National Credit Regulator on its Annual Report 2015/16

Meeting report

The delegation comprised of Ms Nomsa Motshegare, Chief Executive Officer (CEO), Mr Obed Tongoane, Deputy CEO and Ms Ayanda Mafuleka, Chief Financial Officer (CFO). The Department of Trade and Industry (DTI) was represented by Ms Hayley Rodkin, Chief Director: Public Entity Oversight.

Briefing by the National Credit Regulator (NCR) on its Annual Report 2015/16
The briefing was undertaken by Ms Motshegare. The Committee was provided with an overview of the NCR’s strategic objectives for 2015/16. These included the promotion of responsible credit granting and to protect consumers from abuse and unfair practices in the consumer credit market as well as addressing over-indebtedness.

Members were given insight into the amendments that had been introduced to the National Credit Act (NCA) since it had been introduced in 2014. Most of the regulations accompanying the NCA came into effect in March 2015. The NCR had regular engagements with its key stakeholders. These included community outreach programmes (imbizos) with local tribal authorities. The NCR had also formed a credit industry forum comprising of itself, the Banking Association of SA (BASA), Micro Finance SA, debt counselling associations, payment distribution associations as well as community representatives to meet on a quarterly basis to address challenges with respect to the implementation of the NCA. Regular meetings were also held with local regulators ie the Financial Services Board, the South African Reserve Bank (SARB) and other DTI regulatory agencies. Key successes were also elaborated upon. On investigations and enforcement a total of 59 matters involving banks, retailers, small credit providers and debt counsellors had been referred to the National Consumer Tribunal (NCT). Some of the big retailers referred to the NCT were JDG Trading, Lewis Stores, Shoprite, Checkers and the Edcon Group. Banks that had been referred to the NCT were Finbond Mutual Bank, Standard Bank, Absa Bank, Nedbank and Capitec Bank. Raids had also been carried out in the Western Cape and Limpopo Provinces. In Limpopo 13 credit providers had been raided. Bank cards, pension cards and identity documents had been seized and arrests had been made. Criminal cases had been opened and matters had been referred to the NCT. In the Western Cape 21 credit providers had been raided. Five arrests had been made and bank cards and identity documents had also been seized. Criminal cases had also been opened with matters also being referred to the NCT. On education and communication, successes included 360 workshops that had been conducted, 93 exhibitions, activations and roadshows as well as 100 stakeholder meetings took place aimed at educating consumers on the NCA as amended. The NCR had also conducted imbizos in rural areas to educate pensioners and social grant recipients on their rights and responsibilities with a specific focus on credit insurance and illegal retention of identity documents, South African Social Security Agency (SASSA) cards and bank cards inclusive of pin codes by credit providers. Detail was provided on the performance of the NCR for 2015/16.

With the aim of improving compliance with affordability assessment regulations seven workshops had been planned. The target had been exceeded with nine workshops being conducted. To increase compliance with regulations pertaining to total cost of credit the planned target for 2015/16 was to conduct fifteen investigations and to take the appropriate enforcement action where necessary. The target had been exceeded with 32 investigations having been concluded. A total of fifteen matters were referred to the NCT, one compliance notice had been issued and four matters were closed as no contraventions had been found. The rest of the matters were work in progress and would be dealt with in the next financial year. With regards to conducting investigations into reckless lending and taking appropriate enforcement action where necessary the planned target was to have 40 credit providers investigated and to take appropriate enforcement action where necessary. The planned target was partially achieved in that focus was placed on finalising matters from the previous financial year. Nevertheless 56 investigations into reckless lending had been completed, eight matters were referred to the NCT and four matters were closed as no contraventions were found. The rest of the matters were still work in progress and would be dealt with in the next financial year. On increasing compliance by credit bureaus in respect of consumer credit information the target of investigating two credit bureaus with appropriate enforcement action taken had been achieved.

In conclusion the Committee was provided with detail on the financials of the NCR for 2015/16. The good news was that the NCR had obtained a clean audit from the Auditor General of SA’s Office two years running.
 
Discussion 
Mr W Faber (DA, Northern Cape) was disappointed that the NCR had not gotten to the Northern Cape on its public awareness campaign regarding social grants. When did the NCR intend to make it to the Northern Cape and if it did make it to which places would it go? He referred to page 7 which spoke about referrals by the NCR of big retailers like Lewis Stores to the National Consumer Tribunal. He wished to point out that big retailers had mark-ups of at least 40% on their products. This was besides the profit that they made on the financing of the product. It was the poorest of the poor that frequented these retailers as they had 24 months within which to pay off the purchase. The poor were being taken to the cleaners by these types of retail stores. It was all good and well that the NCR regulated the credit part but the profit part remained unregulated. The NCR was asked whether it was aware of cyber sharks. He was aware that the NCR targeted loan sharks. How many loan sharks were there that the NCR was unable to get to? What was the NCR’s plan to get to those loan sharks?  He suggested that the NCR look at the phenomenon of internet loan sharks otherwise called cyber sharks.

Ms Motshegare responded that the NCR would be visiting the Northern Cape in the current financial year or in the next financial year.

Mr Tongoane provided the Committee with insight into the workings of the NCR. The NCR was established in terms of the National Credit Act (NCA). It had a huge mandate and its offices were located in Midrand. The NCR however did have financial constraints. It only had ten investigators and ten legal advisers. Investigations were difficult and issues were complex. Once investigations were completed then enforcement had to be done. When the NCR referred matters to the National Consumer Tribunal (NCT) it had to contend with the best legal minds that money could buy. The NCR’s registrants hired the best lawyers to represent them. These lawyers would bring up technical issues to take apart the NCR’s case. If the NCR won a case then it would be taken on appeal. There were times when a simple matter could be dragged out in court for ten years. In the meantime wrongdoings would continue and perpetrators could not even be interdicted to stop what they were doing. He wished the Committee to appreciate the problems that the NCR faced. The NCR did train members of the South African Police Services (SAPS) as they were required to raid moneylenders in order to retrieve the identity documents and SASSA cards of persons who had taken loans from them. Thereafter moneylenders should be arrested. The NCR was aware of cyber lenders. The NCR was engaging with Google to prevent cyber lenders from placing ads on the internet. The NCR unfortunately did not have a cyber unit but partnered with the Hawks who did have one. The best thing was to educate people against taking loans and going into debt. On loaded charges that stores like Lewis charged customers, he explained that the mandate of the NR looked at illegal costs that were charged to customers. Some of the costs were set out in the NCA.  

Mr M Rayi (ANC, Eastern Cape) asked for figures on the extent of indebtedness of South Africans. Whilst the National Credit Act (NCA) was passed in 2014 and signed in 2015 and regulations were being implemented he noted that the Portfolio Committee on Trade and Industry had gotten permission from the National Assembly to amend the NCA again. He got the impression that the 2014 amendments to the NCA had not gone far enough. The NCR was asked what the challenges were that the Portfolio Committee on Trade and Industry intended to address with the proposed new amendments. The amendments would also find its way to the Committee. He also observed that the Eastern Cape Province had not formed part of the NCR’s public awareness campaign. Why did unions not feature as one of the NCR’s key stakeholders? He felt that the NCR needed to visit workplaces to inform workers on issues of credit and money lending. If the NCR lacked the capacity to do so they could do public awareness through shop stewards. The NCR was asked whether it ran advertisements over radio stations on public awareness. He felt that doing radio interviews was a different type of public awareness. On public awareness he further asked whether the NCR handed out pamphlets to warn pensioners against money lenders. On the performance of the NCR he asked why targets and achievements of investigations were clumped together with targets and achievements of enforcements. Investigations and enforcements had to be separated to get a true sense of the performance figures. On the finances of the NCR he asked why its income was less than its expenditure.

Ms Motshegare said that the NCR had visited Duncan Village in the Eastern Cape. More provinces would be visited within the next financial year. She said that the NCR would be doing radio advertisements especially at community stations. She agreed that there was a need to separate the targets and achievements of investigations from that of targets and achievements of enforcements. 
She noted that the Debt Relief Bill had been presented in the National Assembly as amendments to the NCA. Debt relief was aimed at the poor. The NCR felt that poor and retrenched workers should be given debt relief. The poor and retrenched workers did not own assets which they could sell in order to pay their debts. If a person did not have an income then how was the person expected to pay his debts. Debt relief had not been provided for in the NCA and its regulations. In SA there were about 24 million credit active persons. A total of 42% of these were impaired. Impairment was where a person was more than three months in arrears with an account. The NCR on a quarterly basis analysed information that it had and thereafter published it. Further detail on the indebtedness of South Africans would be forwarded to the Committee.

Mr Tongoane pointed out that radio advertisements were expensive. The NCR only had six staff members to deal with educating people i.e public awareness. There was only so much that the NCR could do. The NCR had to thus be innovative and creative. He pointed out that government employees were also affected by indebtedness. He noted that unions were a key stakeholder of the NCR. The NCR was working with the teaching fraternity and with members of the SAPS.
 
Ms Mafuleka explained that there was greater detail in the Annual Report itself on the income and expenditure of the NCR. On how the NCR funded its deficit she pointed out that in real terms the NCR was not in a deficit. She explained that part of the R114m actual expenditure was for a non cash item ie depreciation and bad debt. On the income side she noted that the NCR had experienced challenges to meet its budgeted income. The NCR had to look at ways of increasing its income line. The DTI only provided the NCR with R60m the rest of the R57m the NCR had to source itself. The NCR only managed to raise R32m. However for 2016/17 income streams were improving as more funds would be raised.

Mr L Magwebu (DA, Eastern Cape) asked why the South African Social Security Agency (SASSA) was not one of the NCR’s key stakeholders. He felt that it should be. The mandate of the NCR resonated with the mandate of SASSA. He pointed out that there were some loan sharks who were regulated whilst others were not. The problem was that those who were regulated still had the same modus operandi as those who were unregulated. Loan sharks still required pensioners to hand over their identity documents and SASSA cards when taking out loans. This practise had been outlawed but seemed to continue unabated. SASSA grappled with this problem. The NCR and the SASSA needed to work together.

The Chairperson noted that page 10 mentioned SASSA.
 
Mr Magwebu said that if the NCR worked with the SASSA then he was satisfied. Page 8 spoke about five arrests being made and he asked what the outcome of the arrests had been. Were the arrested persons convicted or acquitted? He asked whether the NCR worked with the SASSA on community outreach programmes. Slide 13 spoke about 56 investigations on reckless lending having been only partially done due to the NCR having to deal with backlogs of the previous year. He felt that the reason given for non performance was not good enough. He asked whether the backlog had been taken care of given that it was now 2017. 

Ms Motshegare, on the 56 investigations on reckless lending, explained that on enforcement the NCR had been behind. However it was dealt with in the current financial year. At the time of reporting the targets on investigations had been met.

Mr Tongoane, on the five arrests made, said that the mandate of the NCR only went so far. The NCR conducted raids with the SAPS and with the SASSA. The SAPS was tasked with making arrests. The NCR faced challenges when unscrupulous moneylenders were arrested. People were often afraid to testify against moneylenders and hence cases would fall apart. He explained that the backlogs had been sorted and dealt with. The NCR was forced to outsource some of its work due to its lack of capacity. 

The Chairperson said that the difference between the Portfolio Committee of Trade and Industry and the Committee was that the Committee had their provinces interests at heart. The NCR was asked to provide the Committee with a breakdown of its interventions as per province with detail on the actual places where interventions took place. He asked the NCR to provide the information within seven days to the Committee.

Ms Motshegare agreed to provide the information within seven days.

The Chairperson said that the information on the state of indebtedness of South Africans could be also be provided in the document which the NCR was to provide to the Committee.

Mr Faber did not feel that the SASSA’s relationship with the NCR was expressly reflected in the briefing document as the Chairperson said it was.

Mr S Mthimunye (ANC, Limpopo) reacted that the SASSA was accountable to the Portfolio Committee on Social Development and not the Committee.

The Chairperson said that the NCR did work with the SASSA.

Ms Motshegare said that the NCR did work with the SASSA. The NCR had also invited the SASSA to the imbizos that it held. The NCR and the SASSA conducted raids together. The SASSA was roped in. The SASSA was a key stakeholder of the NCR.

Mr Tongoane confirmed that the NCR did partner with the SASSA.

Mr Mthimunye asked whether the NCR had a Board. He also asked whether short term insurance was regarded as credit. He had observed people being blacklisted for not paying their monthly insurance premiums.

Mr M Chabangu (EFF, Free State) asked why only big retail stores had been taken into consideration. What about the smaller retail stores that one found in towns. He also asked why SASSA payouts had been moved from the use of banks to the use of retail stores. He was concerned about citizens of Lesotho claiming South African social grants. He noted that QuaQua in the Free State Province had three tribal authorities. Which of the three had the NCR met during its imbizos?

The Chairperson said that some of the questions asked by Mr Chabangu related to social development. The last question would be answered in the detailed document that the NCR was to provide to the Committee. Statistical detail would be provided to the Committee.

Mr Faber was not pleased with the Chairperson stating that the questions by Mr Chabangu related to social development. If the NCR could answer the questions then they should be allowed to do so.

Mr Mthimunye asked whether the NCR prosecuted its cases through the normal criminal court system.

Ms M Dikgale (ANC, Limpopo) asked that if the NCR had visited the Limpopo Province which areas had they visited. The Limpopo Province after all was huge. If the NCR provided training to SAPS officials then perhaps it should also provide training to teachers. With regards to debt relief, who did the NCR classify as being poor?

Ms Motshegare explained that the information before the Committee was 2015/16 information. Since then other areas in the Limpopo Province and other provinces had been visited. Further information in this regard would also be provided to the Committee. The NCR continued with its imbizos in provinces. On debt relief the NCR was focussed on persons that had been retrenched. The problem was that persons who had been retrenched were not entitled to debt counselling as one needed to have an income to qualify for debt counselling. On debt relief an impact study would be done and regulations would be published. 

Mr Y Vawda (EFF, Mpumalanga) understood the limitations that the NCR faced and said that perhaps the National Council of Provinces (NCOP) could be of assistance. The NCR was asked what laws needed to be amended in order to make their regulating job much easier. He noted that the NCR needed to make proposals in this regard so that facilitation could take place.

The Chairperson asked how often the NCR met with its colleagues in the Department of Trade and Industry (DTI).

Ms Motshegare stated that there were meetings every month with the DTI. The regularity of meetings depended on whether meetings were with the Director General or with heads of branches. 

Committee Minutes
Committee Minutes dated the 22 February 2017 was adopted as amended.

The meeting was adjourned.