Documents handed out: Committee Memorandum for Submission of a legislative proposal regarding Debt Relief (Sub-Committee report)
The Chairperson of the sub-Committee to consider a Legislative Proposal on debt relief reported on the proposal to amend the National Credit Act. The Bill proposed amendments aimed at providing a simpler and more rigorous enforcement of the Act, criminal prosecutions of those who contravened the Act, legal certainty on in duplum debt accumulation, provide an effective debt counselling framework for low-income workers, and to provide capped debt relief to promote change in borrowing and spending. Proposals include measures related to debt counseling, removing adverse credit consumer information, creating payment distribution agents and alternative dispute resolution agents, and providing that prescribed debt should not be claimable. He noted the high levels of household debt statistics, the circumstances that left debtors with more debts than assets, and problems when consumers did not understand their rights and became over-indebted, in part due to continuous and reckless lending by credit providers, and the practical challenges related to declaring a credit agreement reckless. The dti had considered various debt forgiveness measures, but the Committee felt that over-indebtedness must urgently be addressed and targeted intervention could not be delayed. The Memorandum also considered the financial implications of debt forgiveness. The executive felt that the dti must be involved in the drafting, but the dti was in favour of the principle behind the Bill. A Member of the Drafting Unit at Parliament took Members through the main points of the Bill, explaining the principle behind in duplum, that the interest charged should never exceed the capital debt, and clarified the process. The Memorandum and Report would be presented to the House who would decide whether it would be prepared to accept any part of the proposals, and give permission to proceed. Should that happen, the Bill in formal format would be drafted.
Members welcomed the Memorandum and report from the sub-Committee but suggested some technical amendments and sought clarity on the terms “debt forgiveness” and “debt relief”. Members had felt that financial institutions must comply with the law, and it was noted that although there were clauses on reckless lending, financial institutions were not complying. Members adopted the Memorandum and the Report, subject to technical corrections.
The report on the International Astronautical Federation Congress Report was circulated and would be formally reported upon and adopted in 2017. Reports from the National Regulator for Compulsory Specification (NRCS) on the turn-around Strategy for 2016/17, and the 2nd quarter report of the Department of Trade and Industry (dti) had been received. Members adopted minutes from 1 November and noted, as a follow up to those minutes, that the Liquor Policy Bill deadline for public input had been extended to 15 December so that the Bill was unlikely to be with the Committee before March 2017. Members were urged to discuss the proposals with their constituencies in the meantime and encourage input. The dti had now provided information on the latest impact studies and correlation between drinking and brain development up to age 25, and had also provided information on minimum legal alcohol consumption ages in other countries in Africa. Members also adopted minutes of 25 and 29 November 2016. The Committee programme for 2017 was discussed and a final programme would be circulated later. The new travel policy, with specific reference to Members changing travel arrangements after they had been booked, was outlined.
Summary on reports before the Committee
The Chairperson stated that the International Astronautical Federation Congress Report had been given to Members and it was briefly discussed later.
The Chairperson stated that the National Regulator for Compulsory Specification (NRCS) had submitted its report on the turn-around Strategy for 2016/17.
Mr Andre Hermans, Committee Secretary, added that a 2nd Quarter 2016/17 report was also received from Department of Trade and Industry (dti), following a request during the Friday meeting.
The Chairperson confirmed that the Committee had now received all outstanding reports.
Committee Memorandum for Submission of Legislative Proposal regarding debt relief
Mr A Williams (ANC), who had chaired the Sub-Committee deliberating on the legislative proposal, which was essentially to propose a Committee Bill, took Members through the document.
He reported that the Memorandum was a proposal to amend the National Credit Act, No 34 of 2005, which had been submitted to the Committee in the previous week.
The Chairperson prompted Mr Williams to take the Committee through the critical issues in the proposal, page by page.
Mr Williams reported that the fundamental reasons behind the Bill were:
- to provide a simpler and more rigorous enforcement of the Act
- to criminalize prosecution of lenders who contravened the Act
- to provide legal certainty on in duplum debt accumulation
- to provide for an effective debt counselling framework for low-income workers
- to provide for capped debt relief to promote a change in borrowing and spending habits of an over-indebted society.
He expanded that the proposals would include:
- tightening measures related to debt counseling
- removing adverse credit consumer information under certain circumstances
- creating payment distribution agents and alternative dispute resolution agents
- providing for prescribed debts to not be claimable under any circumstances.
According to the South African Reserve Bank (SARB) Quarterly Bulletin for June 2016, household debt, as a percentage of disposable income, was 76.6% in the first quarter (see Memorandum on legislative proposal document). He further stated that this showed that consumers were over-indebted as a result of economic conditions prevailing in the country. These included retrenchments which led to debtors paying off a large portion of a mortgage; the fact that when a debtor falls behind on payments after being retrenched, the house is sold for less than market value, which then leaves the debtor with more debts than assets. Consumers who do not understand their rights or obligations that accompany credit or the cost of credit become over-indebted because they sign debt contracts without understanding them. This is compounded by continuous and reckless lending by credit providers, and the practical challenges related to declaring a credit agreement reckless. Because substantial amounts of reckless lending took place, the proof of reckless lending was time consuming and slow. The dti had considered various debt forgiveness measures, but the Committee felt that over-indebtedness must urgently be addressed and targeted intervention could not be delayed. The Memorandum also considered the financial implications of debt forgiveness. The executive was of the opinion that the dti needed to be involved in the development of the Bill, in order that the Committee would not propose a measure that could not be implemented or that would be detrimental to the economy of the country. The dti was in favour of the Committee's intention to propose this Bill. Finally, he presented the Memorandum officially to the Committee for its consideration.
The Chairperson remarked that Adv A Alberts (FF+) was supposed to be part of the Sub-Committee but was engaged with party business. She asked who else had been present in the sub-Committee.
Mr Williams reported that the sub-Committee included Ms P Mantashe (ANC) and Mr G Hill-Lewis (DA).
Adv Charmaine van der Merwe, Head: Drafting Unit, Parliament, took Members through the main points of the proposed Bill, and explained, at the request of the Chairperson, the meaning of the Latin phrases and clarified the process.
She started by explaining the term in duplum. This was a principle that the amount of interest charged should never exceed the capital debt. However, it was somewhat complicated because there was some question round whether the legal fees should also form part of the interest being charged. In terms of the process, she clarified that the Committee had taken the first formal step on the Bill by discussing the proposals with stakeholders, to ascertain the needs and possible solutions to debt relief. This step had culminated in the report that could give a guide on the possible Committee legislation; on the basis of this Committee Report, the House would be in a position to state whether it would be prepared to accept some parts of the proposals. The House might also be in a position to give its permission on condition that the financial implications of debt relief would be considered. On page 3 of its report, the sub-Committee had suggested that an assessment of the financial implications could be made, but the dti had also given an informal commitment to assist with the assessment.
She noted that the next step would be for the House to consider the Committees Report on the Memorandum and proposal, to give its permission to proceed. After that the sub-Committee would consider what must go into the Bill. In addition, because the Bill involved policy decisions, the Committee would need to be satisfied with the wording before it was set down in a Bill.
The Chairperson remarked that this was the first time she had been involved in this kind of process.
Mr B Mkongi (ANC) welcomed the Memorandum and the Report from the sub-Committee on the proposed legislation. However, he pointed out a few errors around the arrangement and said the style should be consistent. He also wanted clarity between debt forgiveness and debt relief, saying that the Report was not clear on this point.
Mr Williams responded that the sub-Committee had agreed that any referral to ‘debt forgiveness’ would be referred to as ‘capped debt relief’ in the document, and he thought that it would have been captured correctly. On page 3, under the section dealing with the financial implications to the State, in paragraph 1, line 1, the wording should be “any capped debt relief” and not “any debt forgiveness measure”.
The Chairperson remarked that this correction should have been brought to the attention of the Committee but she noted that Mr Williams had spoken to her about it. She appreciated Mr Mkongi's input which showed that Members were taking the process seriously. She asked that Adv van der Merwe should double-check the wording to ensure that it was legally sound.
Mr Mkongi also stated that the pages were not numbered.
The Chairperson observed that the Report had come from the sub-Committee, but the more concise Committee Report on the legislative proposal would include all the corrections now being proposed, and she asked the Committee Secretary to ensure that these were captured.
Mr J Esterhuizen (IFP) stated that, unfortunately he had missed some meetings, for reasons that he had explained to the Chairperson, but wanted to make some input. The South African economy is based on spending, although the consumers were forced into credit and became victims of credit providers there was, on the other side of the coin, no protection for the banks or financial institutions.
The Chairperson remarked that this issue had already been addressed when the sub-Committee had briefed the Committee and the full Committee felt that financial institutions needed to comply with the law, by getting proof of remuneration and proof of address before providing credit to consumers. There should be a clause that refers to reckless lending, and she asked Adv van der Merwe to point that out
Adv van der Merwe stated that there was a requirement in the Act that lenders needed to conduct research to ascertain proof of remuneration and proof of address before providing credit to consumers, and if this did not happen, then this could amount to reckless lending.
The Chairperson observed that, the challenge was that some institutions had not complied with this requirement properly since 2007. The Committee could not encourage either reckless lending or irresponsible borrowing. Experience has shown that often certain institutions that should not be lending money at all; such as furniture and retail stores who had lending and insurance offerings inside the shop. This had been discussed by the Committee in the past. Banks who made submissions to the Committee did indicate that they had their own measures to assist their own clients, but experience had shown that not all banks complied. On this proposal, any institutions who were found to have given credit recklessly and contravened the Act would face criminal prosecution.
Members moved for, seconded and adopted the legislative proposal.
The Committee Secretary confirmed that the corrected report would be available by that evening.
The Chairperson expressed thanks to the sub-Committee Chair and members, to Members of the main Committee for their input and thanked Adv van der Merwe.
Adoption of minutes
1 November 2016
The Chairperson noted that the attendance and apologies seemed to be correct. She noted that this meeting had considered the mini-minutes, and taken a briefing from the dti on the Liquor Policy Bill. She asked support staff member Ms S Naidoo whether the date for inputs from the public on this Bill had been extended.
Ms S Naidoo reported that the date for public inputs had been extended to 15 December 2016.
The Chairperson noted that in this case the Bill might not get back to the Committee until March 2016.
Mr B Mkongi (ANC) asked when the public hearings on the Liquor Policy Bill might be held.
The Chairperson stated that there would be public hearings but there could well be challenges on the programming especially if the executive granted requests for extensions. She asked Members to read the Bill carefully during the recess and make their constituencies aware of the pending legislation, and seek their opinions, particularly those in the rural areas. She noted that the witness programme in Parliament would be able to contribute for impoverished people to travel to Parliament to give their input. ,
She drew attention to page 3, noting that the Committee had discussed the minimum legal drinking age, the cost of liquor, the role of licensing authority, transformation of the liquor industry and the impact of advertisement on liquor. Important resolutions were that the dti was requested to provide empirical study on the minimum liquor consumption age in other African states, as the Committee already had input from Europe, America and Australia. The Committee also asked dti to provide information on the latest impact studies about the health of youth who drink when they are under the prescribed age limit; she remarked that the Deputy Director General had noted a study to the effect that brain and thinking were still developing up to age 25, and she was particularly interested in whether correlations between brain activity and alcohol were suggested, from her past experience.
The Committee Secretary confirmed that the Committee had received both the report on the empirical study into other African regional states and the study conducted on the brain and thinking capacity as referred to in the dti presentation.
Members adopted the minutes.
25 November 2016
Mr Mkongi pointed out some corrections on punctuation marks.
The Chairperson observed that no reason was given for Mr D Macpherson's apology, and she asked that this be done.
She also noted that Mr Esterhuizen had submitted an apology for that reason, because of family illness, which was why he had not known everything that had been discussed. It would be important for Members who were absent to follow up with the Chairperson to find out what they had missed.
She noted that page 2 captured input from the Black Sash and Summit Financial Services. Page 4 captured the input from the National Clothing Retail Federation of South Africa.
Members adopted the minutes as amended.
29 November 2016
The Chairperson asked Members to check those present and apologies. She asked that in future, the agenda for the meetings should indicate which minutes were being presented for adoption.
These minutes captured the 2nd quarter 2015 financial and non-financial reports of the dti on page 2.
Mr Williams noted that these minutes appeared to reflect that the Memorandum on the legislative proposal was accepted on 29 November, whereas it had only been voted on today.
The Chairperson explained that the Committee had actually accepted the Memorandum on the legislative proposal on 29 November, and Members were asked to study the documents in order to then formally consider adopting it today.
The minutes were adopted with the technical amendments.
Draft Report on 7th International Meeting for Parliamentarians on the 67th International Astronaut Congress
The Chaireperson tabled the Draft Report on 7th International Meeting for Parliamentarians on the 67th International Astronaut Congress, which had been held in Mexico. She noted that she and Mr Esterhuizen had been part of the delegation and she had complied the report with conclusions, as a proposal to be studied by the Committee. Mr Esterhuizen would be the first to give input on the draft, and other Members would then be invited to comment.
The Chairperson noted that Mr Mkongi wished to make an input, but said that this report was only being distributed today, so that Members could study it, and all discussion on it would be held over until January 2017.
Committee Programme 2017
Ms Mantashe observed that the meetings of the Committee in 2017 were scheduled on Fridays, and this would disrupt Members' travel arrangements, as they would not be able to travel until the end of each quarter.
The Chairperson noted that the House had decided to schedule Tuesdays and Friday as the dates of the Committee meetings, with an option of Thursday afternoon or Saturday morning as extra days for Committee meetings. The Chairperson of the Committee of Chairpersons was not yet aware of the programme and he may make recommendations that could accommodate the challenges of Members. If Members wished to make complaints they should present these to the House's Chief Whip, via the Chief Whip of their respective parties.
Ms Mantashe asked that the Chairperson could also convey a suggestion, to the Chair of the Committee of Chairpersons, that it would serve the Committee better if it could meet on alternate Fridays .
The Chairperson said that she was going to propose that the Committee should sit on Wednesday, from 08:00 to 09:45.
Ms van Schalkwyk noted that she had another Committee meeting beginning at 09:45.
The Chairperson said she wanted to take Members' travel needs into consideration.
Mr Mkongi proposed that another option might be to start at 15:00 on Wednesday, before general meetings of the House.
The Chairperson stated that she would use her initiative to come up with the best proposals that would allow travel arrangements to be taken into account.
She informed Members that the Committee had proposed oversight visits to Eastern Cape and Gauteng, industrial parks and the National Regulator for Compulsory Specifications in 2017. She asked Mr Williams to tell Mr Macpherson about the latter visit. She also intended to comply with an instruction to encourage this Committee to hold a meeting outside Cape Town, in Pretoria, on the same trip.
Mr N Koornhof (ANC) requested that the Committee should add a visit to the film studios in Cape Town.
The Chairperson responded that the Committee would be at the film studios for the public hearings for the Performers Protection Amendment Bill and did not think an additional oversight visit was needed.
She took the Committee through some of the proposed dates, mentioning a briefing on the Performers Protection Amendment Bill on 10 March and one on the proposed copyright legislation on 14 March 2017. She noted that Members would receive a revised programme by email and asked Members to let support staff know of their personal email addresses, so that they could still receive information during the recess.
She reminded Members that under new policies, any Member who confirmed their attendance at an oversight visit, but later changed the travel arrangements, would have to pay personally for extra costs for the change.
The Committee Secretary confirmed that the House had told the administration department that Members would have to bear the costs associated with changing their travel arrangements for oversight visits, themselves. Members could not make use of the travel agency that Parliament used to make travel arrangements, and had to do their travel arrangement outside these travel arrangements if they wished to change them. In addition Members were also required to complete a form and sign to indicate that they agreed with the travel arrangements that the Committee was making, to cut down on fruitless expenditure.
The Chairperson noted her appreciation to Committee and support staff throughout the year and wished everyone a good festive season, urging them not to indulge in behaviour that would bring disrepute to Parliament.
The meeting was adjourned.
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