Consumer dissatisfaction in South Africa's R362-billion a year consumer credit industry has led to the draft Consumer Credit Bill and a call by the Department of Trade and Industry (DTI) for public input on the proposed measure.

The department says it has found "serious weaknesses" in the industry.

According to Moses Moeletsi, acting deputy director-general of the consumer and corporate regulation division, research revealed a high level of dissatisfaction amongst consumers with the level of disclosure in the industry.

"Consumers felt that the actual cost of credit was frequently much higher than disclosed, that the mechanisms for complaints and redress were inadequate, and that the terms and conditions of contracts were often incomprehensible and one-sided, with ample provision for credit providers' rights and little attention to consumer protection.

"There was a surprising level of agreement between consumers, industry and consumer organisations on the need for legislative reform, especially on the inconsistent treatment of different types of credit, the need for better enforcement, and improved disclosure of the cost of credit," Moeletsi said.

A lack of transparency in the market had given rise to information symmetries, which often prevented consumers from making informed choices.

For example, consumers were often not aware that fees and credit life insurance made up 50% of the total cost of credit.

Moreover, non-standardised disclosure prevented consumers from comparing the product offerings of different credit providers, leading to a lack of competition in the market and high costs, he said.

The proposed legislation aimed to address these problems by establishing norms and standards for pre-contract disclosure, contracts, and statements of account.

The bill also provided that credit insurance could not be capitalised upfront, that it should be charged on the outstanding balance, and that consumers could obtain their own credit insurance and cede these to the credit provider.

It also established the consumer's right to confidential treatment, reasons for the refusal of credit, and accurate information being held by credit bureau.

The bill further, among other things, introduced a number of additional consumer protection measures, such as banning unfair discrimination in the extension of credit, certain advertising and marketing practices, unlawful contracts and terms of contracts, and new provisions for debt enforcement, over-indebtedness, and the repossession of goods.

"We hope that by addressing the weaknesses in the consumer credit market the DTI will contribute towards the development of a sustainable and responsible credit industry.

"The DTI recognises that it is important to balance new consumer protection measures with the additional compliance costs that will be brought to bear on industry," Moeletsi said.

The bill will replace the Usury Act of 1968 and the Exemption Notices and Credit Agreements Act of 1980. – Sapa.