In March 2018, the Western Cape High Court ruled to set aside Regulation 23A(4) of the National Credit Act – which requires the presentation of bank statements and pay slips before credit can be extended.

The ruling resulted from a case brought against the Minister of the Department of Trade and Industry and the National Credit Regulator (NCR) by several retailers. The retailers argued that the regulation was unreasonable and unfairly discriminated against those working in the informal sector, who are self-employed, the unbanked and individuals who do not have pay slips.

The ruling does not impact a retailer’s (or any business looking to extend credit) obligations to conduct fair, rigorous and objective affordability assessments. There is a fear that the ruling may lead to an increase in over-indebtedness.

In lieu of this, the NCR has decided not to appeal against the judgment, but instead has created a new set of proposed guidelines (available here) to clarify when a bank statement and pay slip should be used and how to deal with those who do not possess such documentation.

The guidelines, still in draft form, may be commented on by submitting comments to [email protected] by the 31st of May 2018.

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