The Debt Relief Bill Sub-Committee met to address flagged concerns in the Debt Relief Committee Bill. The National Credit Regulator, the National Consumer Tribunal and the Department of Trade and Industry attended to give the Sub-Committee guidance and input in their areas of expertise. All decisions made by the Sub-Committee would be put forward as recommendations to the Portfolio Committee.
• As reckless lending was a major reason for over-indebtedness, the matter was closely scrutinised. The crux of the problem lay in non-reporting of reckless lending and a way found to monitor debt counsellors who should be picking up instances of reckless lending. An administrative fine for non-reporting of reckless lending was seen as the best way of dealing with the matter.
• The provision of debt relief to child-headed households was discussed at length. Despite the criteria of no assets and an income below R7 500, it was decided that it would be mentioned specifically in the Bill to ensure that that group did not fall through the cracks.
• It was decided to work on gross income and not net income as it was administratively more manageable.
• On whether everyone who qualified for debt relief would be considered over-indebted, there was concern about whether South Africa could afford to pay up to R50 000 in debt for every person who earned under R7 500 and had no assets. The Sub-Committee was reminded that not everyone would qualify to have their debt extinguished. Debt counselling and suspension of debt would suffice in many cases.
• A minimum level of assets was identified as unrealisable assets. Developmental credit would not be extinguished. Interest on debt could be capped for 12 months to assist in repayments.
• Since the intention was both to provide debt relief and to change behaviour towards credit, mandatory financial literacy training was strongly supported but could not be included in the Bill as such courses had not yet been set up nor was there a budget for them.
• Prohibition to enter into a credit agreement for a specified period was seen as one way to change behaviour towards credit but the decision would be left to the Committee.
• Mechanisms were in place for rehabilitation of those who were able to pay off their debt. It was decided that rehabilitation should apply to all processes under the Debt Relief Bill. The credit provider would be aware that the person had paid his debt in full so notification of the credit provider was deemed unnecessary. It could also be confirmed through the credit bureaus. The consumer needed to provide proof of payment
when submitting an application for rehabilitation.
• Credit life insurance would become mandatory for credit up to the amount that could be written off in debt relief as it would be security against an uncertain economic future.
• Provision of false information in a credit application would be dealt with as common law fraud.
• It was decided that the Bill could not wipe out interest as it would not be good for the economy, but a 3% to 5% interest rate was deemed reasonable.
• Prescribed Debt Intervention by the Minister would be debated and decided upon by the Committee.
• Determination of penalties would be debated and decided upon by the Committee.
The Sub-Committee Chairperson welcomed Ms Mantashe as the only other Member of the Trade and Industry Committee, the Parliamentary Legal Advisor, Adv van der Merwe, and the stakeholders, on whom he was relying for guidance and input, from the National Credit Regulator, CEO Nomsa Motshegare, the National Consumer Tribunal, Executive Chairperson, Prof Joseph Maseko, and the Department of Trade and Industry, Acting Chief Director: Consumer and Corporate Regulations, Siphamandla Kumkani.
The Sub-Committee would be looking at further amendments to the Debt Relief Committee Bill and the Legal Advisor would raise questions that had arisen as she had worked through the last round of inputs.
Matters of concern in the Debt Relief Committee Bill by Parliamentary Legal Advisor:
Reporting of reckless credit by debt counsellors
The Parliamentary Legal Advisor, Adv Charmaine van der Merwe, explained that the matter of reckless lending had been raised by several stakeholders who had given input. The reckless lending legislation was in place and that legislation provided some direction on how the Debt Relief Bill could address reckless lending. One option was an administrative fine.
Mr A Williams (ANC) was concerned about making reckless lending an offence as it could lead to involvement by the South African Police Service, and he was not sure that that was what the Bill should necessarily do. Was there no mechanism in place for failing to report reckless credit to the National Credit Regulator (NCR), and to sanction people who engaged in reckless lending? For example, was there not a fine that increased with each occurrence until one lost one’s licence? Was it possible for it to be done without involving the police and money from the State? Or was the best way to involve the police?
Adv van der Merwe replied that she had looked at the BBBEE Act to see how sanctions were dealt with there. There were administrative fines under that Act and they did not run via a court. Section 151 of the National Credit Act stated that fines could be considered by the Tribunal and it gave the percentage that could be fined. Fines had a cap of R1 million. It was possible to link an administrative fine to Section 151. If reckless lending was classed as prohibited conduct, it could be linked to Section 151. She would make sure that Section 151 applied to that behaviour.
Ms P Mantashe (ANC) agreed.
Prof Joseph Maseko, National Consumer Tribunal Executive Chairperson, suggested that the Committee should look at how to police the non-reporting as that was the crux of the problem. Currently, the debt counsellors were the only ones who could pick up reckless lending and report it. Perhaps that needed more monitoring and more teeth for the NCR. That job could be given to someone to do specifically so that it was not about second-guessing a debt counsellor. In determining the administrative penalty, perhaps the Committee could look at a fine that would be a percentage of the reckless credit itself.
Mr Williams noted that they agreed that the clause about a debt advisor or counsellor who failed to report reckless credit to the NCR, would be linked to Section 151, which would allow for an administrative fine. How would it read?
The Legal Advisor replied that the whole section could come out but she had to check if there could be a consequential explanation of prohibited behaviour. She would add it to that section if need be.
Child headed households
The Legal Advisor explained that one of the criteria for being eligible for debt relief was a child-headed household with no income and no assets. What if the child had an inheritance? The suggestion had been to delete the reference to child headed-households and leave the criteria as earning under R7 500 as then everyone would be included, including a child heading a household. The Department of Justice and Correctional Services had made the point that there were other households, such as female-headed households and so on. However, not all female-headed households were in need of debt relief. Another example was that of disabled persons. Just because someone was disabled, it did not mean that the person was in need of debt relief. The municipal indigent category for free municipal services had included child-headed households. That was good in that child-headed households needed access to water and electricity, but perhaps it was not needed in the Debt Relief Bill.
Mr Williams thought that child-headed households and disabled-headed households might slip between the cracks. They might not be aware of the Debt Relief Bill and a social worker might not think to consider it, so there was a need to include them specifically. Who would do the application? If child-headed households were specified, then social workers would be aware that child-headed households could be included. Mr Williams suggested that the criteria specifically state that debt relief was for those who earned below R7 500, including child-headed households, disabled, and a short list of others who may be beneficiaries of debt relief.
Ms Mantashe asked how many children had got into debt. She did not think that children incurred debt, and thought that child-headed households should be removed.
Ms Nomsa Motshegare, NCR CEO, stated that if a person had credit life insurance, when that person passed on, the debts would be paid off. However, if the person had not taken credit life, those debts would remain and would have to be paid off.
Mr Siphamandla Kumkani, DTI Acting Chief Director, explained that if someone who did not have credit life cover, passed away owing money on essential appliances, the child or children would lose those appliances that they could not pay for and that would cause suffering. Credit providers would recover the debt or remove goods, regardless of whether it was a child-headed household or not.
Ms Mantashe suggested that there needed to be an awareness campaign to ensure that the middle class took out credit life cover. The recklessness of the middle class could not become a burden on the state. The poorest of the poor did not incur such debts. She did not agree.
Mr Williams explained that he wanted a reference included because he did not want to see some child-headed households slipping through the gap because they had not been mentioned. He was only referring to those who earned under R7 500. They were the most vulnerable of the vulnerable.
Mr Kumkani explained that that scenario was very prevalent in the mining community. The possible victims would be children of people in the mining space who would have taken out up to 10 debts from loan sharks and who would have the goods in their house attached when they died. That was the group that was behind the policy imperative.
The Legal Advisor suggested the Committee determine that the criteria would be no income, no asset, and state that that would include child-headed households. There had to be consultations on the Bill and perhaps the Committee could ask someone from Social Development to talk to the Committee about child-headed households. The debt might be incidental credit and there would be no contractual agreement such as someone might have bought groceries from the corner store and had not paid one month, which would have led to incidental debt. Children could not ask for debt relief if it was not their debt, but the estate’s debt. It was possible that the children worked to pay off the debt, even though it was the estate’s debt, in order to keep the goods so that they did not lose them. That was not a legal obligation, but a practical solution. She suggested that the Bill included a reference to child-headed households and that more information be obtained from Social Development.
Ms Mantashe wanted the Debt Bill to be simple and reasonable so that the Bill would be passed, and it should not put a burden on the State. She reiterated that awareness campaigns should kick in. Even the poor paid a hidden amount when they were given credit. However, they were not told whether or not that amount contained insurance for when the tough times came. Awareness campaigns needed to save the people of South Africa, and through the Debt Bill, the really needy would find debt relief.
Mr Williams indicated that the Sub-Committee had consensus, and so the Bill would contain the criteria of R7 500 followed by a list which would remind people of child-headed households and others who should be considered. Since the criterion was R7 500, highlighting particular categories of people would not make a big difference. It would not affect the total number of people who would be eligible for debt relief.
Nett or gross salary
The Legal Adviser asked if the limit of the R7 500 income was net or gross. Would UIF and pension deductions be taken into account?
Mr Williams asked how one work would work out the net income. He considered all the possible deductions. He noted that even his net salary was not much more than R7 500 after deductions.
Ms Mantashe suggested the gross salary should be used as it was not their concern how people spent their salary.
Mr Williams confirmed that the Bill would take the gross salary into account.
The Legal Adviser asked if the Sub-Committee wanted to include a reference to over-indebtedness. Did it want to look at affordability or were instalments of unsecured debt of 25% or more to be permitted? The figure 25% had been determined by debt counsellors, although there were others who said that a consumer earning under R7 500 needed 80% of their salary for living expenses. The question was how much a consumer needed for expenses because anything beyond that that would make a consumer overindebted.
Ms Mantashe agreed that instalments should not exceed 20% of the income.
Mr Williams asked why consideration was given to over-indebtedness. Was the debt relief not for anyone who owed anything and earned below R 7 500? Could one state the total amount of debt relief to be afforded to applicants, such as R2 000?
Ms Mantashe noted that the Public Service set 15% as the limit for deductions. That was a better route because otherwise people might be left with nothing for living expenses.
Mr Williams suggested that the percentage should be 0% and rather instead state the total amount of debt that would be paid off.
The Legal Advisor explained that a person earning under R7 500 would be entitled to up to R50 000 in debt extinguishment. She did note, and the NCR CEO agreed, that it was easier to evaluate an application for debt relief if the only criterion was income. If there was an over-indebtedness criterion, it could be quite complicated to determine exactly how much the person was paying on instalments. The reason that over-indebtedness had been included in the Bill was because it was assumed that some people who earned under R7 500 were not over-indebted. If, however, there was a policy decision that everyone who earned less than R7 500 was over-indebted, there was no need for the clause.
Mr Williams queried whether South Africa could afford to pay up to R50 000 in debts for every person who earned under R7 500. That was the real question. He asked the agencies that were attending the meeting to suggest whether that was likely to happen.
Prof Maseko, Tribunal Chairperson, remembered the first time that he had spoken to business about the Debt Relief Bill and he had been viciously attacked. He thought that business might seek justice because as Parliament looked at relieving the debt, it touched on someone else’s balance sheet. It was a question worth asking but, unfortunately, he did not have an answer
Ms Motshegare, NCR CEO, pointed out that not everyone would have their debts extinguished and that some would have their debt suspended and for others, the debt would be restructured. The Tribunal would determine which of those remedies would be applicable to each applicant.
Mr Williams said that he understood about suspension and restructuring debt but he was interested in the worst case scenario. He was not supporting business. He had no idea how many people in South Africa were earning under R7 500 but it could be one million people and each of those would be eligible for up to R50 000 in debt relief. He pointed out that it was necessary to consider the implications of the Bill that the Committee was drafting. If two million people were given R50 000 in debt relief, that amount of money would have to be carried by the banks and the private sector, and that could have a significant impact. Nevertheless, he believed that was the way to go and that once the draft Bill went out for public comments, the Members might get some idea of the impact.
The Legal Advisor explained that the clause dealing with realisable assets existed because a person who met the debt relief criteria could not have realisable assets. However, a minimum level of assets would not disqualify a person from seeking debt relief. The Magistrate Court’s Act listed a number of items that could not be classified realisable assets. Each unrealisable asset category was limited to R2 000. The list included tools of the trade, professional books, household goods, bed, bedding and apparel were not realisable. The question was whether the categories of realisable goods in the Debt Relief Bill should be limited to R2 000 in value. Should clothing be limited to R2000? The argument was that anything over that amount could be sold to pay debts. There was the question of guns and other weapons up to a value of R2 000 being excluded. Should it be retained?
Ms Mantashe agreed that unrealisable items should be limited to the value of R2 000.
The Legal Advisor asked whether the clause on arms and ammunition should remain.
Mr Williams said that if someone, such as a security guard, required a weapon, he could list it as a tool of trade and therefore that clause should be removed.
Ms Mantashe commented that Parliament was fighting for a gun-free society and therefore nobody should need a weapon. She agreed that that clause should be excluded.
The Legal Advisor asked if developmental credit, such as National Student Financial Aid Scheme (NSFAS) loans, should be excluded. In the current draft, the NSFAS debt was included in the R50 000 maximum debts. However, at the Tribunal the NFSAS amount would be removed and would not be extinguished.
Mr Williams suggested NSFAS loans should not be included as the loan had to be repaid to give an opportunity to another person to learn. If the loan was paid back, it could be loaned to someone else to study. However, if the money were written off, there would be no further opportunities for others to study.
Ms Mantashe agreed not to write off NSFAS loans.
Mr Williams asked what other instances of developmental credit there were.
Ms Motshegare, NCR CEO, explained that development loans referred to loans for small businesses, small cooperatives, low cost housing and education.
Mr Williams noted that loans to small businesses and cooperatives would fall outside the Debt Relief Bill. He asked Ms Mantashe for her opinion on including low cost housing. He thought that it should be taken out.
Ms Mantashe agreed.
Mr Kumkani stated that the policy position was that the solution of one problem should not create another problem. If low cost housing loans were extinguished, there would be no appetite for getting into that space and that would be detrimental to many people.
Mr Williams determined that developmental loans would not be extinguished.
Capping of interest
The Legal Advisor explained that when the Tribunal considered an application, the Tribunal would determine how to address the debt problem such as the applicant could be sent for counselling or the debt could be extinguished. One possibility, if it felt that a person could manage to pay but was experiencing temporary difficulties, was that the Tribunal could cap the interest on the debt for a period to allow the person to recover and, ultimately, pay off the debt. Should interest be capped for a period of six months or 12 months? Committee member, Mr Macpherson, had suggested that the time period should be six months. She reminded the Committee that under debt counselling, a person had five years during which the interest could be capped in order to allow a person time to repay. She also pointed out that if a person did not manage to catch up in six months, a second application would have to be made so that the period could be extended, which increased the administrative burden.
Mr Williams felt that 12 months gave the person more time and was less cumbersome to administer.
Ms Mantashe agreed with the 12 months. Mr Macpherson was talking for rich people and not the poor.
Extinguishing of debt
The Legal Advisor explained that the Tribunal could suspend the debt and if that did not help, the next step would be to extend again but, finally, the answer would probably lie in extinguishing a debt. Would 100% of the debt be extinguished, or could the Tribunal determine what percentage could be extinguished? The wording would either indicate that the full debt would have to be extinguished or it could indicate that up to 100% might be extinguished, thereby allowing the Tribunal to decide.
Ms Mantashe was concerned about credit providers who had to survive and sustain their businesses. The Committee had to be responsible and not destroy the economy. She would go for 50%.
Mr Williams disagreed.
Prof Maseko, Tribunal Chairperson, suggested that it would be better to leave it for the Tribunal to determine on a case-by-case basis so that, on a balance of justice, a decision could be made.
Ms Mantashe was satisfied and Mr Williams agreed with the Tribunal Chairperson.
Mandatory versus non-mandatory financial literacy training
The Legal Advisor said that the Tribunal could determine that it was mandatory for someone who received debt relief to undergo financial literacy or budgetary training. However, at the moment there was no such training offered and there was a question of who would pay for such training. She pointed out that it had already been made prescriptive for the Minister to develop such a training program. However, the programme might not be ready in time for those affected by the Bill immediately and then the person would not be able to fulfil the requirements of the Tribunal. The question was whether to make such training mandatory or whether it could remain as an option to be imposed by the Tribunal. That would mean that such a requirement would not be expected of anyone until a training program was ready. It also put the obligation on the Minister to develop the training program.
Ms Mantashe said that she could not talk on a programme that was non-existent. She did not know if there would be a budget for the Minister to do what the Bill would be requiring.
Mr Williams noted that training was very important. The Committee did not only want to do debt relief but also change the way that people dealt with money and, especially, how they viewed credit. The problem was resources. It was best to leave it as it was so that it became an option further down the road. But it was important that the training was not neglected as people might get even more indebted if they got credit relief and then tried to get further credit elsewhere.
Prohibition to enter into a credit agreement
The Legal Advisor addressed the clause on the prohibition to enter into a credit agreement for a particular period of time. In the current form of the draft Bill, such a prohibition was not mandatory but the Tribunal could place a limitation on a person who had received debt relief from entering into a credit agreement for a specified period. The question was whether such a prohibition should be discretionary, or up to the Tribunal, or not at all. The question of how long the limitation was for, would be dependent on the decisions taken by the Tribunal on the debt relief mechanism imposed. In New Zealand, people were limited in their right to enter into credit agreements but the instalments were capped at a particular percentage of the person’s income, for example, 5% of income for a determined period of time. As an example, if a person got a job and a good salary, could he enter into a credit agreement or not? He could be penalised since he had made use of the debt relief system. Was it a penalty or simply about rehabilitation, or both? If it was about a penalty, as well as rehabilitation, it had to mandatory.
Ms Mantashe felt that it was complicated, but noted that the Committee did not want to bar people from engaging in the economy.
Mr Williams determined that a major decision of principle had to be made and so the clause should be presented to the Committee for a decision.
The Legal Advisor noted the following sub-section allowed a person to enter into a developmental credit agreement or public interest credit (such as after a disaster).
Mr Williams said that developmental credit had not been included in the Debt Relief Bill, so people could apply for loans in that sector.
Ms Mantashe agreed. She did not want to bar people from engaging in the developmental sector.
The Legal Advisor introduced the rehabilitation clause. She explained that rehabilitation would be applicable where a person had to have the right to credit suspended for a period of time but then obtained a good job and asked for rehabilitation. The question was whether rehabilitation would only apply in cases where the debt had been extinguished or would it apply for any of the Orders allowed in that part of the Bill. Should it apply equally to people who had had suspension, capping of interest, and so on.
Mr Williams suggested that rehabilitation should apply to all processes under the Debt Relief Bill.
The Legal Advisor clarified that when clause had been discussed, only extinguishing of debt was discussed for rehabilitation. She had thought that it should apply to all Orders, but did not wish to exceed her mandate.
Mr Williams stated that any person who had been awarded any type of debt relief, could, after making full payment, be rehabilitated.
Ms Mantashe agreed.
Prescription of interest rate
The Legal Advisor asked if the debt relief applicant would have to pay everything that was owed up to the date of application when all interest accrual would stop or whether some interest should be paid in consideration of the loss suffered by the credit provider. If the latter course was followed, what would that interest rate be? Should the Minister prescribe the interest rate?
Mr Williams asked the NCR and the Tribunal for input.
Ms Motshegare, NCR CEO, was unsure and asked for time to apply her mind.
Prof Maseko, Tribunal Chairperson, said that interest by its nature was time-bound and so it compounded the longer one took to pay. If one paid immediately, there should be no interest. One could not be charged for paying earlier. He thought that interest should be extinguished
Mr Kumkani, DTI, said that from a policy perspective, the main idea of rehabilitation was to reintegrate one into the mainstream of the economy. The Bill could not wipe out interest as it would not be good for the economy, but a 3% to 5% interest rate was reasonable. A 15% interest rate was unreasonable.
Mr Williams decided to take the question of the interest rate to the Portfolio Committee.
Notification of the credit provider during rehabilitation
The Legal Advisor asked if the credit provider should be notified when a person applied for rehabilitation, and whether a credit provider could object to the rehabilitation of a person. From a lawyer’s perspective, she would advise that a credit advisor should be notified of an application for rehabilitation. The question of raising an objection was debatable, but it may be advisable. A restriction on rights would have been applied to the consumer and the consumer would be trying to lift it.
Mr Williams asked if the credit provider would not have been informed when the money had arrived in the credit provider’s bank account. The only way to obtain rehabilitation was by paying back the debt, so surely the credit provider would know?
The Legal Advisor pointed out that there may be a case of a credit provider who had not been paid. That was a key reason for informing the credit provider.
Mr Williams created a scenario in which he qualified for debt relief. Would the credit providers not be informed that he was in the debt relief programme? When he had the money to pay back, the credit provider again needed to know. He strongly agreed that credit providers should be kept in the loop and informed as far as possible as they were the ones who were bearing the cost of the debt relief process. He asked the Tribunal Chairperson to comment about permitting objections from the credit provider.
Prof Maseko, Tribunal Chairperson, pointed out that when a person exited the process, there would have been hearings from both sides. He would be reluctant to allow them to fight it out later. The debtor would have to provide proof of payment before the person could be rehabilitated. The credit provider should not be given too much leeway at that time.
Mr Williams asked to what the credit provider could object.
The Legal Advisor stated that the debtor would show the forms indicating that he had paid. If the credit provider had not received the money, how could he object?
Mr Williams said that the onus needed to be on the debtor to get the bank to provide proof that he had paid.
Ms Motshegare, NCR CEO, explained that the credit provider would provide a letter when a person had paid his debt in full. It could also be confirmed through the credit bureaus as the credit provider would inform the credit bureaus.
Mr Williams noted that the obligation would be on the consumer to get the letter and submit it with his application for rehabilitation.
Ms Mantashe agreed.
Prescribed Debt Intervention
The Legal Advisor asked if prescribed debt relief intervention should be included or not. Debt intervention could be prescribed following a natural disaster, etc. Should the Minister be able to use the Bill to proclaim a debt relief intervention, given the very specific criteria, the very specific process and the obligation to consult widely and then go to Parliament for approval before a debt relief intervention could be published? Alternatively, should the prescribed debt relief measure be taken out and the Minister would have to take an Act to Parliament every time that the Minister wanted to prescribe debt relief?
Mr Kumkani, DTI, asked that the clause be taken to the Portfolio Committee and DTI would provide the reasoning behind the clause.
Mr Williams agreed to refer it to the Committee.
Credit Life Insurance
The Legal Advisor referred to Clause 16 amending Section 106 which dealt with credit insurance, which should have read credit life insurance. She therefore needed to re-draft, but should credit life insurance be mandatory? It would increase the price of credit. Should it also be mandatory for immovable property?
Ms Motshegare, NCR CEO, explained that the cap on credit life interest was R4.50 for every R1 000 of debt. She pointed out that prior to the introduction of the cap in August 2016, there had been no limit on how much credit providers and insurers could charge.
Mr Williams explained that mandatory credit life insurance would mean that the debt was covered in the event of the death of the person or loss of income. The good side was that in 20 years’ time, the Committee would not have to come up with debt relief measures because everyone who had been given credit would be covered if the person lost his or her job, or died. What the bad side?
Mr Kumkani replied that the bad side was that a person might not be told that he was paying a certain amount for credit life insurance. Others might not have been told how much was involved in insurance payments and the consumers often did not even know that they had credit life insurance and so did not claim it. The cost of such insurance had been extremely high in some cases. In 2016, the Department had brought in a cap of R4.50 per R1000 for all credit life insurance. It was defined as part of the cost of credit.
Mr Williams decided that the Sub-Committee would recommend mandatory credit life insurance, with a cap in place. It would change habits and also be security against an uncertain economic future.
The Legal Advisor asked if there should be credit life insurance in respect of all debt or should it be in respect of the amount of debt. Should there be credit life insurance on a house, for example? She noted that the Bill allowed a person to get insurance from somewhere other than from the credit provider.
Mr Williams suggested that the limit insured should be up to R50 000 or R100 000, i.e.to the amount for which one could get credit relief so that those costs would not have to be borne by business again. If rich people do not want to get credit life insurance that was their decision. The Bill was actually about addressing the debt problem of the poorest of the poor.
Provision of false information in a credit application
The Legal Advisor stated that the Bill would make it an offence for a credit provider to enter into a reckless credit agreement. Should the converse apply as well? Should it be an offence if a person lied in a credit application or if one deliberately omitted information?
Ms Mantashe said that the Bill should encourage an honest citizenry and so it should be an offence.
Mr Williams asked what happened if one lied. Did it mean that one would not get the credit?
The Legal Advisor pointed out that a person might well get the credit, precisely because the person had lied, but it would be fraud if one lied on an application form and that was a common law offence.
Both the NCR CEO and Tribunal Chairperson agreed that fraud to be dealt with as a common law offence.
The Legal Advisor explained the concept of an unlawful credit agreement, which could arise if the credit agreement was drawn up by a person who falsely claimed to be a credit provider or debt counsellor. Misrepresentation as a credit provider or debt counsellor had been made an offence. Should a penalty be attached to non-registration? Should non-registration be treated the same as other offences and be subject to 12 months’ imprisonment or equivalent fine, or should it attract a larger penalty such as 10% of annual turnover?
Mr Williams invited the NCR CEO and Tribunal Chairperson to give an opinion.
Prof Maseko, Tribunal Chairperson, said the view of the Tribunal was that the 12 month penalty was sufficient. Monitoring it would be difficult. Enforcement was more important than adjusting the scale.
Ms Motshegare, NCR CEO, agreed.
Mr Williams decided that the matter would be put to the Committee.
The Legal Advisor stated that another penalty related to a person providing false information. Should the penalty be 10 years’ imprisonment? Was it too harsh?
Mr Williams decided that the matter would be put to the Committee because of the implications.
Lastly, the Legal Advisor asked about the penalty for reckless or unlawful lending. Was a fine or a 10-year term of imprisonment for a natural person too harsh? She asked the same question about the penalty for a company. Was a fine of 10% of the annual turnover too harsh? Mr Macpherson had suggested that the company fine should not exceed R1 million as a cap.
Mr Williams was of the opinion that it was a Committee decision but there was some consensus in the Sub-Committee with the clauses as they stood. The opposition had come in with the same numbers. He thought that they could include the limit to not exceed R1 million.
Mr Kumkani, DTI, noted that the amount of recklessness would depend on the amount in the loan book. R1 million would be too minimal for a R2 billion loan book.
Mr Williams observed that a small entity would find R1 million too much whereas a large corporation would find it insignificant. His concern was that they were writing legislation for the poorest of the poor. The impact of a fine of R1 million would depend on the size of the company.
The Committee meeting would review the recommendations on 7 November as the Bill had to be ready by 14 November 2017.
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