Throughout 2013 the National Credit Regulator (NCR) made significant inroads in clamping down on lenders who contravene the National Credit Act (NCA) and make use of abusive methods to collect outstanding debts. Retaining consumer’s identity documents, bank cards and pin numbers, although illegal in terms of the NCA, is still rife amongst certain lenders who try to evade the law. What many of these lenders do not realise is that these underhanded tactics will not only cost them hefty fines and prison sentences but also their licence and possibly their livelihood.

In November 2013, the NCR announced that 10 people had been arrested in Mpumalanga for violating the NCA. In their statement, the NCR said that they had joined forces with the South African Police Service in order to conduct on-site investigations at several lending institutions. Altogether 37 lenders were investigated in the towns of Middelburg, Barberton, Nelspruit, and Witbank. Similar investigations were also conducted throughout 2013 in other provinces which resulted in 4565 bank cards, 6691 pension cards and 681 ID documents being recovered. Furthermore, 76 people were arrested, with 64 criminal cases opened.

In light of these abuses the NCR has urged all credit providers to abide with the provisions of the NCA when granting credit. “The focus of this kind of operation is primarily on credit providers who are unlawfully garnishing, retaining pension cards, bank cards, identity documents and personal identity numbers (PIN) of their clients as surety,” said Nomsa Motshegare, CEO of the NCR. “This is a contravention of the National Credit Act (NCA) and it is a criminal offence.”

In addition to this other serious contraventions of the NCA which were investigated included excessive interest being charged, pre-agreement statements and quotations not being provided to consumers, a lack of proper affordability studies being performed and unlawful provisions being included in the credit agreements.

Unfortunately, not only do these practices have a crippling effect on the guilty party but also on the credit industry as a whole. Reckless lending can destabilise the unsecured credit market and as such can result in more consumers becoming over-indebted. The abuse can also cause significant problems in the collections space as it makes collections difficult for those lenders who do not engage in such underhanded tactics. Furthermore, the reputation of the entire unsecured credit industry can be severely impacted by the illegal activities of a few.

Compuscan urges all its clients to abide with the provisions of the NCA and at all times to conduct their business in a responsible manner. All of Compuscan’s products are compliant with the NCA and if correctly utilised will assist clients to perform their business tasks in an ethical and legal manner while still ensuring the peak performance of their company.

 

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