The National Consumer Tribunal (NCT) said its mandate had been expanded by the National Credit Amendment Act, No 19 of 2014. The definition of prohibited conduct had been amended and through this amendment it had expanded the number and types of prohibited conduct that can be brought before the NCT. Its mandate now included reckless credit matters, the prohibited collection of prescribed debts, payment distribution agents, matters involving debt counsellors as payment distribution agents, and alternative dispute resolution agents.
A highlight for the year was that the NCT had managed to decrease adjudication costs despite a 78% increase in its caseload. No NCT cases had been overturned on appeal in the High Court during the reporting period, and it had received a second clean audit. Debt re-arrangement agreements were the bulk of the cases done by the NCT. It had implemented an electronic Case Management System (CMS). This automation was a very important strategic direction the NCT was taking administratively. The CMS managed expenses and reduced manual intervention, resulting in increased capturing while simultaneously reducing the risk of errors.
The core programmes of the NCT were the adjudication and administration programmes, which were aligned to the National Development Plan (NDP) and the Medium Term Expenditure Framework (MTEF), as well as the Department of Trade and Industry’s (dti)’s goals. The two major challenges for the NCT were the unpredictable and increasing caseload, and funding constraints based on the increased caseload. There were possible changes to legislation in the pipeline.
The budget for the MTEF period had been prepared on the assumption that the caseload would be 12 800 cases in 2015/16, 17 890 cases in 2016/17 and 23 240 cases in 2017/18. The additional funding required for the years 2015/16 to 2017/18 was R4.9m, R6m and R8.6m respectively. The NCT was aware of governmental budgetary constraints but it anticipated deficits, as the grant allocation and other income were not sufficient to cover the adjudication costs of the projected case load numbers. As the entity could not budget for a deficit, the shortfall was reflected in the budget as additional grant/donor funding required. One way to raise income was to increase filing fees. The debt filing fee had remained R100 for a number of years, but the NCT had to take into account that the people who approached them were in financial trouble, so it did not want to increase the fee. Other forms of income were possible donor funding for specific projects like the youth development programs
Members said the salary scales component for staff members was not in the presentation, and the salaries appeared to be top heavy. The NCT appeared to be a duplication of the National Credit Regulator (NCR) -- could this be clarified? Did debt counselling agencies have a Board to which they belonged, and what was the NCT interaction with this Board? The NCR appeared to be using the NCT as a scapegoat in the African Bank issue. What was the NCT’s involvement in the African Bank issue? Members questioned whether the position of executive chairperson was good corporate governance practice, as this could compromised the independence of the Board. Did the NCT receive any other funds apart from dti grants? Members said 15% of expenses were for consultants, and asked why this work could not be done internally. They asked for details of the number of cases resolved, per province, per year. Did the NCT have a consumer education programme? Full financials should be made available when next the NCT reported to the Committee.
Members asked questions on the effectiveness of what was being done by the NCT. How many cases had been reviewed and how many cases had been taken to court? Why were cases still taken to court? Could corrections not be implemented at the source, or at the level of the Ombud? What type of cases were predominantly dealt with, and could recurrences be prevented? Which universities had been approached by the NCT? How was the challenge of conflict of interest handled? What was the risk management strategy? Members voiced concern about people who were disabled and asked that they be incorporated into the work of the NCT. They hoped adequate provision had been made in the mid-term budget with regard to information communication technology (ICT), because it had not been raised in the meeting.
Briefing by National Consumer Tribunal (NCT)
Ms Diane Terblanche, Executive Chairperson, NCT, said that reckless credit matters could now be heard, following the promulgation of the National Credit Amendment Act, No 19 of 2014. The amendments also meant the mandate of the NCT had been expanded to include:
- The prohibited collection of prescribed debts;
- Payment distribution agents;
- Matters involving debt counsellors as payment distribution agents;
- Alternative dispute resolution agents;
- The number and types of prohibited conduct cases that could be heard, because of the expanded definition of “prohibited conduct.”
She spoke about the guiding principles of the NCT. She said the NCT was ‘inquisitorial’, which obliged it to ask the consumer questions on a matter other than what had been put before it by an interested party. This was done to prevent postponements, which led to increased costs. Because there were no surprises at hearings, matters were finalised expeditiously. Hearings were hosted in Cape Town, Durban and Port Elizabeth.
The NCT had managed to decrease adjudication costs, despite a 78% increase in its caseload. No NCT cases had been overturned on appeal in the high court during the reporting period, and an important decision in favour of consumers (Barko v NCR) had been endorsed by the Supreme Court of Appeal (SCA).
She said debt re-arrangement agreements formed the bulk of the cases seen. Even if both parties agreed to a settlement, the NCT would not endorse that settlement if the settlement was illegal. For example, a settlement could include an interest rate that was higher than the legal limit. The Tribunal also would not endorse settlements if the repayment terms were impossible for a party to fulfill, given their circumstances. The NCT had issued 18 000 debt re-arrangement agreements.
The NCT had a strict supply chain management process and paid invoices within 15 days. It had received a second clean audit.
The NCT had implemented an electronic Case Management System (CMS), with most of its functionality already incorporated. This automation was a very important strategic direction the NCT had taking administratively. The CMS also managed expenses and reduced manual intervention, which had resulted in increased capturing while at the same time reducing the risk of errors. The capturing of cases had been helped by a contingency resource pool. Through the contingency resource pool and an internship programme, the NCT had created opportunities for youth development.
Mrs Hazel Devraj, full time Tribunal member, said the NCT had two core programmes -- adjudication and administration. These were aligned to Government’s National Development Plan (NDP), Medium Term Strategic Framework (MTSF) and the Department of Trade and Industry’s (dti’s) three-year Annual Performance Plan (APP). She spoke to the APP and the quarterly milestones for the adjudication and administration programmes.
The budget for the MTEF period had been prepared on the assumption that the caseload would be 12 800 cases for 2015/16. However, in April and May of 2015 alone, 3 000 cases had been referred. It had anticipated 17 890 cases in 2016/17 and 23 240 cases in 2017/18. Over 70% of the cases were debt rearrangement agreements. The NCT had a small organisational structure so the vacancy rate had been set at 85%. The information communication technology (ICT) interventions were contributing to savings in both cost and time, but it was difficult to predict the number of cases. The NCT was working on developing, for budgeting purposes, what the cost per case was.
The NCT had an increasing case load, but was aware of governmental budgetary constraints. Its highest cost factor was Tribunal member fees, at R9.2m. The NCT was putting interventions in place to ensure it remained within budget, but it anticipated deficits as the grant allocation and other income was not sufficient to cover the adjudication costs with these anticipated case load numbers. As the entity could not budget for a deficit, the shortfall had been reflected as additional grant/donor funding required in the budget.
Ms Terblanche said they had two major challenges. The first was an unpredictable and increasing caseload which had increased by 78% from the previous financial year. The effect of this was to put additional strain on staff and Tribunal members, and made it difficult for the NCT to plan. The second challenge was funding constraints, despite an 11% increase in the dti grant. The effect of this was that the NCT might not have enough funding to adjudicate on all its cases, if all the cases were filed with the NCT.
As part of contingency planning, the NCT had increased the type and number of participants in the contingency pool of employees. It had increased the pool of students, and had created a dedicated IT room and used electronic file transfers into the electronic CMS. It had filled several vacancies during the year and had re-aligned staff to the changing human resource (HR) requirements. It had implemented the CMS with future enhancements, such as e-filing.
The NCT had studied the work processes to the point where no more efficiencies could be gained. It had revised its work processes and efficiencies in order to continue to adjudicate cases within the allocated timeframes. The implementation of the CMS would significantly reduce operational costs and increase access for parties.
There were possible changes to legislation in the pipeline. Filing fees would possibly increase. The debt filing fee had remained at R100 for a number of years, but the NCT had to take into account that the people who approached them were in financial trouble, so it did not want to increase the fee. Other forms of income were possible donor funding for specific projects, like the youth development programmes
Mr W Faber (DA, Northern Cape) said he had not seen the salary scale component for staff members in the presentation, and the salaries appeared to be top heavy. He said the NCT appeared to be a duplication of the National Credit Regulator (NCR) -- could this be clarified? Did debt counselling agencies have a Board to which they belonged, and what was the NCT’s interaction with them. He said it appeared the NCR was using the NCT as a scapegoat in the African Bank issue. What was the NCT’s involvement in the African Bank issue?
Ms Terblanche said the NCR was not the final arbiter, and could take matters either to the NCT or to the courts. The NCT was, however, cheaper and more informal than the courts. There was thus no duplication. The NCR acted as the prosecutor or plaintiff, and referred cases to the NCT.
The item on fees for Tribunal members included payments for the adjudication work they did. Tribunal members were appointed for five years by the President. There were three full-time and ten part-time members. Staff provided case management administrative support. She would provide a breakdown of the figures to the Committee.
There was not one umbrella association for debt counsellors, but there were associations to which debt counsellors belonged. The bulk of cases came from debt counsellors.
She said that on the date set for the African Bank hearing, the matter had been settled and a R20m fine had been paid, so the NCT had not heard the matter.
The Chairperson said that Mr Faber could look at the NCR presentation of the previous week for further information on the matter.
Mr S Mthimunye (ANC, Mpumalanga) questioned whether the position of executive chairperson was good corporate governance practice. Did the NCT receive any other funds, apart from dti grants? He said 15% of expenses were for consultants, and asked why this work could not be done internally. He asked for a full record of the financials to be provided to the Committee. He wanted details of the number of cases resolved, per province, per year. He asked whether the NCT had a consumer education programme.
Ms Terblanche said the position of executive chairperson was as laid out in the legislation. The NCT adhered to the King III guidelines, but knew that the issue of an executive chairperson was a sticky issue.
Ms Jodi Scholtz, Group Chief Operating Officer (COO): Department of Trade and Industry, said that when the NCT had started, the Department had decided to have a part-time executive chairperson post. However, with the increase in cases it had been made into a full-time post. Cases had increased from an initial 400 to 16 000.
Mr Mthimunye said the post of executive chairperson compromised the independence of the Board.
Ms Scholtz said that the NCT Board was not a board in the traditional sense. The Tribunal was an alternative dispute resolution mechanism, rather than a traditional Board. The Chairperson focussed on adjudication while Ms Devraj focussed on administration.
Ms Terblanche said the Tribunal’s income was derived from a dti transfer, filing fees and interest. There was no donor income.
Consultants’ fees amounted to R5.8m out of a total budget of R50m which was just over 10%. The NCT needed specialist services in many cases. If cases were taken to the high court, lawyers had to be appointed.
She said the NCT did not have a breakdown for figures per province, as some debt counsellors might be based in Gauteng, for example, but work in other provinces and their figures did not reflect the provincial breakdown. The NCT would, however, attempt to source provincial figures via the NCR, the National Consumer Council (NCC) and provincial bodies.
The NCT did not have an education budget. The NCR and the NCC had education budgets, and the NCT accompanied them when these two bodies conducted educational programs.
The Chairperson said the full financials should be made available when next the NCT reported to the Committee.
Mr J Londt (DA, Western Cape) asked questions about the effectiveness of the work done by the NCT. How many cases were reviewed? How many cases were taken to court?
Ms Terblanche outlined the dispute resolution process. She said that if a consumer had a problem, it had to approach the service provider first. If this failed, the consumer then had to approach industry bodies like the ombudsman, then the regulators and finally either the courts or the NCT. The NCT was cheaper, quicker and more informal. On a debt re-arranging matter, the NCT charged a R100 filing fee while via the courts, fees would be over R2 000.
Regarding cases reviewed, she said an NCT order was the same as a high court order. Ten cases had been appealed /reviewed, and all cases had been ruled in favour of the NCT.
Mr Londt asked why cases were still being taken to court. Could corrections not be carried out at the source, or at the level of the Ombud?
Ms Devraj said the NCT did not have the power to award damages. Therefore one needed to go to court to get damages awarded.
The Chairperson asked what types of cases were dealt with predominantly, and could recurrences be prevented.
Ms Terblanche said it dealt with 149 types of cases. The NCT could provide a list of the types of matters to the Committee.
On the question of the recurrence of cases, she said it was a matter of the determination in a case which set a precedent. Precedent setting cases informed and changed behaviour.
Dr Y Vawda (EFF, Mpumalanga) asked which universities had been approached by the NCT. How was the challenge of conflict of interest handled?
Ms Terblanche said the NCT had approached all the universities. How the students interacted was dependent on their geographic location and their ability to access secure internet.
Tribunal members could not hear cases when they had an interest in any party. The NCT even took the identity numbers of members and ran them through the Companies and Intellectual Property Commission (CIPC) to search whether members had an interest. The NCT also interviewed staff, service providers and tenderers. There was no political interference in the NCT’s work.
Mr Mthimunye asked what the risk management strategy was.
Ms Terblanche said the NCT followed a risk management framework, identified risks, allocated ratings to it and planned around it. There was an audit and risk committee which oversaw all levels.
Ms Devraj said risk management was continually reviewed and reported on, and documents were available which could be shared.
The Chairperson said he was concerned about people who were disabled, and asked that they be incorporated into the work of the NCT. He hoped adequate provision had been made in the mid-term budget, especially with reference to ICT, because it had not been raised in the meeting.
Ms Terblanche said that the number of hearings depended on matters referred to it by the Regulator. The NCT did have a plan, and ensured that they had interpreters at the hearings.
Regarding the ICT budget, Mr Bax Nomvete, ICT and Records Manager, said ICT had been elevated to a strategic level because of its efficiency gains. The NCT had not got enough IT systems off the ground, although the base ICT system had been implemented and would significantly decrease expenses on external consultants.
The meeting was adjourned