On 24 November 2017, the Portfolio Committee on Trade and Industry published the Draft National Credit Amendment Bill (“the Bill”), for public comment. Written comments on the Bill were due by 15 January 2018 and public hearings were scheduled to take place on 30 January 2018 and thereafter on 6 and 7 February 2018.
The Bill seeks to amend the National Credit Act 34 of 2005 to provide debt interventions for low income consumers with the aim of addressing over-indebtedness. Furthermore, it aims to provide for the evaluation and referral of debt intervention applications and the suspension of agreements considered to be reckless as part of the enforcement functions of the National Credit Regulator (NCR); and to include the consideration of a referral as a function of the Tribunal.
The Bill requires a credit provider and debt counsellor to determine whether an agreement is reckless. It also provides for offences related to debt intervention, prohibited credit practices, reckless lending, selling or collecting prescribed debt and related to failure to register. It further provides for measures when an offence is committed by a company and the penalties in relation to the created offences. Finally, the Bill requires the Minister to prescribe a financial literacy and budgeting skills programme.
In simple terms, the draft Bill permits a person who, as at 24 November 2017, earns less than R7,500.00 per month, who have no readily realisable assets (excluding exempted items mentioned in the bill), are not subject to debt review an and whose debt amounts to R50,000 or less in unsecured debt relating to Credit Agreements to make an application to the NCR for debt intervention. The NCR will assess and if they are of the view that the applicant requires assistance, a single member of the National Credit Tribunal (NCT) can suspend all qualifying Credit Agreements in part or in full for a period of 12 months. If the financial circumstances of the applicant do not improve, the Tribunal can write off all or part of the debt under the qualifying Credit Agreements.
This Bill has a second debt intervention aspect which allows for the Minister of Trade and Industry to prescribe debt intervention measures to alleviate household debt that has become unmanageable due to either job losses, a natural disaster or an industry sector that has experienced a large number of retrenchments. This debt intervention by the Minister is only applicable to indigent persons, consumers who earn less than R7,500, or persons who suffered unforeseen loss of income or who are subject to adverse conditions in a sector that has been identified by the Minister.
This Bill, in its current form, will have far-reaching consequences for credit providers in terms of the National Credit Act. There are many concerns surrounding the Bill including the possibility that reducing or removing debt might lead to consumers spending recklessly with the knowledge that the debt could be written off. This would lead to an increased risk for credit providers who might end up making access to credit more difficult for low-income consumers in the long-run. Further, the Bill could “result in the lower-income population seeking to obtain credit through informal channels where legislation does not provide sufficient or practical consumer protection." More public hearings have taken place recently of which the opinions have yet to be released. Contact us at SchoemanLaw today for all your debt management and debt collection needs.
Written by Sixolile Timothy, Schoemanlaw Inc