On 29 May 2013 the Department of Trade and Industry published the draft National Credit Act (NCA) Policy Review Framework and the draft National Credit Amendment Bill in the Government Gazette (No. 36504 and 36505). Both documents seek to address the criticisms levelled at the NCA and practical problems that have arisen since the Act was promulgated. Furthermore, according to the introduction in the draft policy review, the documents seek to close any loopholes in the legislation that have allowed entities to avoid certain provisions intended to be mandatory. The policy review of the NCA, which was undertaken by the National Credit Regulator (NCR), examines the flaws of the NCA and identifies remedial actions necessary for problems that have hampered the effectiveness of the Act. Furthermore, the document calls for “an all-inclusive approach when considering amendments to the core aspects of the Act that relate to the financial situation of the consumer.”
Within the policy review document it is acknowledged that one of the key areas requiring attention is reckless lending. To address this the document proposes certain solutions such as minimum standards for affordability assessments, improved consumer education, the full disclosure of the cost of credit to consumers. In addition, the regulation of garnishee and administration orders is proposed where they relate to credit agreements.
According to the draft policy, proposed policy and legislative imperatives include:
- Regulating participants in the consumer credit industry in a “comprehensive manner”
- Enhancing the powers of the NCR with regards to implementation, enforcement and redress
- Improving the functioning of the National Credit Tribunal (NCT)
- Ensuring increased support for positive industry participation
- Registering all credit providers to ensure appropriate market conduct regulation for those operating under the “radar of enforcement bodies”
- Clarifying the roles of alternative dispute resolution agents and the Ombudsman
- Investigating the value of payment distribution agencies and registering and regulating these agencies
The draft amendment bill, on the other hand, seeks to rectify problem areas within the Act and implement the necessary changes in order to right irregularities, mistakes and ambiguities in the Act. Ultimately, the Bill seeks to amend the NCA by:
- Amending certain definitions
- Allowing the CEO of the NCR to delegate certain functions to other officials of the Regulator
- Tightening measures relating to debt counsellors and their practices
- Allowing debt counsellors to voluntarily cancel their registration
- Empowering the NCR to cancel the registrations of any registrant
- Allowing the NCR to apply for credit agreements to be declared reckless by the NCT who will be empowered to suspend reckless credit agreements
- Tightening requirements with which credit providers are to comply relating to marriages in community of property, by requiring written consent of the spouse to the credit agreement
- Providing for the registration and accreditation of alternative dispute resolution structures
Furthermore, 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.
There are a number of other challenges outlined in the policy review for which no solutions have been proposed at this stage. This includes the fact that some consumers do not qualify for any form of debt relief. The policy review states that: “Statistical evidence shows that while a large number of consumers are over-indebted and many apply for debt counselling, very few consumers actually go through the process. The logical conclusion is, therefore, that debt counselling is working, but only for a limited few.” Other challenges listed include: dealing with over-indebtedness, debt collection which does not fall within the scope of the NCA, the extent to which the debt relief process has been compromised by conflicting judicial interpretations and the availability of proficient debt counsellors and the judicial interpretations of various sections.