National Credit Amendment Bill [B47B-2013]: Negotiating Mandates

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Meeting Summary

The Committee considered negotiating mandates from the provinces on the National Credit Act (NCA) Amendment Bill. Mpumalanga, the Northern Cape and North West voted in favour of the Bill with no amendments. Proposed amendments by the Eastern Cape, Free State, Gauteng, Kwazulu-Natal, Limpopo and the Western Cape were rejected as the proposals were either already covered in the Act or were policy matters which could not always be legislated for.

The Eastern Cape proposed amendments for “life” to be removed from “credit life insurance” and another proposed amendment around the prohibition of prescribed debts.

The Free State raised concerns around the prescription of duties and obligations of a person when applying for registration, the regulations of premiums and regulations issued by the Minister on the functions of the National Credit Regulator (NCR).

The Gauteng Province proposed amendments to the prohibition of selling of prescribed debt in relation to the Prescription Act.

Kwazulu-Natal raised a number of concerns for consideration when discussing transaction capital, Payment Distribution Agencies (PDAs) in terms of clause 13 while the Limpopo Province voiced concern with short term insurance of debtors.

Final mandates would be considered by at next week’s Committee meeting.
 

Meeting report

Negotiating Mandates on the National Credit Amendment Bill

Eastern Cape Provincial Legislature
A delegate from the Eastern Cape Provincial Legislature said the Province voted in favour of the Bill within some proposed amendments. The first proposed amendment was to remove the word “life” from the phrase “credit life insurance”. This would also give clause 30 much broader applicability.  There was a concern that clause 31 of the Bill, in its current form, would prohibit the collection of prescribed debts.

Ms D Rantho (ANC, Eastern Cape) asked to be excused to attend another meeting as there were other delegates from the Eastern Cape attending this meeting. 

Adv. Charmaine van der Merwe, Parliamentary Legal Advisor, said the inclusion of “credit life insurance” did not mean there was no stakeholder engagement but it was simply as a result of that engagement that it was in fact changed. The rationale was that credit insurance premiums were (ab)used to recover costs that could no longer be claimed under other credit administration costs or interests. Clause 30 was therefore amended to read that “Section 106 of the principle Act is hereby amended  by the addition of the following subsection: (8) The Minister may, in consultation with the Minister of Finance, prescribe the limit in respect of the cost of credit insurance that a credit provider may charge a consumer”. There was an emphasis on the agreement needed between the two Ministers.

On the issue of prescribed debt, if the debt was extinguished by prescription, no one was allowed to sell that debt under a credit agreement. One may also not be allowed to continue collecting debts which were prescribed. These scenarios did not occur when the debt was in dispute. This would not be an offence but a complaint would be laid with the National Credit Regulator (NCR) to deal with. These matters were dealt with in the Prescription Act. These matters were also a policy decision. The affordability assessment regulations were also policy decisions.     

Ms Zodwa Ntuli, DDG: Consumer and Corporate Regulation Division, DTI, agreed with what Adv. van der Merwe had said. In terms of the Bill, the Minister had the power to deal with credit insurance of which credit life was part of, through the relevant institutions. From research done, credit life insurance was most abused in the sense that it was included in short-term debts. Furthermore, consumers did not even know what they were being covered for however when the consumer got into financial difficulty, that insurance was not invoked to cover debt. This abuse could not be disputed and there was research to prove that. Credit insurance therefore must be regulated and the only thing missing from the Bill was the capping of premiums/interest rates. Based on consultation processes, this regulation would be done in agreement with the Minister of Finance. This was balanced, there were sufficient safeguards and there would be an opportunity for engagement or for aggrieved people to approach the courts.

On the collection of prescribed debts, the issue was around protecting consumers from being harassed by people they did not know or enter into an agreement with. This was done with the thought that many consumers were illiterate, semi-literate or just not versed in the law. It was an obligation of parliament and government to protect the consumer from being abused because the consumer was vulnerable. The section did not stop prescription or make it an offence but it set parameters to deal with potential abuse from a policy perspective.

With secondary legislation, the Executive did give this to Parliament to look at. In her experience, when people requested this it was often a tactic to delay implementation and the Department did not support that.

Mr K Sinclair (COPE, Northern Cape) questioned, for clarity, if the intention of the Act was that once a bond was paid up it could also be rescinded? 

Ms Ntuli said if there was a judgement again someone that judgement would sit against your name for five years. If the debt was paid up, the information must be removed. 

Mr F Adams (ANC, Western Cape) heard what Adv. van der Merwe had said but the problem he faced in his constituency was that lawyers/attorneys pressurised people because they knew the Act was coming. Lawyers were now coming with emolument orders. Was there any way the Minister could issue regulations for a moratorium on lawyers?

Ms B Mncube (ANC, Gauteng) wanted to know the implication would be if the Department and a province not agreeing on an issue.

Mr B Mnguni (ANC, Free State) had the same problems as raised by Mr Adams

Ms E Van Lingen (DA, Eastern Cape) was greatly concerned about strange deductions/withdrawals being made off the South African Social Security Agency (SASSA) card which was actually a bank card.

Ms Ntuli said this was brought to attention in the consultation process and National Treasury was looking at this. The Social Development legislation said that no deductions may be made off the grant except for up to 10% for funeral policies but the matter was being looked at by Treasury.

The Chairperson knew Members were going to their constituencies next week but he wanted Members to confine themselves to issues raised in the Eastern Cape negotiating mandate.

Free State Provincial Legislature
Mr Mnguni stated that the Free State Province had voted in favour of the Bill.  Proposed amendments were outlined for the prescription of duties and obligations of a person when applying for registration in terms of section 45, issuing of regulations by the Minister on the functions of the NCR, proposed delivery method  and the regulation of premiums. 

Adv. van der Merwe said clause 13, which dealt with the prescriptions of duties and obligations of a person when applying for registration was already catered for but if Members felt this needed to be more explicit, this would be a policy decision to consider.

On the regulation of premiums, this was a policy decision which was already discussed in the previous negotiating mandate. The regulation would be done in consultation with the Minister of Finance who would have to agree with whatever was being regulated.

The proposal on the delivery mechanism, the Act provided for a number of delivery mechanisms which could take place. This arose from a Constitutional Court judgement in Sebola and Another v Standard Bank SA where the Court required this be track and trace mail even if it increased the cost. This was contained in section 129. There were different timeframes for the different delivery mechanisms outlined. If the Committee felt this needed to be more specific, it was a policy decision.  

Ms Ntuli addressed the question on the delivery of notices. In terms of notices delivered under section 129 of the Act, the Court instructed it was not good enough to just say the notice was posted but the arrival of the notice needed to be ensured. The Department then was just aligning itself with the Court judgement with the limitation to registered mail or physical delivery.

She said the removal of adverse information was separate from the payment and repayment of bonds. If the bond was the only outstanding debt, a person could have an earlier rehabilitation certificate. Then the bond could not be in arrears and regular payments would have to be made. 

Mr Sinclair did not want to belabour the point but on 10 March 2014 he received a document from Standard Bank on the rearrangement of debt which Ms Ntuli had just spoken to. 

The Chairperson asked that the Committee finish the Free State negotiating mandate and discuss this issue later.

Mr Mnguni accepted the explanations given by the Department on the proposed amendments.

The Committee accepted the negotiating mandate.

Gauteng Provincial Legislature
Ms Mncube said the Gauteng Province had voted in favour of the Bill but there were issues for clarity as raised in the public submissions. The first was on the prohibition against selling prescribed debt – a submission was made which suggested that the inclusion of prescription in the National Credit Act was inappropriate as the matter was already provided for in the Prescription Act. It was however submitted that there were specific aspects of prescription that were being regulated by the amendment, vis, selling of prescribed debt, which issue was not explicitly dealt with in the Prescription Act.

For the application for debt review, clause 26 amending section 86 prohibited a credit provider from terminating an application for debt review lodged in terms of the NCA where an application had already been filed in a court or tribunal. The provision did not provide a safeguard against unscrupulous debtors who would default on a credit agreement that was being reviewed ad immediately expedite filing of the application with the court or tribunal. The unintended consequence of this provision was that certain debtors will delay their rehabilitation through abuse of process. It was proposed that section 86 (10) (b) then be deleted. 

Adv. van der Merwe said the proposed deletion of section 86 (10) (b) was very much a policy decision for DTI to take.

Ms Ntuli said the intention of the legislation, in providing debt counselling and debt review, was to ensure that any consumer, could approach the credit provider to assist this consumer with debt rearrangement or the extension of terms if the consumer faced financial difficulties. It was found there were parallel processes as not all credit providers were helping consumers and were undermining the process of assisting the consumer. 

Ms Mncube thought this might be a cause for concern but she would love for the explanation to be put in writing to explain to the provinces

The Chairperson said this would be done for all provinces

The Committee accepted the negotiating mandate.

Kwazulu-Natal Provincial Legislature
The Chairperson presented the KZN negotiating mandate to the Committee and said that the Province supported the Bill with proposed amendments.

Adv. van der Merwe noted there were a number of considerations to come out of the KZN negotiating mandate. The first submission referred transaction capital where the authority or scope of the functions performed by the payment distribution agents (PDAs) were not set out, the manner in which the distribution of amounts by PDAs to creditors were to be remitted had not sufficiently been set out with prescribed calculations and time limits, prescribed costs were to be charged to the PDAs and that PDAs hamper and negatively impact on the whole debt review process. These concerns were addressed in clause 13 (b) provided that the Minister may prescribe criteria for registration, duties and obligations of PDAs and the fees that may be charged by a PDA.

On the transaction capital, clause 13 (3) said that “if an applicant complies with the provisions of this Act and the applicant meets the criteria set out in this Act for registration, the National Credit Regulator, after considering the application, must register the applicant, subject to section 48, unless the National Credit Regulator after subjecting the applicant to a fit and proper test, is of the view that there are other compelling grounds that disqualify the applicant from being registered in terms of this Act”. This covered the concern raised by the Province. The emphasis was on “fit and proper”.  On credit amnesty, no credit amnesty was provided for in this Bill so this was not a concern.

Ms Ntuli discussed the issue of PDAs noting they added value and assisted a lot of consumers when the debt was rearranged and the consumer defaulted on that rearranged debt. A thorough assessment of the PDAs was done and risks identified were mitigated against and safeguards were put in place which the NCR was overseeing.

The Committee rejected the proposed amendments by the KZN Province.

Limpopo Provincial Legislature
In the absence of a permanent delegate, the Chairperson presented the Limpopo Province’s negotiating mandate. The Province had voted in favour of the Bill and indicated one proposed amendment – an insertion of section 71A (Clause 13) (i) “An additional sub-section that imposes penalty on credit providers that do not submit information regarding settlement to the credit bureau within the prescribed timeframes where an obligation under such credit agreement was subject to the provisions of subsection I (ii) there should be a short term insurance for debtors”.

Adv. van der Merwe said a penalty on credit providers would follow a complaints process to the NCR but this was a policy decision for the Committee to take in terms of whether there should be a penalty or not.

She felt the short term insurance for debtors would fall in the insurance legislation – the Act just referred to it but did not determine credit insurance. The Minister of Finance would definitely need to be consulted on that as it fell within his portfolio. There was an Insurance Bill before the Portfolio Committee on Finance which would be the more appropriate tool to deal with the matter.

Ms Ntuli said the requirement was for credit provider to submit information was a “must” in the Act. If there was no compliance the provisions relating to offences and penalties would apply. 

The Committee rejected the proposed amendments by the Limpopo Province.

Mpumalanga Provincial Legislature
In the absence of a permanent delegate, the Chairperson presented the Mpumalanga’s negotiating mandate to the Committee and said that the Province had voted in favour of the Bill.
 
The Committee accepted the negotiating mandate

Northern Cape Provincial Legislature
Mr Sinclair stated that the Northern Cape Province voted in favour of the Bill.

The Committee accepted the negotiating mandate. 

North West Provincial Legislature
Ms K Kekesi (ANC, North West) stated that the North West Province voted in favour of the Bill.
The Committee accepted the negotiating mandate. 

Western Cape Provincial Legislature
Mr Adams stated that the Western Cape Province supported the Bill with concerns. He had asked the Province to specify amendments so this meant the Bill was supported by the Western Cape Province with no amendments.

Ms Van Lingen questioned, from the Western Cape negotiating mandate, if section 126B was a risk to the Bill.

Mr Adams objected to this as the Member kept speaking for the Western Cape Province when he was the permanent delegate for the Province. The Committee was dealing with amendments not concerns. The matter concerned provinces not party politics. 

The Chairperson said final mandates would be deal with so amendments could then be raised.

A Procedural Officer in the NCOP was quite satisfied with the procedures followed. She was concerned about the presentation which was supposed to take place by Standard Bank – would the Committee consider this presentation or not?

The Chairperson asked if the state law advisors had anything to say.

Adv. Mongameli Kweta, Senior State Law Advisor, said the just of the matter was that he had no objections to the procedure followed.

The Chairperson said Standard Bank had been asked for an opportunity to say something to the Committee but they had now shown up. Even though the Committee provided the opportunity, as part of a democratic Parliament, the Bank could still make submissions to the provinces before final mandates were completed. 

Next week Tuesday the Committee would deal with final mandates and the Bill would be debated 26 March 2014.

The meeting was adjourned.
 

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