Speech by Hon. Joanmariae Louise Fubbs of ANC Chairperson of the Study Group on Trade and Industry on the National Credit Amendment Bill, 12 September 2018 in the National Assembly
Hon Members of this House
People of South Africa
1. For the first time, in South Africa, the dignity of low income workers and the poor who are over-indebted will be restored. The National Credit Amendment Bill intends providing urgent debt relief to South Africans who are not currently covered by the natural person insolvency and debt review systems.
2. The ANC is of the view that as poor and low-income workers cannot benefit from any of these measures, this constitutes unfair discrimination based on socio-economic status and it also undermines the dignity of affected consumers.
3. Debt administration, debt review and debt counselling are also offered. However, debt administration is costly and debt counsellors do not provide a service for people earning less than or equal to R7 500 because this is not "cost-effective". These measures effectively exclude the poor from an insolvency or debt restructuring process, which is contrary to international trends and best practice.
4. During the global financial meltdown in 2008, the National Credit Act saved South Africa from the worst effects, even while some first world economies were significantly affected. This debt intervention seeks to strengthen the Act and enable the poor and low income worker who is over-indebted to extract themselves from debt in a responsible manner.
5. The National Credit Amendment Bill will encourage and enforce responsible lending and borrowing. This is brought about through a number of measures including a capped debt intervention to promote a change in the borrowing and spending habits of an over-indebted society.
6. National Treasury estimated that 2.6 million consumers with an income of less than R7 500 are three months in arrears. Furthermore, 1.5 million of these consumers are nine months in arrears to a value of R9.8 billion. These consumers are unable to effectively service their debt and would in all likelihood land up in a debt spiral.
7. It became increasingly clear that the Committee had to pursue a responsive and responsible solution. Therefore, a request was brought to this House to grant it permission to develop a Committee Bill which would address this. It is not surprising that this request was unanimously supported by members of the National Assembly in 2016.
Beneficiaries of Debt Intervention
8. The beneficiaries of debt intervention will be people whose income is less than or equal to R7 500 a month and whose unsecured debt is less than or equal to R50 000 and who are over-indebted. The process of debt relief will be inclusive. Existing measures include debt review, reduced instalments and prohibition of reckless lending but do not address the plight of the poor.
9. Having been granted permission by this House, the Committee developed this Amendment Bill. Several public hearings, submissions and engagements were held. These included the Departments of Labour, and Justice and Constitutional Development, the Department of Trade and Industry, National Treasury, the National Credit Regulator, and the National Consumer Tribunal among many other public and private institutions including non-government organizations such as the Black Sash and the unions such as COSATU, as well as banks, and retailers.
10. The National Credit Regulator and National Consumer Tribunal, working with the National Treasury contributed greatly in the development of this Bill by providing essential information about the challenges facing over-indebted South Africans.
The provisions of the Bill
11. The Bill requires repayment through restructuring of debt as the first step in the debt intervention process. If the consumer cannot, despite an attempt to restructure, repay his or her debt within five years, the debt intervention process then envisages suspension of credit agreements (12 months x 2), regular reviews and finally, if after 24 months the consumer is still not in a position to repay his or her debt, extinguishing the debt or a percentage thereof. Extinguishing debt is considered only after other measures have been exhausted.
12. A person who applies for this debt intervention may not obtain further credit from the date of application. However, credit providers may not enforce debt from the date of application. The National Consumer Tribunal may, where debt is being extinguished, suspend the applicant's right to apply for credit. As the applicant would already have been restricted from accessing credit for 24 months at this stage, this suspension is limited to a maximum of 12 months.
13. The National Credit Act balances protection of consumers and the rights of credit providers. However, the Act does not effectively address the plight of the poor hence this amendment, which strengthens this critical legislative instrument.
Regular Reviews and Regulations
14. It is worthwhile to highlight a few other key issues raised during submissions, and engagements with stakeholders and Committee deliberations during the Committee process.
15. In this regard, ministerial powers are given so that the Minister may adjust the gross income and the amount of maximum unsecured debt to the extent that it must be in line with inflation. The Minister may also introduce regulations that will provide for credit life insurance on all loans of more than six months and less than or equal to R50 000.
16. This Bill criminalizes illegal lenders, which is related to the registration requirements. Until this Bill becomes an Act, unregistered lenders cannot be arrested for illegal lending, forcing law enforcement officers to arrest such "illegal lenders" on the basis of other prohibited conduct such as holding the IDs of their clients.
Ensuring a fair and just process to strengthen the National Credit Act
17. As has already been pointed out, credit providers are an integral part of the process. Debt Counsellors will not be prejudiced by the provisions in this Bill as they do not service this target group of people whose income is less than or equal to R7 500 a month as this group is not considered economically viable.
18. We need to ensure that the National Credit Act remains robust and continues to be the sharp and sound legislative instrument to not only support an inclusive and sustainable economy but also to address the plight of the poor, retrenched workers and most vulnerable people in our society. Therefore, this Bill also provides for a regular review process that takes account of the prevailing socio-economic environment.
Power of the magistrates in relation to the Bill
19. The Bill has also addressed the concern that the Magistrates have no power to reduce the interest rate or other charges, as magistrates are bound by the relevant legislation when making an order and the NCA at present does not empower Magistrates to do so.
20. In short, the Bill now empowers Magistrates to reduce interest and other charges, and furthermore empowers them to, after having followed prescribed requirements, to reduce interest in respect of unsecured debt up to zero where such a reduction is required to enable the consumer to repay his or her debt.
21. With regard to the reduction of interest rates, the Bill distinguishes between secured and unsecured credit, taking into account the prevailing repo rate plus ensuring that credit providers are not unfairly prejudiced by a reduction.
22. The voluntary Task Team Agreement entered into in 2010 by the National Credit Regulator and credit providers will provide a framework to guide magistrates.
23. The National Consumer Tribunal is also empowered to consider debt intervention applications, and may also reduce interest rates and charges just as the Magistrate's Court is now empowered to do. This will not only alleviate the pressure on the Courts, but the Tribunal is also more accessible to the people.
24. The ANC believes this Bill is essential but not sufficient for social cohesion. However, it will go a long way in strengthening the National Credit Act in a responsive and responsible manner. The National Credit Amendment Bill 2018 empowers the poor, low income worker, debt counsellors and the magistrates. Therefore, I appeal to all members of this House of Assembly, in the spirit of the Constitution and to adopt this National Credit amendment Bill.
25. My appreciation to all Committee members for applying their minds to this Committee Bill, especially the chair of the sub-committee Honourable Adrian Williams and his team. The constructive inputs of the DTI and other departments with whom we engaged including NT have contributed to this significant piece of legislation. The ANC supports this Bill.