'Debt Intervention' National Credit Amendment Bill: clause-by-clause reading

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Trade and Industry

28 August 2018
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Before the clause-by-clause reading could begin, the Senior Legal Advisor took the Committee through proposed changes by National Treasury:
• Clause 19: Rather than an outright statement which would make credit life insurance mandatory, it should be made subject to regulations being prescribed. It was better to give flexibility to the Minister of Trade and Industry because there would be learnings in the matter and a need to refine the measures for credit life insurance. There were divided opinions on the matter as credit life insurance would then, not necessarily, be mandatory for all borrowers in the identified category.
• Clause 29: Before the Minister consider an adjustment to the maximum income and debt level, there should first be a consultation with stakeholders and a report tabled to Parliament on that consultation. Both parties agreed to the addition. Treasury proposed the word ‘only’ to limit the factors that the Minister had to take into account when adjusting the maximum income or debt level. The rationale was to limit the Minister to those three factors listed in the Bill. There were arguments from the Committee that there could be unforeseen events that the Minister would have to take into account. National Treasury had objected to the uncertainty that would be introduced into the Bill. Consensus could not be reached.
• Clause 12 allowed a magistrate to reduce interest fees and other charges, except credit life insurance, on secured and unsecured debt to as low as 0% for a period not exceeding 5 years. Treasury said that reducing secured debt to 0% interest would bring undue risk to the credit market. The key was to differentiate between secured and secured debt. About 10% of the credit retail market was unsecured credit while secured credit was 90% of the credit retail market and worth R1.3 trillion. Taking interest rates to zero fundamentally impacted on a bank’s balance sheet and put savings at risk. While debt relief was critical, the process could not put the financial sector at risk. There was emphatic acceptance in the meeting that the financial sector had to be protected from risk and that certainty was essential to the sector. The necessary amendment would ensure that secured debt could only be managed according to the current debt review processes which ensured that the interest rate would be above the repo rate.

During the clause-by-clause reading, the Committee adopted all clauses except for Clauses 12, 13, 14, 15 and 29. Clauses 12, 15, 29(a)(bA) were flagged for final amendments and would be read the following day. The DA objected to part of Clause 13 on the basis that, to date, the party had not seen empirical evidence to suggest why the decision had come about to use R50 000. At the beginning, it had been somewhat of a thumb suck. The DA was uncomfortable using figures that had not been proven in the Bill.

The DA proposed an amendment to Clause 14(b)(b)(ii)(dd) as it had indicated all along that it could not support the zero interest rate unless there was an absolute case to be made that it was the only way to reach the goal of assisting someone. The clause seemed to the DA to be open-ended in getting to that point. The proposed amendment: ‘determining the maximum interest, fees or other charges, excluding charges contemplated in section 101(1)(e), under a credit agreement, with a diminishing rate to zero...’ was defeated.

The DA proposed adding the phrase ‘failing which would render the Bill unimplementable’ in point 4 of the Memorandum of the Objects on the Bill to read: ‘The NCR and Tribunal would require additional resources, failing which would render the Bill unimplementable.’ This decision was held over for the next day.

Meeting report

The Chairperson alerted Members to the visit to Cape Town by Ms May, Prime Minister of Britain. She was visiting the President that day but she was also returning the bell from the SS Mendi. A contingent of South African black soldiers had been on board the ship during the First World War and had died a heroic death but were only recognised for their bravery many decades later. The Chairperson noted that the soldiers had done their duty to the very end. She added that the duty of the Committee was to finalise the National Credit Amendment Bill. The Committee would meet with the Secretary of State for Wales the next day at 2pm.

Mr D Macpherson (DA) asked for permission to discuss the programme. He thanked the Chairperson for her invitation to the meeting with the Secretary of State and confirmed that the DA would attend the meeting on Wednesday but the DA would not be able to participate in the Committee meeting on Thursday 30 August 2018. Questions would be put to the Deputy President and the DA was required to be in the House. The public hearings and other matters on the Committee Programme were going to be problematic for the DA. It had been a short term and there were only three weeks left. The DA was required to be in the House for the majority of the time and so the DA could not commit to the programme because it took the Members out of the duties in the House. He would seek guidance from the party leaders.

The Chairperson agreed to adjust the start of the Thursday meeting until after  the questions to the Deputy President end at 4pm.

Mr B Radebe (ANC) understood the concern of Mr Macpherson but the Bills were a priority. However, it had to be clear that the Committee could not repeat discussions and decisions made in a meeting from which a Member was absent.
 
The Chairperson did not think that there would be a problem as the Chair of the Chairperson’s Forum had given the Committee permission to meet. She would leave it in his hands.
 
National Credit Amendment Bill adjustments 
Adv Charmaine van der Merwe, Senior Parliamentary Legal Advisor, said that the Bill had been almost ready for the clause-by-clause reading when National Treasury had approached the Committee with some concerns. Some adjustments had been made following a presentation by National Treasury but one or two aspects were outstanding. She would take the Committee through those clauses where an agreement had been reached, so that Members could see that they agreed to the amendments.

Clause 19: Section 106(b)
National Treasury had proposed rather than an outright statement that credit life insurance would be mandatory, that it rather be made subject to regulations being prescribed. In line 45,’ where the term of debt exceeds six months and the principal debt did not exceed R50 000, or such amount as may be prescribed, the Minister may ‘in consultation with the Minister of Finance require the credit provider to enter into and maintain credit life insurance …’ The advocate was not clear as to whether the Committee wanted ‘in consultation’ or ‘with consultation’. The Committee had had a discussion on section 8 but not in respect of Clause 19. She had written ‘in consultation’ but required the guidance of the Committee.

Mr Radebe commented that credit was the domain of the Minister of Trade and Industry so it had to be ‘after consultation’.

Mr Macpherson was concerned about the word ‘may’ because it seemed to be optional for the Minister to prescribe regulations on credit life insurance. Was it at the discretion of the Minister? If it was, he could not support that position. The DA felt strongly that there had to be credit life insurance. On ‘in’ or ‘after’ consultation, he was worried. As it involved insurance, there had to be consultation with the Minister of Finance. He asked if the advocate had sought any opinions on the matter.

Mr A Williams (ANC) was of the opinion that the term should be ‘after consultation’.

Adv van der Merwe responded that Treasury had requested that the implementation of credit life insurance be at the discretion of the Minister of Trade and Industry once he had had consultations with the Minister of Finance. Treasury was concerned about it being mandatory and that there was no option available. There had to be consultation between government departments. The term ‘in consultation’ was normally used when one Minister stepped into the domain of another Minister. In Clause 19 the word ‘after’ showed that the decision was that of the Minister of Trade. However, the actual rate of the insurance had to be ‘in consultation’ with the Minister of Finance.

Ms Katherine Gibson, National Treasury: Chief Director Financial Sector Conduct, agreed that that had been the intention of Treasury. It was better to give flexibility to the Minister of Trade and Industry because there would be learnings and a need to refine the measures in terms of credit life insurance. Treasury would have preferred ‘in consultation’ but it was more important that it was a regulations-making power.

The Chairperson indicated that she did not want to go backwards and forwards on the matter.

Mr Macpherson asked what the position was since the ANC was saying ‘may’ and the DA wanted ‘must’.

The Chairperson pointed out that ‘may’ and ‘must’ had been discussed the previous week. The Committee had gone past that.

Mr D Mahlobo (ANC) stated that Treasury had requested the amendment and explained the context, and the ANC had supported Treasury and was not going to change its position. Sometimes legislation was too inflexible when those in the Executive knew the current situation. The regulations would not happen outside of the Cabinet process. The term ‘after consultation’ meant that consultation would happen.

The Chairperson had assumed that everyone had expressed themselves and asked Mr Macpherson if he was raising his hand on a new point.

Mr Macpherson stated that the DA had not supported the view that the Minister of Trade and Industry ‘may’ make regulations. He asked the Committee note that the DA did not support the use of ‘may’ in that clause.

Clause 19: Section 106(e)
Adv van der Merwe noted that there was a consequential amendment to the amendment in Clause 19: Section 106(b). The words ‘is prescribed’ would be added to the end of the paragraph.

Mr Mahlobo stated that the ANC was comfortable with the amendment.

Clause 29: Section 171(b)(iii)(d)
Treasury had proposed that before the Minister considered an adjustment to the maximum income and debt level, there should first be a consultation with stakeholders and a report tabled on the consultation. Adv van der Merwe suggested that an extra paragraph (i) be inserted after Section 171(b)(iii)(d) which would instruct the Minister to consult with relevant stakeholders and to table a report on the consultation in the National Assembly.

The Chairperson noted that everyone agreed.

Flagged issues
Clause 29: Section 171(b)

National Treasury had proposed the word ‘only’ before the factors that the Minister had to take into account when adjusting the maximum income or debt level. The rationale was to limit the Minister to those three factors listed in the Bill. There were arguments from the Committee that there could be unforeseen events that the Minister would have to take into account. National Treasury had objected to the uncertainty that would be introduced into the Bill.

The Chairperson confirmed that the Committee was pursuing certainty.

Mr Mahlobo stated that it depended on how people interpreted the legislation. The factors that the Minister had to take into account when adjusting the maximum income or debt level, were items that had been carried from other parts of the legislation. It defeated the purpose to try and qualify those factors. The factors were so broad that an instrument would have to be developed and the instrument had to be rational. When Treasury had proposed the change, it had said that the intention was to avoid confusion. To him, it was immaterial because it had to be read in conjunction with other clauses.

Mr Macpherson confirmed that definition and certainty were always better. Factors that would influence a Minister’s decision should be clearly defined to prevent other factors being used. The inclusion of ‘only’ provided clarity and prevented a broad decision that would succumb to outside pressures that might not be appropriate for a sound decision. He supported the inclusion of ‘only’.

Mr William stated that the Committee should not include ‘only’ because there might be something else that could affect the Minister’s decision. He would be making the decision after a lot of consultation. It should be open to allow the Minister to consider other factors that it might be necessary to take account of. There would be checks and balances.

The Chairperson reminded Members that the decision of the previous week had been to omit ‘only’. There was no agreement and she would move forward. The Committee could not keep reversing the decision.

Mr Mahlobo said that Members should try to explain how a word got there, how it was contextualised and how it related to the guiding principles. The word ’only’ was not originally there. One could not just add it and not take into account the important clauses in the Bill. Mr Mahlobo agreed with Mr Williams that there would be checks and balances.

Clause12: Section 86
Adv van der Merwe stated that Clause 12 allowed a magistrate to reduce interest fees and other charges, except credit life insurance, to as low as 0% for a period not exceeding five years. The power to lower interest rates had been given to the National Consumer Tribunal in the debt review process. But magistrates could not lower charges as it was not in the statutes. This clause had been advertised and comments were that magistrates be given specific guidelines in reducing interest rates. The Bill required the Minister to develop guidelines. However, Treasury was concerned because magistrates were being given the power that was applicable to debt review and debt review was applicable to both secured and unsecured credit.

Ms Gibson highlighted elements from the National Treasury presentation. Treasury understood the concerns about magistrate powers and believed that their powers could be enhanced in terms of debt review without bringing undue risk to the credit market. The key was to differentiate between secured and secured debt. About 10% of the credit retail market was unsecured credit. Secured credit formed 90% of the credit retail market. National Treasury had researched unsecured debt and had determined that the market could carry debt intervention for unsecured debt. Unsecured credit accounted for R173 billion of the total outstanding gross debtors book, while secured credit stood at R1.3 trillion.

Taking interest rates to zero fundamentally impacted on the bank balance sheet and put savings at risk. While debt relief was critical, the process could not put the financial sector at risk.

Treasury recommended that unsecured debt could be reduced to zero but that secured debt could not be brought below repo lending rate plus two, as per the existing Task Team Agreement. As it was linked to the repo rate, it was flexible and would come down should the repo rate come down.

Adv van der Merwe pointed to the clause on regulations where the Minister had to take into account the requirements for secured and unsecured debt (Industry Guidelines of the Task Team Agreement). If that Agreement was already part of requirements, those criteria would be applied. She was concerned about the repo rate as that would mean including the Reserve Bank definition of ‘repo’. She believed that it was covered as the Agreement was already part of the Bill, but if the Committee wanted it to be made clearer, the Committee could add to Clause 19 that the Minister had to take into account the requirements for secured and unsecured debt.

Mr Mahlobo accepted that the explanation by the technical team sufficed but asked how one ensured correct implementation? When people read the Act, they did not always read all the relevant clauses so there had to be a clear guideline between secured and unsecured. He asked how Treasury had arrived at a repo rate of plus two. Where did the plus two come from? The repo rate changed all the time, so why should it remain plus two. The advocate had explained how the two clauses had to be read, was Treasury not happy with that proposal or did Treasury want it broken down?

Mr Radebe said that it was not possible to introduce the repo rate because that would have to be advertised. The Bill should be limited to unsecured debt only because they were dealing with the poorest of the poor.

Mr Williams agreed that the Bill was only about unsecured credit. Secured credit had nothing to do with the Bill and should be removed.

Mr Macpherson said that the secured credit talked to the debt review process but the Committee had not dealt with debt review. Not all credit agreements were offered at prime plus two. He agreed with Mr Radebe that the word ‘unsecured’ should be inserted. The primary target was unsecured credit less than R50 000. That should be put in the guidelines so that magistrates would zero in on that credit and not look at other unsecured credit. He was concerned about the fact that the Minister could reflect on the Agreement and choose not to take it into account. How could the Bill make it clear that the Minister had to give serious consideration to the Agreement and not just reflect on it in passing?

Mr G Cachalia (DA) noted that the repo rate had varied 1.5% across eight years. It did not change like the weather and given the impact on the bank, the repo plus two seemed reasonable.

After a five-minute break, the Chairperson asked Treasury to explain why it wanted to link the interest rate to repo plus two.

Ms Olaotsi Matshone, Chief Director at Treasury, explained that the repo rate was set by the Reserve Bank and the prime lending rate was linked to the Reserve Bank rate. It was not a market rate and so was not particularly volatile. ‘Repo rate’ meant the banking lending rate or the interest rate at which banks borrowed from the Reserve Bank. Prime rate was higher than the repo rate and could be repo plus two. The prime rate was the rate at which the bank made loans available to its clients. That was where it made its money. One might be able to get a loan at prime minus, but that would not be below the repo rate. No one could borrow at repo minus.

Ms Gibson was comfortable with limiting the clause to unsecured debt. She understood the reason for linking the empowerment of magistrates to secured debt, but if unsecured debt was included, it would have to be restricted. She acknowledged that there was a reference to the Task Team Agreement but because the impact could be so great, it had to be elevated into primary law.

The DTI Director-General, Lionel October, said that DTI supported one of the two. The main aim of Bill was the unsecured market and that was DTI’s primary focus. If the Bill dealt exclusively with that, then secured lending did not need to be addressed. But, if it were necessary to talk about secured credit, his emphasis was ensuring that the banks did not leave that market because the intervention was in a very narrow sphere of the market where there was reckless lending and low income groups but DTI wanted to keep the banks in the space. The repo rate, as explained by Treasury, was the rate at which banks borrowed money from the Reserve Bank which meant that was what the banks paid for it. One could not give magistrates discretion to lower the rate to zero which meant that the bank would be running at a loss. The intention of the amendment was to limit the discretion of the magistrate. A magistrate could not tell a bank that it was to operate at a loss. The proposed repo plus two would keep the banks in the market because they would take comfort from the fact that the magistrate would not go lower than that.

The Chairperson said that she now had a much better understanding. She agreed that the focus of the Bill had always been on unsecured debt and now the moment it went before a magistrate the whole matter was opened up.

Mr Mahlobo stated that the explanations had been helpful but when the matter reached the magistrate, he or she had to adjudicate. He agreed that it should be repo rate plus. It could not be minus anything but he did not know how Treasury had arrived at plus two. Was plus two to be the only option or was the Bill going to give the magistrate a range of interest rates when he adjudicated? He fully understood that they did not want to destroy the industry.

Mr Williams was still of the opinion that secured credit should be removed from the clause. Treasury suggested either removing secured debt or adding the repo rate. The Bill was all about unsecured loans and that was what they should stick with. The Committee had started talking about secured loans but was told not to deal with credit relief or secured loans.

Ms C Theko (ANC) had not understood but now she understood. However, the aim in the Bill was unsecured rates but she wanted a proposal from the advocate on how to insert that amendment so that the Bill could be amended to cover secure and unsecured debt but without confusing a person. She needed to hear the advocate’s proposal for the amendment again. She agreed with Mr Williams that the Committee had been told to leave out secured debt. She understood that they had to protect both banks and lenders. She had been comfortable with Adv van der Merwe’s proposal because the Committee needed to protect both sides.

Mr Macpherson had a problem with the numbers presented to the Committee that were like lottery numbers. Why two? Why not one or three? The fundamental problem that existed with the Bill was that the Committee had no idea what impact the decisions would have on the market because the Committee did not have an impact report. The Committee actually did not want to know and continued to make uninformed decisions. The Bill should relate to unsecured credit and there should be a cap of R50 000 in the guidelines.

The Chairperson was trying to make progress but there was no real convergence.

Adv van der Merwe proposed that more guidance be inserted in the regulations, rather than in the principal legislation. She understood Treasury’s concern about the enormity of the impact. However, she had the same concerns as Members. They all knew what the repo rate meant but in drafting a Bill, one had to make sure that it was understandable. If she used repo she would have to use the Reserve Bank’s definition of repo and use that terminology. Secondly, what if the agreement concerning plus two changed? What if plus two changed and it was in the primary legislation?

Clause 29 contained the reference to Guidelines for the Court and Tribunal. She suggested inserting something to make a clear distinction between the minimum interest rates applicable for secured and unsecured agreements and something that referred to repo, such as link it to the Reserve Bank. There was a possibility that if a person had an interest rate lower than prime, the requirement of repo plus two could be more than that person’s personal lending rate. There was leeway for the magistrate to use his discretion not to raise the interest rate. Such guidance would have to be in the guidelines.

The Chairperson requested that the proposal be typed out.

Ms Gibson stated that she understood where the advocate was coming from but her proposal did not give the certainty that Treasury was looking for. It was a massive market on which they could not impose uncertainty.

Mr Lesiba Mashapa, NCR Company Secretary, informed the Chairperson that the paragraph currently in the Bill had been inserted with the support of the National Credit Regulator. It was meant to formally recognise the Task Team Agreement with debt restructuring rules that distinguished between secure and unsecured credit. One had to read the clause in line with section 171 which required the Minister to take into account the Task Team Agreement. It was not advisable to limit the reduced interest rates to unsecured debt because it would be in conflict with the Task Team Agreement which referred to both secured and unsecured debt.

The Chairperson noted that the Bill was tied to the Agreement and wondered if the clause would still be valid if the Agreement changed.

Adv van der Merwe explained that actually elevating the Task Team Agreement into the Bill meant that if the Agreement changed, the regulations would have to change.

The Director General attempted to find a way forward. Adv van der Merwe had made a good point and had indicated how to draft the clause more tightly, and that a definition of repo rate would be necessary. He accepted that regulations were tight. But the real concern was about the economic world. DTI had been getting calls from international banks that were really concerned that the Bill was interfering in setting interest rates in the country. Banks would want to see the restriction in the primary legislation. Banks were concerned about regulations because the Minister could change regulations quite easily. DTI was interfering in only one sector of the market, which it had to do. In the US, reckless lending had almost brought down an entire financial system. The intervention was limited but the security had to be in the main legislation. There had to be security for banks.

Mr Mahlobo accepted what the DG and Ms Gibson had said and it was a critically important issue. All weekend, and since, there had been a lot of hype in the media about what the Bill was going to do. Adv van der Merwe and Treasury had to reach agreement. Magistrates had to adjudicate, but there had to be certainty. The issue was about creating certainty, even if it meant certain things had to be repeated in the Bill and cross-referenced. One did not want to collapse the financial system for a lack of clarity. He suggested that the Committee flag the clause because there could not be a vacuum on those matters.

Mr Macpherson said that the real problem lay in how the Bill was read and the true intentions were outsourced to regulations, or secondary legislation. He did not find comfort in the guidelines to be drafted by the Minister because there was nothing that compelled the Minister to take the Task Team Agreement into account or even to reflect it. The Minister could say that he had taken it into account but chose to ignore it. He wanted more instructive words for the Task Team Agreement to be the bedrock of the guidelines but it would not work with words like ‘reflect’.

Ms Theko asked the advocate to read the proposed amendment so that the Members could check that the paragraph contained everything mentioned.

The Chairperson was emphatic that everyone wanted consistency and certainty for the market. Members of one party would prefer more significant matters were in the primary legislation; others wanted it in secondary legislation. She had been besieged by the international media over the weekend at a time when she had serious personal matters on her mind. She had told the media that there was no intention for the Bill to undermine the fundamentals of the financial system and the credit system but it was to ensure that the poorest of the poor would be protected and that they could also benefit. The advocate had to take account of what Treasury had put forward in the interests of certainty in the market.

Adv van der Merwe asked for time to draft something. She could tighten (ccA) but it had to be done in terms of what was prescribed. She pointed out that in section 171, the Minister had to reflect the guidelines and not ‘reflect on’ the guidelines. She would make it clear that the guidelines had to include repo rate. She would consult Treasury.

National Credit Amendment Bill: clause-by-clause reading
The Chairperson informed the Committee that she was going through the Bill clause-by-clause.

Preamble
The Chairperson asked all Members to note the final sentence: “All consumers must be afforded protection through fair, transparent, sustainable and responsible processes.”

Clause 1:
The Committee approved Clause 1.
No amendments

Clause 2:
The Committee approved Clause 2.
No amendments

Clause 3:
The Committee approved Clause 3.
No amendments


Clause 4:
The Committee approved Clause 4.
No amendments

Clause 5:
The Committee approved Clause 5.
No amendments

Clause 6:
The Committee approved Clause 6.
No amendments

Clause 7:
The Committee approved Clause 7.
No amendments
 
Clause 8:
The Committee approved Clause 8.
No amendments

Clause 9:
The Committee approved Clause 9.
No amendments

Clause 10:
The Committee approved Clause 10.
No amendments

Clause 11:
The Committee approved Clause 11.
No amendments

Clause 12 :
The Committee agreed to flag the clause to come back to the clause the following day. Only if there was no way to agree, the Committee would have to meet early the following morning.

Mr Radebe was comfortable to wait for the proposal from Adv van der Merwe and Treasury the following morning.

Mr Mahlobo suggested meeting on Thursday morning. The Bill had to be completed that week.

The Chairperson postponed the decision until 13:25.

Clause 13
The Committee approved the clause

Objection: Mr Macpherson referred to the reference to unsecured debt of more than R50 000. To date he had not seen empirical evidence to suggest why the decision had come about to use R50 000. At the beginning, it had been somewhat of a thumb suck. He was uncomfortable using figures in the Bill that had not been proven. The DA had raised that concern throughout the drafting on the Bill. The challenge was that he did not have a number. The DA objected to lines 4 – 8 of clause 13.

Mr Cachalia explained that the DA was unable to propose an amendment as such an amendment would be contingent on receiving the information on the quantum of unsecured debt, and the bands that would inform the ceiling.

Clause 14
The Committee approved Clause 14.

Amendment to 14(b)(b)(ii) (dd) was proposed by Mr Macpherson (DA) who noted that the DA had all along indicated that it could not supported the zero interest rate unless there was an absolute case to be made that it was the only way to reach the goal of assisting someone. It seemed to the DA to be open-ended in terms of getting to that point.

The proposal was: ‘determining the maximum interest, fees or other charges, excluding charges contemplated in section 101(1)(e), under a credit agreement, with a diminishing rate to zero...’

The Chairperson noted that there had been a discussion on that issue and that the DA had taken that position but she recalled that it was only a recommendation to the Tribunal which would, in determining the rate, move up and down. She accepted Mr Macpherson’s proposal which Mr Cachalia had seconded.

Mr Mahlobo said that the ANC was comfortable with (dd) as it stood. It was discretionary because the roles and responsibilities of the Tribunal and the NCR had been defined earlier in the Bill. They would never act arbitrarily and they would be men and women of highest integrity who would take the decision that it would go to zero. The ANC was comfortable to leave it as it stood.

The Chairperson noted that an important point had been made. She also noted that section 86A(6)(d) had reference and that it specifically determined the time period for adjusted interest rates.

Adv van der Merwe explained that the clause was also subject to the guidelines which stated the Minister had to make it clear that there had to be a diminishing before reaching zero. One did not start at zero.

Mr Macpherson had noted that it was in the guidelines but he was convinced that there was nothing wrong in having it in the principal Act.

The Chairperson asked Mr Macpherson if he still wanted to propose an amendment

Mr Macpherson confirmed his request for an amendment.

The Chairperson called for a vote.
In favour – DA (2 Members); Opposed – ANC (5 Members)

The Chairperson mentioned that it was an important Bill but not all political parties were present despite a request to the Chief Whips, but she assumed they would be speaking in the House

Clause 15
Mr Cachalia stated that section 87A(3)(a)(i) referred to debt intervention applicants, including a minor heading a household. He asked how a minor could contract legally.

The Chairperson asked Adv van der Merwe to clarify the point. She pointed out that the matter had been discussed and that the term ‘child-headed household’ or ‘minor-headed household’ was a phrase frequently used in effective legislation.

Adv van der Merwe explained that a concern had been raised that if a minor had entered into an agreement, it would be an illegal agreement and would be one of factors that the Tribunal had to take into account. The public had pointed out that there were minors who had entered into credit agreements. Certain minors could be paying for things coming down through an estate. The Bill included minors so as not the lose the fact that they had originally been seen as one of the most vulnerable groups.

Mr Cachalia understood the intent but it was legally a contradictory statement and minors could not become applicants.

The Chairperson explained that child-headed households were being excluded from so much that they needed in the country. One could conclude that giving credit to minors was a civil or criminal case but the fact was that the goods were being removed and people were getting away with it. It was a practical situation.

Mr Mahlobo said sometimes people could become too legalistic. The reality was that there were minors who were in that position following the death of one or both parents. A minor could appoint a lawyer, but that would be in a more affluent community. One had to be cautious not to become exclusive. Roman Dutch law did not apply in some communities where customary law applied. Some of the issues were spelled out in customary law.

Mr Macpherson stated that he was unaware that customary law applied to credit agreements and if it was a debt from a deceased parent, the minor could not be held liable for the parent’s, or even a relative’s, debts. A minor could not contract to a credit provider to obtain credit. If Mr Mahlobo knew that minors were signing credit agreements, he should immediately inform the NCR.

Mr Radebe commented that it showed that some people did not know South Africa as a whole. When it came to secured loans, that might be the case but, when it came to unsecured loans, debtors came knocking on the doors of the children because their parents had owed money. The children had to be protected. Just as the financial sector wanted certainty, he wanted certainty for the children.

The Chairperson summed up. ANC was looking at practicalities, but someone else was saying that it was illegal. That was a valid argument but the question was what was pertaining on the ground. The issues were around certainty. She did not believe anything would be achieved by pursuing the debate. She would flag the whole of clause 15.

Clause 16:
The Committee approved Clause 16.
No amendments

Clause 17:
The Committee approved Clause 17.
No amendments

Clause 18:
The Committee approved Clause 18.
No amendments

Clause 19
Adv van der Merwe reminded the Chairperson that the Committee had agreed that in section 106(e) ‘in consultation’ would be replaced with ‘after consultation’.

The Committee approved Clause 19.

Mr Macpherson proposed amendments to the clause. He proposed that the two references to ‘may’ in section 106(b) change to ‘must’. He also proposed that ‘with consultation’ be changed to ‘in consultation’ with the Minister of Finance.

Mr Macpherson asked if he could substantiate his proposals.

The Chairperson told him that he could not substantiate and told him to switch off the mic. He could write to the Speaker asking for the Chairperson’s removal or respect the Office of the Chairperson. No member of ANC could take her position. It was a Bill! Not a report.

When the meeting had settled down, the Chairperson asked Mr Macpherson to make his point.

Mr Macpherson believed that the clause had to state “must” because he did not want an endless cycle of people who had been retrenched or disabled or any other reason being unable to meet their debt when credit life insurance could have been introduced and ended the cycle of debt. The use of ‘may’ made it optional for the Minister who might choose not to decide on credit life insurance and there would have been no point to the legislation because it would not end the cycle of debt and everyone would be in exactly the same position as before the Bill. Credit life insurance should be mandatory. He called on the Committee not to allow people to sink into death when life’s tragedies happened. The discussions between Treasury, DTI and the insurance people had still not taken place and that was a big problem. The Committee could not disregard the poorest of the poor because work had not been done. He urged the Committee, if Members were serious about the Bill, to make it a ‘must’ and not a ‘may’.

The Chairperson repeated that it had been discussed the previous week when not all Members were in the meeting. She was going to create a precedent in Parliament by asking the Speaker to change the Rules so that when a Member missed a meeting, the Committee had to go back to square one.

Adv van der Merwe explained that there were three references to ‘may’. The first was in section 106(b) ‘Where the term of a credit agreement exceeds six months, or such period as may be prescribed.’ The word ‘may’ allowed discretion for the period to change. Secondly, also in section 106(b) ‘and the principal debt does not exceed R50 000, or such amount as may be prescribed” allowed for the amount to be changed. If ‘must’ were used, the Minister would be obliged to change it. Thirdly, ’the Minister may, after consultation with the Minister of Finance, prescribe requirements.’ Treasury was concerned that there might be implications for the market. That clause had, originally, been intended to become operational at a later stage and not when the Act was promulgated. The Minister would have to put the matter into regulations, which would have the same effect of delaying the introduction of the process. She accepted that there was a chance that the Minister might decide not to make regulations, but the Committee was satisfied that the Minister be given discretion.

Mr Mahlobo proposed that it be accepted. It had been a flagged issue but because it had been discussed previously and Members had gone through it, it had been quickly accepted today. The ANC was standing by that position.

Mr Macpherson noted that he was correct in understanding that the Minister could choose not to implement credit life insurance. That was his concern. He recommended that a time period be written in so that the Minister had to finalise regulations within a certain period. It was not the fault of the Committee that there was no information. He had repeatedly asked for information, interactions with credit insurance businesses, the modelling of possibilities, but the work had not been done. The Committee was expected to put the poorest of the poor at risk because that work had not been done. That was not sufficient reason for taking out the ‘must’, but a time period such as 12 months would allow time for the work to be done.

The DG explained that according to the same logic that legislation could not force a bank to operate at a loss, so legislation could not force a consumer to take out insurance. The consumer had to have the right to decide. If the Minister had to force consumers to take insurance, there had to be a possibility of a low cost industry-driven insurance. Primary legislation could not impose an insurance on citizens.

Ms Gibson strongly supported and echoed the DG. She added that there had been chronic abuse in the insurance industry both in selling insurance and in how claims were handled. If one did not know that one had insurance, one did not claim. It was a useful tool, but appropriate protections had to be put in place. The research that Treasury had available had been undertaken prior to the caps on insurance.

The Chairperson appealed to all Members, as well as Mr Macpherson, because she believed that it would not achieve what Mr Macpherson wanted it to do if it were a ‘must’. She hoped the comments from the DG and Treasury would assist.

Mr Macpherson acknowledged that the DG had made a good point that one could not impose credit insurance on the citizens. He was frustrated that in the two years, information, research, modelling, meetings that the Committee had wanted from DTI, had not been forthcoming. Requests were simply ignored by DTI. It was a problem as the hands of the Members were tied when they had no information.

Ms Motshegare, NCR CEO, mentioned that there was a cap on credit life insurance for everybody in the target market.

The Chairperson noted that SA did not force people to come and make a comment. People had had an opportunity. They had been invited to make a comment so it was not factual to say that people had not had an opportunity. There had been a thorough engagement on the matter the previous week.

Mr Macpherson withdrew his amendment following the words of the DG. He asked that credit life insurance be addressed as soon as possible or the Committee would have failed in its intention to break the cycle of debt.

The Chairperson asked for support for the withdrawal. Mr Mahlobo supported the proposal to withdraw the amendment. Ms Theko seconded the motion.

Clause 20:
The Committee approved Clause 20. No amendments

Clause 21:
The Committee approved Clause 21. No amendments

Clause 22:
The Committee approved Clause 22. No amendments

Mr Mahlobo questioned whether the reference to section 110 of Act 4 of 2013 was correct.

Adv van der Merwe confirmed that it was correct as that clause had been amended by the Protection of Personal Information Act of 2013.

Clause 23:
The Committee approved Clause 23. No amendments

Clause 24:
The Committee approved Clause 24. No amendments

Clause 25:
The Committee approved Clause 25. No amendments

Clause 26:
The Committee approved Clause 26. No amendments

Clause 27:
The Committee approved Clause 27. No amendments

Clause 28:
The Committee approved Clause 27. No amendments

Clause 29:
The Chairperson reminded Members that they had been asked by Treasury to consider inserting the word ‘only’ in that clause.

Adv van der Merwe stated that there were a number of issues in the clause. Section 171(a)(bB)(i) would be affected if the interest rate was included in the guidelines. The Committee had discussed inserting the word ‘only’ in Section 171(a)(bB)(ii). It had been agreed that the Minister of Finance would be consulted on, but would not have to approve, the introduction of mandatory credit life insurance.

The Chairperson noted that the amendment made to an earlier clause impacted on that clause.

Adv van der Merwe had prepared a replacement clause but had not had a response from all stakeholders yet. Treasury had asked her to confirm that it was agreed that section 171(a)(bA) ‘must consult the Minister of Finance on the funding of such programme’ would remain unchanged.

Ms Gibson asked about section 171(a)(bA) ‘must consult the Minister of Finance on the funding of such programme’. She was asking for confirmation that the clause would remain the same, which would imply that the funding would bypass the appropriation process. The second issue related to Clause 12 and needed a technical discussion.

The Chairperson asked for discussion on the wording that suggested that the funding for financial literacy would avoid the appropriation process.

Mr Mahlobo suggested that that the reference to the funding mechanism should be deleted.

Mr Radebe suggested that the ordinary budgetary process should be followed by the Department.

Mr Macpherson stated that the problem was that it was contingent on a budget being made available.

The Chairperson suggested that once there was a law, a ministry would surely provide funding.

Mr Macpherson asked what would happen if the required budget was not made available. What if only a percentage was made available? One could not say that because it was a law, someone would find the budget for implementation .

Mr Williams reminded Members that Parliament passed the budget, not the Minister.

Mr Radebe added that the NCR had also put aside a budget. It was the job of the Committee to ensure that the required budget was provided. Treasury had to provide reasons if it did not fund the programme and the Committee could ask Parliament to take a decision on that.

Mr Mahlobo said it was not necessary to insert in a Bill that a budget had to be made available. There were funds available. That gave him a sense of comfort. The Members were the people’s representatives so they needed to ensure funds were available. He agreed to the first amendment, which was just a small one. But the technical team should get together and provide Members with a proposal for the rest of the clause the following morning.

Adv van der Merwe asked whether (bA) should state ‘in’ or ‘after’ consultation with the Minister of Finance.

Mr Macpherson asked how it would work if there was no agreement with the Minister of Finance. If he did not agree, there was no budget. How did that work?

Mr Radebe pointed out that Members knew very well that it was ultimately the decision of the Committee as to how the funds were allocated by the Department. The Committee could even shift funds from one programme to another.

The Chairperson agreed that the Committee did have the right to amend allocations to a department if the budget was not appropriately allocated to programmes, although the budget had to be within the global amount.

The Chairperson noted that Adv van der Merwe had a commitment the following day, which was also a Bill. However, it had been decided to get another Legal Advisor to sit in when Members went through the changes and the adoption of the clauses. She asked Treasury, DTI and Adv van der Merwe to attempt to agree on an amendment for Clause 29 that afternoon.

Mr Mahlobo asked for clarity about the other amendments. The Committee had discussed the clause extensively so he wanted which part Treasury was unhappy about. A decision had been made on (bA). If Members knew exactly which part of the clause Treasury would be working on with the advocate and what the issues were, they could start preparing for their responses in the morning.

Ms Gibson stated that the specific clause that Treasury was concerned about was subsection(1)(bB) (ii). It was the connection with Clause 12 and related to the regulations.

The Chairperson stated that Treasury was very clear. She referred everyone to Clause 12 so that Members read the two clauses together.

Mr Mahlobo requested guidance. Was it possible to conclude the rest of Clause 29?

The Chairperson agreed.

Mr Mahlobo informed the Chairperson that the ANC adopted the clause with the amendment to be made to (bA).

The Chairperson understood that Mr Mahlobo was breaking up the clause and indicating the ANC’s position.

Mr Macpherson asked whether the word ‘only’ was or was not in the clause.

The Chairperson indicated that ‘only’ had been removed from the clause.

Mr Macpherson proposed an amendment in Clause 29(b): ‘(2A) (a) The Minister may once every 12 months, by notice in the Gazette and after having considered only the following factors…’

Mr Macpherson wanted to give clarity to what was being decided and to ensure that the Minister’s decision was backed up by specific references and was not arbitrary in nature. It would be prudent to confine his decision to a consideration of those facts so that it did not become broad and generalised and that the Bill could not be opened up to attack.

The Chairperson asked for clarity on the ANC’s position.

Mr Mahlobo stated that it had been fully discussed and, as it was an importation from the other clause, ‘only’ was not necessary.

The Chairperson confirmed that the part outstanding was that part that related to Clause 12.

Mr Macpherson asked for a vote on his proposed amendment.

The Chairperson explained that he would be required to put his amendment forward again the following day when the completed Clause 29 was put to the Committee.

Clause 30:
The Committee approved Clause 30.
No amendments

Clause 31:
The Committee approved Clause 31.
No amendments

Clause 32:
The Committee approved Clause 32.
No amendments

The Chairperson announced that that was essentially the Bill. The following day, Clause 12 and 29 would be presented in concurrence. First on the agenda, would be the completion of the clause by clause process.

Mr Macpherson asked if he could propose an amendment to point 4 the Memorandum: The NCR and Tribunal would require additional resources, failing which would render the Bill unimplementable.

Ms Theko objected to the addition.

The Chairperson stated that the matter would be dealt with the following morning.

The Chairperson noted that she had been in a rush during the meeting but that all protocols were observed. She thanked the Committee Members for their co-operation throughout the difficult process of preparing a Committee Bill for the House.

The meeting was adjourned
 

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