Draft Debt Relief Committee Bill (only distributed to Members)
The Parliamentary Legal Adviser responded in depth to the questions raised the previous day by Members and Treasury after she had presented the draft Debt Relief Committee Bill. She explained in detail the process that would need to be followed by the Minister as Treasury had concerns about powers given to the Minister of Trade and Industry. These powers would be within laid down criteria and once comment was sought from all stakeholders, permission had to be sought from the National Assembly as it was in fact a delegation by Parliament to the Minister.
Deliberations continued. The IFP and the EFF were not present, and debate was between the ANC and the DA. The National Credit Regulator (NCR) and the Department of Trade and Industry (DTI) were represented, and made inputs.
In deliberations, the most contentious issue was to what extent the Bill had to be devoted first and foremost to debt relief, or whether it had to contain prescriptions to move those who qualified, into debt review. The ANC argued that for the Bill to provide for effective debt relief, debt relief had to be the first consideration. The DA wanted the Bill to also contribute to make debt review more accessible, so as to keep people in the system. According to the DA, people who could make the debt review threshold were not to be included in the Debt Relief Bill. There was concern about the power of the Minister to prescribe debt relief measures, as it could allow too much for discretion. It was also felt that there could be legal problems related to the delegation of parliamentary authority to the Minister. There were concerns about the role and capacity of the National Credit Regulator and the National Credit Tribunal (NCT). There were calls for restructuring of the Tribunal. The DTI claimed that the Tribunal had lost its vision, and that processes of informal dispute resolution, conciliation and mediation within it had to be strengthened. That was linked to concerns about the presence of lawyers in the motion process within the Tribunal, and the possibilities for legal representation of credit providers adherent to the provision made for affidavits by credit providers. Another discussion point was the relation between the Bill and a broader review of the National Credit Act (NCA). The DA placed more emphasis on a broader review. The DTI remarked that a broader review could not be waited for. Other remarks and questions were about reckless lending and illegal credit; debt to municipalities and SARS; developmental loans, and administrative costs. There was a question if the private sector was being called on to do this then the South African Reserve Bank should forgive the African Bank loans of which 30% were recklessly lent and which SARB still continued to collect. A Member objected to Treasury lobbying the Legal Adviser that Treasury be involved in the Bill process. He had overheard it the day before. The Legal Adviser agreed with him that she felt uneasy about that.
The Chairperson referred to the good news story of BMW further investing R160 million in its Rosslyn factory. Other entities were starting up. Toyota closed down in Australia and could relocate to South Africa. That did not mean that the foot could be taken off the pedal. More foreign direct investment was needed. The agenda for the day was deliberations on the draft/framework Debt Relief Bill, which was a Committee Bill. She cautioned Members that in future each party caucus, whether ANC, DA, FF+, IFP or EFF, had to send information under the party logo. Information had to be received from parties, not individuals. She welcomed delegates from the DTI and the NCR.
Adv Charmaine van der Merwe, Parliamentary Legal Adviser, responded to questions that had stood over from the previous day’s meeting. She answered Mr Cachalia that debt relief was a softening of the term debt forgiveness. She answered Mr Macpherson about reckless lending and illegal credit, and the relation between the Bill and the review of the National Credit Act. The Bill was not part of a broad review of the Act. It focused on debt relief measures, and the once-off debt relief process. The Credit Regulator was to be the evaluator that had to decide about unlawful lending. The National Credit Tribunal would adjudicate and make a declaration. There was a question about one person in the Tribunal dealing with applications. She could not speak for the Portfolio Committee on the matter. There would have to be consultation. Tribunal members had to have the necessary qualifications to be able to do the job. There was one judge or magistrate in a court. Decisions could be tested and reviewed. If the Act was complied with in terms of required expertise, it could be done.
She answered about costs. Credit bureaus were not to be able to charge for information given to the credit regulator. There was provision in the Act for when there could be charges, and when not. People who could provide answers, would have to be spoken to. Mr Macpherson had asked about not allowing persons on probation to apply for credit. In terms of section 10 a developmental loan could be applied for. Section 10 was an exception to the relief process. The Regulator had to pronounce on that. In New Zealand people could still apply for limited credit. If included in the Bill it would have to be under developmental credit.
She replied that it was possible for the Committee to develop a stand-alone Act, but it had to be considered which part of the NCA had to go into the Bill. If slotted into the NCA, it would become part of a network. A stand-alone Act would not detract from NCA remedies. She suggested that the Bill form part of the NCA. There were risks attached to a stand-alone Act.
On National Treasury saying that debt collectors were a problem, she replied that this could be addressed as part of a larger review process. She answered about the in duplum rule, saying what was not in the Act as part of debt relief, could be included in the Bill. The “no income no asset debtors” NINA principles were not in the Act. The Bill would only include what was not provided for in the Act. National Treasury had mentioned that the debt relief process could be streamlined even more, not by removing checks and balances, but through removing discretion, as in the New Zealand NINA. Allowing discretion was a compromise. The process could be smoother if there was a strict progression of orders. First suspension would be applied, and after 12 months there would be a review, after which there could be further suspension or extinguishing. She was in favour of streamlining, as in the precedent set in New Zealand. Treasury was also concerned about prescribed measures. She was of the opinion that Ms Gibson of Treasury misunderstood the legislative process. It could be stated that when the Minister prescribed such measures, he/she would have to ask permission from the National Assembly. Then it could not be seen as delegated any more. If the Committee was not comfortable about the Minister prescribing, it could be removed. If the Minister was allowed to prescribe, a lot of criteria would have to be built in. She could not answer about debt relief and economic stability. Treasury could perhaps propose on that.
The Chairperson referred to Treasury concerns about powers given to the Minister. However, Adv van der Merwe had stated that powers would be within laid down criteria.
Adv van der Merwe responded that slides 19 and 20 of her presentation on the previous day dealt with empowerment of the Minister to prescribe debt relief measures. There had to be strict criteria on consultation. In the draft Bill it was dealt with on page 23, under subsection 2. There had to be a formal NINA for SA. The Committee could consider a Bill on that. In the NCA, page 23 going on to page 24, under paragraph 4, a liquidation process for consumers with minimal income was provided for. The middle block of slide 19 of the briefing referred to very strict criteria about where the Minister could prescribe (beneficiaries of debt relief defined as indigent persons; child headed households; retrenchments in a sector identified by the Minister, or disasters in a sector or region identified by the Minister). Slide 25 stated what the Minister could prescribe. The Minister could consult with the Ministers of Justice and Finance. There could be a paragraph about consultation with the Finance Minister about measures. The Committee had to decide on that. The NCR, the NCT and the credit industry had to be consulted. The Minister had to publish a notice in the Government Gazette, with 30 days granted for comments. Comments received had to be tabled in the National Assembly. The Minister would not be able to simply create debt relief measures without considering the comments. The Minister had to justify the measures. No permission was included, it was to be a delegation by Parliament to the Minister.
She answered Mr Williams saying that nothing could be found about process in countries where affidavits could be made by credit providers. The practice in New Zealand was that the credit provider had to be notified. Even if it was known what other countries did, there still had to be compliance with section 34 of the Constitution. The credit provider could agree or disagree with whatever debt relief was granted. If it disagreed there was a dispute, and a fair public hearing could be held. Both sides had to be heard, which was why affidavits were included in the Bill. It could be taken out of the Bill, but it would still happen in practice. Information from the credit provider made it unnecessary for the Tribunal to call witnesses.
The Chairperson remarked that the Tribunal seemed to think that the Bill did not affect it, but there would be an impact. The Tribunal had to be invited so that it could not say that it was not consulted.
Mr D Macpherson (DA) commented that the answers led to more questions. Other issues in the NCA review had to be dealt with. NCR powers were related to reckless lending, and how the NCT functioned. If the NCT worked with a motion process, it would require legal representation by the credit provider and the applicant. The question was how well the motion process would function. An institution was needed that could deal with applications without cost burdens on applicants. It had to be slotted into the NCA framework. The NCA empowered the Minister to prescribe functions under section 88E(1). If the Minister prescribed once-off relief and continued the process without parliamentary authority it would constitute delegation of parliamentary legislative authority, and would be a legal problem. If the Minister was allowed to prescribe it would amount to fulfilling the constitutional role of Parliament. More debate was needed. He was concerned about reckless lending. African Bank had around 30% recklessly lent credit. The book was transferred to the South African Reserve Bank (SARB), which continued to collect money from people. It had to form part of the Bill.
The Chairperson told him that it was in the Act. Implementation was called for. The Debt Relief Bill had to address what was not covered in the current legislation. The Finance Standing Committee had to discuss the matter. The Committee Debt Relief Bill had to deal with a ring fenced area covered in the NCA.
Mr Macpherson replied that the private sector was being called on to do something that government did not do. Private institutions could not be asked to do what the SARB would not do. He asked what prevented SARB from being accountable to the legislation. The NCR had to provide an update when there was a full update of the African Bank book.
The Chairperson noted that there were ANC members who were also in the Finance Standing Committee. She asked that the Secretary make a note, as it was the third time the matter had been raised in the Committee.
Mr Macpherson protested that the matter was relevant to the Bill, as it touched upon the matter of once-off debt relief measures. The African Bank loan book was relevant to the Bill. He referred to developmental loans like education loans. He had assisted a student with a bank loan as his mother did not meet the affordability assessment criteria. He asked if it should be possible for people to access credit even if they could not afford it. If a student could not pay a student loan back, the bank would treat him/her as a debtor, and action would be taken against them. He had doubts about the ability to access credit, even when it was developmental credit.
Mr A Williams (ANC) said that Treasury wanted to be included in the Bill process, as Ms Gibson had consulted with Adv van der Merwe. He thought it necessary to remove the affidavit clause. Credit providers would hire service providers to object to debt relief. He referred to access to credit during debt relief. There had to be a clause that stated if there was a change of circumstances or if someone got a job, that person could pay back the money. If a person got a job, for instance, it had to be possible to buy off the debt relief measure.
The Chairperson remarked that NSFAS was there for those who could not pay back loans. That was its mandate. If there was default, it could be included under developmental loans.
Adv van der Merwe answered about review of the NCT function. A judicial body could remove the right to legal representation. A court could sit on a hearing for a day, but hundreds of motions could be done in a day. If the Tribunal adjudicated and disallowed legal representation, the Committee had to be told. The question was if a single Tribunal member would be adequate to deal with motions. The Committee had to provide answers. The Committee also had to instruct about the powers of the Minister. The question was if powers had to be removed. Section 88E could be done away with. Developmental loans were dealt with in the NCA under section 10. For a developmental credit agreement the credit provider had to have a supplementary registration certificate. There were three types of agreements, related to a cooperative or member of a cooperative, education or small business, or to acquire small income housing. If the person Mr Macpherson referred to was registered, she did not know why the application was turned down. The Act provided for developmental credit as an exception to other principles in the NCA. She had identified it as something that had to be treated differently. The Committee could say if there was to be no special provision.
She agreed with Mr Williams, in that she felt uncomfortable about being lobbied by Treasury to be part of the drafting process. A buy-out from debt relief could be treated like early rehabilitation.
She answered the Chairperson that she was no expert on developmental loans. It stood as an exception in the Act. Debt was not extinguished, but extended or capped. In the New Zealand Act, maintenance and child support debts were excluded. Default on developmental loans had to be part of the debt relief application.
She answered Mr Williams that in the event of a debt relief application, the credit provider could not take action. The question was what happened if R20 000 was owed, and relief was only applied for R10 000. It was possible that someone could have a big debt and only apply for a small relief.
Mr Macpherson asked about municipal debt, and whether a person could apply for relief from SARS debt. He asked how declaration of income and assets would be dealt with. A person could fill in an application and state that they did not have a job, but could be employed as a waiter, where there was no formal record. A lot of people were bound to take chances, and would abuse the process. He agreed with Ms Gibson that processes had to be clear, and not stated in terms of “may” or “if”. The question was how to make clear criteria.
The Chairperson commented that in the case of municipal debt, the indigent had to apply for relief. She was not aware of how one qualified as indigent for a municipality. She asked how debt to SARS would be dealt with, when a person earned a salary, and how a person who had incurred tax debt and was currently unemployed, would be dealt with. In the event of an emergency, the Minister needed power to provide debt relief.
Adv van der Merwe answered Mr Williams that a creditor had to be notified if a consumer lied about debt. The credit provider had to be given a list of assets, income, expenditure and debts. The question was what would transpire if only two out of four credit providers were notified. The credit bureau could be asked. The New Zealand Act could set an example of what had to be in a notification. Concerning municipal debt, she had provided for the credit registrar to look at reckless lending. If it was included in the debt, the municipality would be informed.
Mr Williams commented that it was not necessary to include municipal debt, as municipalities had mechanisms in place. There was no reason for debt relief.
Adv van der Merwe responded that SARS debt could be part of sequestration. There could be an application and SARS could respond. SARS could propose to the Committee that its debts be excluded.
The Chairperson commented that the Credit Tribunal and SARS had to be called in.
Mr Macpherson remarked that if the Tribunal would have to deal with 100 motions per day, the way it was structured would have to be reviewed. 100 lawyers could line up for credit providers. Just because people qualified as indigent, did not mean that municipalities would grant extensions. He used to be a ward councillor and knew that the indigent received huge bills. Municipalities could not be excluded, as they did not recognise and deal with queries.
The Chairperson remarked that the way other countries dealt with municipal debt had to be looked into. Municipalities could be at fault in that they offered the indigent an opportunity but did not always recognise them. It was not the purpose of the Bill to deal with that, it had to be tackled on another front. African Bank and municipalities had to be referred to other committees to deal with. It would not do to take on more than what the Committee intended. Government was not to be treated differently from the private sector, when it came to corruption or debt. The private sector had a different business model, which was to make profit. Government was not committed to profit for an individual or a department.
Mr Macpherson protested that government did make money.
The Chairperson countered that it was not the government mandate to do so. The public sector was different from the private sector. It was not advisable to go down those routes.
Adv van der Merwe replied that it was safe to exclude municipal debt. Municipal debt was not a gap to be filled. It had to be addressed in the right forum. If a person qualified for debt relief it was not a benefit that he/she could be taxed on. A natural person could not make SARS aware of debt. SARS had to be asked to speak to the Committee, benefits had to be in the Income Tax Act. SARS had a right to be excluded. There had to be liaison with the Department of Labour about declaration of income and assets. It was difficult with informal employment. There had to be a penalty for false information, and a strict flow of orders. If there was false information, interest could not be suspended. Interest and charges could be stopped on application.
Ms Van Schalkwyk (ANC) remarked that New Zealand kept on being referred to. Was Adv van der Merwe aware of other models closer to this continent? As legislation changed, the private sector changed its own measures to not comply with legislation. With respect to insurance in terms of inability of the debtor to pay, credit providers would put in a clause to the disadvantage of the client.
Mr Williams noted that there was initial suspension and then review after a 12 month period. The question was what happened if there was change during a period of up to three years when a consumer was stuck and could not get credit because of being listed with the credit bureau.
The Chairperson commented that if the credit provider was informed, it would bring lawyers. The purpose of the Bill was not to get them there. Only the name of the applicant had to be mentioned. If credit providers could come with an army of lawyers the purpose would be defeated. There was too much litigation in the country. Courts had to be a last resort.
Adv van der Merwe replied that legal representation at the Tribunal was undesirable. Unless the Tribunal changed, it was possible. The Tribunal had to explain to the Committee. Section 34 allowed for fair hearing and legal representation. Courts had motion days, when lawyers were restricted to information on paper. She wanted proceedings to be shorter.
She answered Ms Van Schalkwyk that she was able to get hold of the New Zealand Act. In New Zealand it was part of bankruptcy law. The private sector would find loopholes; that was why the Bill had to be slotted into the NCA.
She answered Mr Williams that the Regulator had to say what it could do. The process could be done within one to two weeks. The Regulator had to pronounce about time needed for pre-screening, sending out of notification, and evaluation. The process could be slowed down if there had to be checking with the Department of Labour to see if a person was employed. It could be necessary to add two members to the Tribunal in the Act; 50 to a 100 motions could be done each day per member.
Mr MacDonald Netshitenzhe, DTI Acting Deputy Director General: Consumer and Corporate Regulations, said that the Tribunal had to come up with informal dispute resolution. The DTI wanted a look at processes of conciliation and mediation. A system could be inserted that functioned smoothly. There could be borrowing from labour relations as in the CCMA. There was also a Companies Tribunal administered in the DTI. The DTI resolved disputes rapidly. Lawyers were not present in the main. The Tribunal had lost its vision. There had to be consultation with the Ministers of Finance, Trade and Industry, and Justice. The NCA contained consultation with the Finance Minister for implementation. After consultation, whether there was agreement or not, the Minister could go ahead. He agreed that affidavits and motion proceedings had to be done in document form. But lawyers would want clarity on issues. The Tribunal in its present form needed two or three members. One member would be sufficient for simple situations, but if lawyers were involved, it would be hard. Everything could not be cobbled together as an NCA review. The DTI wanted a review two years before, which was why debt relief was focused on. A review of the NCA could not be waited for.
Mr Williams suggested that it was premature to consider implementation. He advised that the legislation be nailed down first. The “what” had to be nailed down before the “how”.
The Chairperson agreed that principles had to be talked to. The Committee had to ask if it was currently where it wanted to be. It was time to move from the presentation to the Bill.
Mr Netshitenze responded that the DTI agreed with Adv van der Merwe that legislation had to be implemented through the Trade and Industry Minister. It was not a constitutional requirement that regulations had to come to Parliament. But Parliament had to ask for inputs, even where it was a competency of the Minister. Parliament could ask the Minister to report. There was a clause that stated that misrepresentation during affordability assessment amounted to fraud. When people misrepresented themselves, it was not reckless lending.
Mr Macpherson said that there had to be a written submission from credit providers on steps taken to repossess assets.
The Chairperson remarked that houses were sold under value and the former owner continued to pay the full amount although the auctioned amount was less. It had to be taken up with the Justice Committee.
Mr Macpherson asked if a case study could be requested.
The Chairperson replied that it could be done when the Bill was put up for public comment.
Mr Macpherson remarked that averages had to be looked at. His cutoff figure for debt counselling was R7 500. The question was who funded debt review for people who earned less than R7 500.
Mr Williams said that a figure had to be decided upon for debt review to become viable.
Ms Van Schalkwyk said that if the figure was below R10 000 it would exclude people who were desperately in need of debt review.
Mr Macpherson commented that debt review had to be made more accessible, currently only R7 500 plus qualified. To make it viable for lower incomes, there had to be a subsidy. R10 000 was too high. People with credit agreements had to be assisted to keep them in the system. Research was needed.
The Chairperson told him that he had initially suggested R5 000, and then moved to R7 500. He had said that the R10 000 suggested by Treasury was merely a view.
Mr Macpherson responded that he would prefer to present the document he had given to the Advocate. His position had to be understood within the context of the document. He asked if he could present the document.
The Chairperson told him that his points were captured, and that not everyone agreed with him. His different opinion had been noted. Research was needed.
Adv van der Merwe responded that the Bill would still change.
The Chairperson told members that whether it was a Committee Bill or not, when people made a contribution it was not to be under their own name.
Mr Williams commented that assets could include motor vehicles. If someone was over-indebted but had an old car, the question was if that person would then not qualify. A maximum value had to be established but the question was how.
Mr Macpherson said that a person could not be called indigent when he earned R10 000 or owned a car.
The Chairperson advised that that the definition of an indigent be flagged. Realisable assets had to be looked at. A cap could be put on the value of a motor vehicle, say R17 000. The question was how to get away from abuse.
Adv van der Merwe responded that it was almost a necessary household item. Research had to be done. Vintage cars and those still being paid off, had to be excluded.
Mr Williams asked if a motor vehicle could be seen as a necessary tool of trade.
Mr Macpherson referred to slide 5 of the presentation. People who earned between R7 500 and R10 000 qualified for debt relief. It was a big group, and research was needed. Such persons had to be shepherded into the debt review process, to keep them in the system and to rehabilitate them. It would take a large number out. To strengthen the process, the threshold had to be understood. It was currently R7 500. The question was how to bridge the gap between R5 000 and R10 000. To fix indigency at R10 000 took people out of debt review. People above R7 500 had access to relief measures. The review process had to be changed.
The Chairperson referred to the view of Treasury and debt councillors that said that debt review was only viable for over R10 000. The issue had to be flagged.
Adv van der Merwe referred to the definition of realisable assets on slide 6. Necessary household furniture, tools of trade, motor vehicles and pension funds or retirement annuities were not included. She had used the word “indigent”, but the word “applicant” could be used.
Mr Williams suggested that “indigent” be removed, but be included in the list of criteria.
Adv van der Merwe referred to a total amount of unsecured debt owed to credit providers. For a small credit agreement the credit facility limit was R15000. R8000 was attached to a single credit agreement.
Adv van der Merwe said that the Tribunal had to distinguish between developmental loans and other credit agreements.
Mr Macpherson remarked that there could be huge financial implications for NSFAS, which had to be flagged until further discussion.
Adv van der Merwe suggested that municipal debt be excluded from qualifying for debt relief. With regard to a credit agreement before a court, the question was what if a consumer had five agreements and only one was before a court.
Mr Williams commented that those not before the court could be applied for. There could be R50 000 debt and only R20 000 before the court. It had to be capped at R50 000. There could be a R1 million debt and application for R50 000.
The Chairperson asked what happened if one had an emolument order in one’s name.
Adv van der Merwe responded that the emolument attachment order would have to allow for a certain percentage available.
The Chairperson asked about applications in terms of section 9 on page 12 of the draft Bill.
Adv van der Merwe responded that when the consumer was part of the debt relief process, he/she was excluded from debt review, if not able to afford debt relief any more.
Mr Macpherson commented that there were established means of dealing with debt problems. The debt review met strict criteria, which included assessment of income, liabilities, registered debt, counselling service and agreements with creditors. It was not advisable to undermine that, as it would create instability in the debt review mechanism. It worked well although there were problems. Persons who were under debt review were not to terminate that to access debt relief. Circumstances could change but there was no quick option. It had to be considered that the first option had to be to assist people through debt review, to keep people in the system.
The Chairperson agreed that it was a valuable point.
Mr Williams commented that the object of the Bill was to address the gap underneath debt review.
The Chairperson asked if it was being said that the intention was that only those not in debt review were eligible for debt relief. The debt limit addressed was R15 000, to avoid abuse.
Mr Macpherson said that the question was who had to be spoken to. The NCA was a great piece of legislation. It could assist the debt-trapped through review. Those who could not make the threshold could be assisted. People who could make the debt review threshold ought not to be included in the Debt Relief Bill.
Adv van der Merwe said that the Minister could prescribe what constituted proof of income. Municipalities allowed UIF and bank statements. There had to be information about the total amount due. The Bill could require income and expenses and total debt.
Mr Williams commented that all debts had to be declared, and were not to exceed R50 000. All the credit agreements one had, had to be known.
Mr Macpherson remarked that the NCR was the body that received applications. It had to be asked if it was funded and capacitated. The staff component had to be adequate. Credit bureaus could be contacted about total debt. The question was who had to bear the cost for information from the credit bureau.
Adv van der Merwe responded that section 88B dealt with evaluation of applications. The NCR had to provide proof of receipt to the consumer, and had to notify affected credit providers and every registered credit bureau of the application. Credit providers had to be notified to confirm debt.
Ms Nomsa Motshegare, NCR CEO, replied about NCR capacity, that the NCR was sufficiently capacitated. Some matters would be referred to the NCT. The Committee had to call in the Tribunal to comment. The NCR could do the job.
The Chairperson asked if there had to be an increase in financial resources.
Adv van der Merwe responded that financial implications had to be indicated. Whether it was a new body or the NCR, there would have to be additional funds. Application for once-off relief had to comply with all requests. The affidavit could be excluded.
Mr Macpherson asked if, when looking at an application, the Bill had to state that the first objective was to see whether the application qualified for debt relief or not. If a person qualified for debt review, he/she could be moved into the right lane, and into the left lane if he/she qualified for debt relief.
Mr Williams said that the purpose of the Bill was to provide debt relief, not to aim at putting debt review into immediate effect. It could take up too much of debt relief resources, to establish whether someone qualified for debt review. To look for the possibility of debt relief had to be the first consideration.
The Chairperson commented that Ms Gibson of Treasury had said that there was a need to have a process where the person who looked at the application could simply tick boxes. Members had to get a schematic diagram into their heads. If an application was received, and the applicant earned more than R7 500, it could be sent back.
Mr Williams remarked that the criteria for debt review were different from those of debt relief. Criteria had to be clear and precise. If debt review criteria were introduced, it could no longer be like that.
Ms Motshegare said that under debt review the debt councillor could advise an over-indebted person to perhaps buy a smaller car.
The Chairperson asked about charges by debt councillors.
Ms Motshegare replied that the assessment fee was R300.
Mr Williams insisted that it would waste time if criteria for debt review had to be known. It had to be a matter of either qualifying for debt relief or not.
Mr Macpherson said that there were a lot of people with problems. If they did not meet the debt relief criteria the NCR would just let them carry on.
Mr Williams commented that those who did evaluations were not to be expected to do the job of debt review councillors.
Mr Macpherson responded that he was not asking for that. But people with a salary of R10 000 had to be encouraged to seek debt review.
Adv van der Merwe noted that section 88B(5) stated that if the consumer did not qualify for debt relief, and the application was rejected, the NCR could refer the consumer to a debt councillor. “May” could be changed to “must” in that instance. What distinguished debt review from debt relief was the amount of income. It was stated in subsection 4 that the first step was to look at reckless lending debt that could be excluded. Section 88C(1) dealt with a single member of the Tribunal for once-off relief.
The Chairperson commented that it was not advisable to say one person “must”, but rather “can”.
Mr Macpherson referred to 88C(3)(b) and asked about other credit agreements.
Adv van der Merwe replied that it was maintenance or child support, and debt from court orders.
Mr Macpherson asked about vehicle finance and mortgages. He asked if the Tribunal had discretion. Discretionary powers had to be moved away from.
Adv van der Merwe responded that there was not discretion but a progression of orders.
Mr Macpherson remarked that a possible order for the Tribunal was a cap on interest for six months, with an option for the NCR to review, if requirements were met.
Adv van der Merwe noted that capping of interest was included as a debt relief order, but it was still discretionary. If a strict progression was followed, there had to be suspension for 12 months. Capping for six months was prescribed in the Bill, and suspension for 6 months.
Mr Williams felt that it had to be 12 months.
Mr Macpherson remarked that within six months there needed to be an evaluation of how the consumer was doing. The interest cap was not to fall away after six months. There had to be an intervention to see how the consumer was doing.
The Chairperson commented that the moment circumstances changed the consumer had to be obliged to inform. The Advocate was saying that the consumer had to inform after six months whether circumstances had changed or not. It was too short, and would pressure the resources of the Tribunal.
Mr Macpherson asked what happened to the agreement with the Tribunal from the time the application was received until adjudication. The NCR had to have the power to suspend interest until adjudication.
Mr Williams said that it could take months, the person could be taken to court. There had to be powers granted to people who decided about debt relief.
Mr Macpherson said that it could be slotted into the NCA, there could be an amendment to NCR powers, so that it could suspend until the order was given. It had to be a separate amendment to the NCA.
The Chairperson advised that it be kept in the Committee Bill.
The Chairperson remarked that it was important that target groups be known. Reckless lending was covered in the legislation.
Adv van der Merwe responded that the first order was to be suspension. There would be assessment after 12 months. If circumstances improved, the consumer could need debt review. If circumstances worsened, debt would be extinguished. The Tribunal might say that 50 percent could be extinguished after 24 months.
Mr Williams suggested that debt be extinguished after 24 months if people could not pay.
Adv van der Merwe noted that while debt was suspended the limitation on the right to apply for credit was automatic. It had to be decided if it had to be tied to a certain period. Mr Williams had suggested a buy-out provision.
Mr Williams remarked that he was skeptical about programmes for financial literacy. It would be difficult to run programmes for a possible six million people who would apply for debt relief.
The Chairperson referred to progressive implementation. Means and measures had to commence.
Adv van der Merwe responded that the aim of education was to improve the consumer’s financial position to become a productive member of society. It said in the regulation section that the Minister had to make the necessary regulations.
Mr Williams agreed to that.
Mr Macpherson commented that the Minister could be allowed to do so, but it was not advisable to write a Bill for people seeking debt relief, mostly poor black South Africans, without empowering them not to get back into a debt situation.
Adv van der Merwe noted that under section 88D, a consumer was not to enter into any further credit agreement until processes were finalised. If a consumer accepted referral for debt review, he/she had to comply with the provisions of the Act. Consequences for the credit provider were that it might not enforce any right or security under the credit agreement until processes were finalised. If debt was extinguished, the consumer could not enter into any further credit agreement for the period the consumer's right to apply for credit was limited. But the consumer could apply for developmental or public interest credit in that period.
Mr Williams advised that there had to be a process for buy-out, so that people could be taken off the list of people who could not apply for credit.
Mr Macpherson suggested that the credit provider be involved.
Mr Williams said that criteria for no credit had to have nothing to do with the credit provider. The full amount had to be paid.
Ms Van Schalkwyk remarked that the credit provider might blacklist. Some kind of provision was needed to enable people to buy-out.
The Chairperson commented that it could be a problem, once debt was extinguished.
Mr Williams remarked that if circumstances changed so that a person could buy back, there had to be a mechanism that provided an option to buy back.
Mr Macpherson noted that the Advocate had said that extinguished debt could not be rescinded.
Adv van der Merwe responded that she had to study rehabilitation under sequestration, as the current matter was like informal sequestration. Even with sequestration, 60 cents to the Rand were written off. But one had to make a payment during early rehabilitation. The Minister could prescribe information, procedure and documents for prescribed debt relief. Prescription could include criteria additional to indigents and child headed households, like loss of income and mass retrenchment.
Mr Macpherson commented that it could be contentious to give the Minister discretion. There could be pressure groups of people who believed that their debt had to be extinguished. The matter of adverse conditions had to be addressed. If it referred to adverse conditions in a region the whole of KZN could ask for extinguishing of debt. Consequences had to be thought through.
The Chairperson remarked that the Minister was being instructed to prescribe, which meant that there was not much discretion.
Mr Macpherson remarked that it was stated under Benefits that the Minister could bypass the Bill to declare debt extinguished. He would have the power to replace the Tribunal. It had to be ascertained what an adverse condition was.
The Chairperson commented that the legislature felt that the Minister could have too much power without being directed by the legislative arm. It was open to abuse.
Mr Williams remarked that legislation was not being written for the current Minister, hence a clear definition of “adverse” was needed.
The Advocate replied that it was not an option given, the Minister could only prescribe in the event of exogenous shock or disaster. It spoke to economic circumstances. It could be changed to “only under certain circumstances”. The Minister had to comply with a process of consulting with the National Assembly, the Ministers of Finance and Justice, the NCR, the Tribunal, and industry. Thirty days had to be provided for parties to comment.
Mr Macpherson suggested that the Minister had to get permission where debt relief measures fell outside of the criteria. Parliament had to understand the views of role players. Parliament had to be the final arbitrator of whatever affected the credit market. The Minister first had to consult with everyone, and only then come to the National Assembly.
The Chairperson told him that his fears might be misplaced, but it could be flagged. The Debt Relief Bill was the biggest Committee Bill yet, and could lay the basis for other amendments. It was up to the Minister to deal with the flaws in the NCA. She asked Members to read all inputs.
The Chairperson adjourned the meeting.