge for smaller, remote credit providers.

Mr Netshitenzhe said time was of the essence for the consumer and the provision spoke to the interest of the consumer.

Ms S Shope-Sithole (ANC) said as a rural woman whose primary concern was the consumer, she thought seven days was enough.

Mr McIntosh said it was understood that it was in the interest of the consumer and the credit provider should be held liable if it was not forwarded to the bureaus within the seven days.

Mr Swanepoel said it was not a complicated process and seven days were enough.

The clause was adopted.

Clause 22, Insertion of section 71A
The Chairperson said the Committee had spent days on this issue because it was the crux of the Bill.

Mr Selau said 71A(1) referred to the credit provider that should provide the credit bureau of settled debt information within seven days and 71A(2) provided that the credit bureau removed any adverse listings within seven days after receipt of information and he asked if it should be a fourteen day process.

The Chairperson said this was a practical issue and the bureaus needed to be afforded time to remove the listing upon receipt of the information and failure to do so would be an offence and it was a maximum fourteen day process.

Adv van der Merwe said she was not sure that it would be an offence, but a consumer could lodge a complaint with the NCR.

Mr McIntosh said credit bureaus needed time to process information and there could possibly be 100 000 such accounts. The concern was 71A(4) which spoke to the deletion of adverse credit information. It should be recorded that the person paid off all their debt, but the record should remain. The outcomes if the record did not remain, would be that credit bureaus would find other ways or systems to show that this person had indeed been through the court system or had judgements. It would reduce the quality of credit records of which South Africa had a global reputation. The credit bureau and a credit record helped lenders to reduce risk and if people needed money, they would find a way to borrow even if they had to turn to loan sharks.

The Chairperson said it was explained to the Committee that credit providers needed a payment profile to assess risk and that profile would remain.

Ms Ntuli said the payment profile would remain. That would show how a consumer kept their payment obligations and the affordability regulations would compel proper affordability assessments by credit providers. Risk could not be determined by credit bureau information alone and most credit providers included a calculated risk amount in their instalments regardless of whether a specific consumer carried a risk or not. If a debt had been paid, it should be removed, because consumers with the means could go to court and have the judgment rescinded.

The Chairperson said the aim of this amendment was to help people gain access to and maintain employment and grant access to credit if people could afford it. Banks needed to focus on the affordability aspect and determine whether a consumer could afford the credit.

Mr McIntosh said South Africa had an internationally respected credit industry, both in terms of lending and borrowing with an internationally well-regarded credit bureau system. Many people go through difficult times, but they come back. If somebody successfully settled their debt it should be positively recorded, but not deleted. The concern was not the injustice of keeping a person’s bad credit record permanently, it was the need for the economy and credit bureaus to have full records.

The Chairperson said the feedback from the independent consultant, Prof Fiona Tregenna stated the context of the country needed to be considered and it was a policy issue that had points for and against it and the Committee’s job as legislators was to balance these points.

The clause was adopted.

Mr McIntosh wished to put on record that COPE objected to this clause, specifically 71A(4) which in fact impacted the whole clause.

Clause 23, Amendment of section 73
The Chairperson said the section was consequential to section 71A.

Mr McIntosh asked how the clause tied in with section 71.

Adv van der Merwe said once the Bill came into effect, the Minister could at any time confirm that the consumer credit information had been reviewed, verified, corrected or removed.

The clause was adopted.

Clause 24, Amendment of section 82
The clause was adopted.

Clause 25, Amendment of section 83
The Chairperson noted that it was a consequential amendment and the clause was adopted.

Clause 26, Amendment of section 86
The Chairperson asked if the 60 business days reflected in section 86(10)(a) was the same as in the principal Act.

Adv van der Merwe confirmed it was the same.

The Chairperson referred to subsection 86(10)(b) that read: ‘No credit provider may terminate an application for debt review lodged in terms of this Act, if such application for review has already been filed in a court or in the Tribunal’.

The clause was adopted.

Clause 27, Amendment of section 89
The clause was adopted.

Clause 28, Substitution of section 91
This section dealt with the prohibition of unlawful provisions in credit agreements and supplementary agreements.

Mr McIntosh said the word ‘pretence’ in subsection (1) should be ‘pretences’.

The clause was adopted with amendments.

Clause 29, Amendment of section 100
This section stated a person who contravened the prohibition of unlawful provisions in credit agreements would be guilty of an offence. The clause was adopted.

Clause 30, Amendment of section 106
The provision read ‘The Minister may, in consultation with the Minister of Finance, prescribe the limit in respect of the cost of credit life insurance that a credit provider may charge a consumer’.

Ms Ntuli said the Act talked about credit insurance and credit life insurance was a part of credit insurance. The provision should talk to ‘credit insurance’.

Mr Selau said it should be consistently corrected throughout the Bill and the Chairperson agreed, because it was an insertion.

The clause was adopted with amendments.

Clause 31, Insertion of section 126A
Mr Gcwabaza said the word ‘been’ should be inserted in subsection (1)(b)(i) to read ‘which debt has been extinguished’ and the Committee agreed.

The clause was adopted with amendments.

Clause 32, Amendment of section 129
The Chairperson said the section 129 notice was an important section of the Bill and Adv van der Merwe had confirmed that the effected amendments were in line with a Constitutional Court judgment that was passed that morning.

The clause was adopted.

Clause 33, Amendment of section 130
The clause was adopted.

Clause 34, Amendment of section 134
The clause was adopted.

Clause 35, Amendment of section 134A and 134B
The sections dealt with the registration, accreditation and deregistration of alternative dispute resolution agents. The clause was adopted.

Clause 36, Amendment of section 136
The clause was adopted.

Clause 37, Amendment of section 163
The clause was adopted.

Clause 38, Amendment of law
The clause was adopted.

Clause 39, Short title and commencement
Mr Gcwabaza asked if the Committee could add that the Bill ‘come into operation’ immediately and not be delayed nor wait for the regulations to be finalised.

The Chairperson said the Committee could not tell the President when to give his consent.

Adv van der Merwe said in order for the regulations to be published, this Bill should be operational. The date fixed by the President by proclamation would be determined by the Department’s indication of when this Act should be implemented.

Mr Netshitenzhe said the Department would have to determine which of the sections were not affected by regulations and could approach the President to proclaim those sections not affected by regulations.

The Chairperson said the Committee had inserted wording into previous legislation that made it operational immediately.

Adv Kweta said the Department would have to identify the sections that were not affected by regulations and in terms of the Interpretation Act, the President could identify different dates for different provisions to come into operation.

Mr McIntosh asked if Mr Gcwabaza’s eagerness to have the Bill signed into law by the President had anything to do with the 7 May election date.

Mr Gcwabaza said it did not.

The clause was adopted.

The Committee Report noting the approval of the Bill with amendments, was adopted.

The Chairperson said the National Credit Amendment Bill [B47B-2013] had been adopted by the Portfolio Committee on Trade and Industry. It would be noted that COPE objected to clause 22(4). The Chairperson thanked everyone for their input and commitment.

Meeting was adjourned.
 

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