Debt-forgiveness

The National Assembly has given the trade and industry portfolio committee permission to develop a bill amending the National Credit Act to provide indebted consumers with debt relief.

Millions of South Africans can not live without credit and are falling further behind on their debt repayments, resulting in over-indebtedness. Numbers from the National Credit Regulator show that out of the 23 million credit-active consumers in the country, over 42% are considered impaired. This means that they have been in arrears for three or four months or have judgments against them.

According to experts, there are several reasons why consumers become indebted – these include reckless lending by credit providers, a lack of knowledge on the part of consumers and perhaps a lack of responsibility. Other factors include a faltering economy, unsecured lending, the collection of prescribed debt, high inflation rate, the selling of credit insurance at high prices, and the rising cost of fuel, food, electricity, water, rates and other basic costs.

Last year, the committee held hearings on debt relief measures, where various stakeholders made presentations on what they saw as the main problems, discussed some of the options and proposed solutions.

The aim of the bill would be to provide capped debt relief in the form of debt forgiveness to help heavily indebted consumers and promote change in borrowing and spending habits. The committee plans to do a socioeconomic impact assessment of its proposals to determine how best to intervene.

There is acknowledgment that debt-relief measures would affect access to credit and cost of credit, but the economy would benefit in the long term.

Most parties supported the proposed bill, with the DA and ACDP advising that the current bill should be used in full before any amendments are made.