The Minister of Trade and Industry recently published the Draft National Credit Act Policy Review Framework (the draft policy review) and the draft National Credit Amendment Bill (the Amendment Bill).
The draft policy review and Amendment Bill seek to bring the National Credit Act, No. 34 of 2005 (the NCA) in line with the proposed policy review. The public has been invited to comment by 28 June 2013.
The review aims to identify remedial actions for considering and addressing problems that have hampered the achievement of the intended outcomes of the NCA. These actions will be identified in proper consultation with key stakeholders, interested and affected parties.
According to an introduction to the draft policy review, both documents seek to address practical problems that have arisen since the NCA was promulgated and to close any loopholes in the legislation that have allowed entities to avoid certain provisions intended to be mandatory.
The draft policy review evaluates the strengths and weaknesses of the NCA and how certain changes are needed to bring about clarity and efficiency in several areas. The draft policy review acknowledges that some of the key challenges requiring attention pertain to legislative failures such as drafting irregularities, issues with interpretation, or application of the legislation and reckless lending.
Proposed policy and legislative imperatives include:
- regulating participants in the consumer credit industry in a "comprehensive manner through the use of various...mechanisms";
- enhancing the powers of the National Credit Regulator (the NCR), especially in respect of implementation, enforcement and redress;
- improving the functioning and efficiency of the National Consumer Tribunal (the NCT);
- ensuring increased support for positive industry participation;
- registering all credit providers to ensure appropriate market conduct regulation for those currently operating "under the radar of enforcement bodies";
- clarifying the roles of alternative dispute resolution agents and the ombudsman; and
- investigating the value of payment distribution agencies and registering and regulating these agencies if they do, in fact, have a useful role to play.
Having identified the various issues that have hampered the proper achievement of the outcomes of the NCA, the Amendment Bill seeks to rectify and implement these changes. In a bid to promote the key policy aim of "a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry", there have been amendments to the NCA. The Amendment Bill is designed to tackle irregularities, errors and ambiguities with a raft of mechanisms that include proposals for enhanced efficiency.
By way of summary, the Amendment Bill proposes to amend the NCA through:
- amending certain definitions (for example it is proposed that the definition of "lease" no longer requires the passing of ownership);
- allowing the CEO of the NCR to delegate certain functions to other officials of the Regulator;
- tightening measures relating to debt counsellors and the conduct of their practices as debt counsellors, and allowing debt counsellors to voluntarily cancel their registration;
- empowering the NCR to cancel the registration of any registrant without reference to the NCT, where the registrant fails to comply with a condition of its registration or fails to meet a commitment contemplated in section 48 of the NCA;
- empowering the NCT to suspend reckless credit agreements;
- tightening the requirements that credit providers must adhere to in respect of marriages in community of property, by requiring the written consent of the spouse to a credit agreement; and
- providing for the registration and accreditation of alternative dispute resolution structures and providing for matters connected therewith (no specific guidelines or requirements are currently set out in this regard).
In addition, the Amendment Bill proposes to amend the Insolvency Act, No. 24 of 1936 by providing that an application for debt review by a debtor must not be regarded as an act of insolvency.
Challenges for which no solutions are proposed at this stage include dealing with debt and over-indebtedness; debt collection (which does not fall within the scope of the NCA); the fact that some consumers do not qualify for any forms of debt relief; the extent to which the debt relief process has been compromised by conflicting judicial interpretations and the availability of proficient debt counsellors; the judicial interpretation of sections 86(2) (application for debt review when a credit provider has taken steps for enforcing the agreement as contemplated in section 129) and 129 (required procedures before debt enforcement) of the NCA; and logistical difficulties relating to 86(10) (notice to terminate a debt review).
Access the draft policy review and the Amendment Bill here.