National Credit Amendment Bill [B47B-2013: briefing by Department of Trade and Industry

NCOP Trade & Industry, Economic Development, Small Business, Tourism, Employment & Labour

28 February 2014
Chairperson: Mr D Gamede (ANC, KwaZulu-Natal)
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Meeting Summary

The Department of Trade and Industry (DTI) briefed the Committee on the National Credit Amendment Bill. Background provided was that the National Credit Act of 2005 came into effect on the 1 June 2007.However loopholes in the Act were identified and the Bill attempted to cover those. Some of the policy challenges identified were that the National Credit Regulator’s powers had to be strengthened; reckless lending practices had to cease and each credit provider had to do an affordability assessment of the consumer before granting credit. The Amendment Bill also tightened requirements for people who may practice as debt counsellors, Payment Distribution Agents  (PDA) or as credit providers. The Bill would formalise the relationship. There was a need to set norms and standards when it came to affordability assessment criteria, by empowering the Minister to issue affordability assessment regulations. Other changes were the introduction of clearance / rehabilitation certificates once a consumer had settled all debts under debt re-arrangement (except long term debts such as mortgage bonds). There was also to be the automatic removal of adverse consumer credit information after payment had been made on an ongoing basis. The Minister had issued a Notice in Government Gazette No 37386 dated 26 February 2014 about the removal of adverse consumer information, after consultation with Cabinet and Parliament. The Bill would additionally prohibit the sale or collection of expired debt, which expired after three years of prescription. There would furthermore be a capping of credit insurance to deal with the abuse of credit life insurance.

The Parliamentary Legal Adviser noted that the Portfolio Committee had sat through four days of public hearings on the Bill and forty one submissions had been received. A number of amendments made to the Bill had originated from the public submissions. It was a very different Bill now compared to when it had first been introduced into Parliament. However, there was a feeling out there that sufficient consultation on the Bill had not taken place although she did not agree with this notion. The provincial legislatures needed to take this into consideration. The Bill was significant and input from the provinces would be important.

Due to time constraints, there was only a brief question and answer session. Concerns were raised about loan sharks and the manner in which they took advantage of old age pensioners.
 

Meeting report

The Chairperson opened the meeting by pointing out that the National Credit Amendment Bill was slotted to be debated in the National Council of Provinces on 26 March 2014. He emphasised that the Bill was the Committee’s.

National Credit Amendment Bill [B47B-2013]
The briefing was undertaken by Ms Zodwa Ntuli Deputy Director General, Consumer and Corporate
Regulation Division and Mr Macdonald Netshitenzhe Chief Director: Policy and Legislation at the Department of Trade and Industry (DTI).

Ms Ntuli noted that the National Credit Act of 2005 came fully into effect on the 1 June 2007. The Act was developed from a policy framework for consumer credit. She said that the policy was sound and the Act had been successful but areas of improvement had been identified to make the Act more effective. From June 2012 the DTI embarked on a comprehensive review of the policy framework on consumer credit with the purpose of analysing and amending the current policy. The draft policy review document was finalised during March 2013. Loopholes in the existing Act were identified and the DTI proceeded to draft the Amendment Bill. She said that for example when a consumer was undergoing debt counselling, there should be no legal action against such individual.

She pointed out that the Banking Association of South Africa (BASA) had approached the DTI to delay the proposed amendments to the Act as they wished to explore their own mechanisms to assist consumers. The DTI agreed to an industry solution and delayed the process. However nothing materialised as far as a solution from the industry and the DTI decided to proceed on its own. The result was this Amendment Bill.

She noted that good consultation on the Bill had taken place and the proposals made were sound. The Portfolio Committee on Trade and Industry in the National Assembly adopted the Bill and it was referred to the Committee on 27 February 2014.

Mr Netshitenzhe continued the briefing by elaborating on key policy and legislative challenges.
Some of the policy challenges were that the National Credit Regulator’s powers had to be strengthened; reckless lending practices had to cease; each credit provider had to do an affordability assessment of the consumer before granting credit; Alternative Dispute Resolution (ADR) had to be done in terms of the Act; Key legislative challenges were the requirements for people who may practice as debt counsellors, Payment Distribution Agents  (PDA) or as credit providers had to be tightened and these relationships formalised; there was a need to set norms and standards when it came to affordability assessment criteria, by empowering the Minister to issue affordability assessment regulations; debt counsellors should employ trained staff in their practices and should not allow staff members who were not registered as debt counsellors to perform the functions of a debt counsellor; the role of Alternative Dispute Resolution structures or agents as well as the manner in which they were registered or accredited needed to be defined; the provisions about debt review (sections 86,129 and 130) needed to be amended.

Other issues identified were the introduction of clearance/ rehabilitation certificates where a consumer had settled all other debts under debt re-arrangement - except long term debts such as mortgage bonds. There was also to be the automatic removal of adverse consumer credit information provided for in the Bill after payment had been made on an ongoing basis. The Minister had issued a Notice in Government Gazette No 37386 dated 26 February 2014 about the removal of adverse consumer information - after consultation with Cabinet and Parliament. The Bill would additionally prohibit the sale or collection of expired debt, which expired after three years of prescription. There would furthermore be a capping of credit insurance to deal with the abuse of credit life insurance.

Ms Ntuli added that the issue of the cost of credit had also been raised by the public. The cost of collections was also exorbitant. Capping of interest charged could also be done by the Minister in the regulations. She reiterated the importance of affordability assessments that needed to be done. Reckless lending needed to be curbed and government had to step in to protect the public.

There was also a huge concern about illegal credit providers. In the current Act if a credit provider had less than one hundred credit agreements then there was no need to register but there had to be compliance with the Act. It created problems of monitoring. The Bill was thus proposing that every credit provider had to be registered even if there was only one credit agreement in place.

The Chairperson thanked the DTI for the briefing and asked the Parliamentary Legal Adviser to comment.

Parliamentary Legal Adviser comments
Ms Charmaine Van Der Merwe, Parliamentary Legal Adviser, provided the Committee with an account of the processing of the Bill in the Portfolio Committee on Trade and Industry in the National Assembly. The Portfolio Committee had sat through four days of public hearings on the Bill and forty one submissions had been received. She noted that a number of amendments made to the Bill had originated from the public submissions. It was a very different Bill now compared to when it had first been introduced into Parliament.

Mr F Adams (ANC, Western Cape) interjected Ms Van Der Merwe on a point of order and said that recommendations made on the Bill in the National Assembly had no impact upon the Committee. The Committee would take the Bill to the provinces and deal with it. He however valued the input made but it had no impact on the NCOP Committee.

Ms van der Merwe asked members just to bear with her. The point that she was trying to make was that there was a feeling out there that sufficient consultation on the Bill had not taken place. She personally felt that sufficient consultation had taken place. She wished the provincial legislatures to take into consideration that it was felt that sufficient consultation on the Bill had not taken place. The Bill was significant and input from the provinces would be important.

The Chairperson pointed out that from the 1 April 2014 no credit provider would be allowed to use negative information on a person’s credit record if the debt was cleared. A period of two months was provided for such information to be expunged. He did not grasp why the perception out there was that parliament was rushing the Bill. The process on the Bill had been long.

Mr Adams agreed with the Chairperson. Media interviews and hearings on the Bill had taken place. How could the Bill be rushed? He felt that the critical part was still coming up in the provinces themselves.  The DTI had to deploy competent people in the provinces. When public hearings took place in the provinces, DTI officials should be present.

Ms E van Lingen (DA, Eastern Cape) asked the DTI which institutions objected to the Bill and what issues had they raised. She was also concerned about how good the Bill would be to deal with the issue of loan sharks. Especially the fact that loan sharks withheld pensioners’ South African Social Security Agency (SASSA) cards.

Ms B Abrahams (DA, Western Cape) agreed that the issue of loan sharks withholding pensioners SASSA cards was crucial. There was even talk of loan sharks having access to peoples bank accounts.
Affordability assessments were also considered very important. At present it was not done thoroughly. It was done too quickly.

The Chairperson decided that instead of asking the DTI to respond to these questions immediately, it should respond to them in writing and sent to the Committee.

The meeting was adjourned.
 

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