Capitec says it has prepared for new debt relief law

Capitec says it is prepared for the introduction of the new National Credit Amendment Act, adding that the new law is unlikely to have a major impact on its business.

The bank has traditionally focused on lower-income South Africans, which means that it arguably has more exposure to potential debt write-offs.

However, Capitec CEO Gerrie Fourie says that the legislation has been a long time coming and it has had sufficient time to prepare for it.

“The new National Credit Amendment Bill – also referred to as Debt Relief Bill – has been in discussion for almost over two years,” said Fourie.

“During this time, Capitec Bank, like all other banks, made our representations and our views to the industry body, BASA. BASA then represented the unified voice of the industry on this particular bill.

“During the two years leading to the amendment, Capitec Bank planned and managed our exposure to the consumer market earning less than R7,500 per month, being well aware of the regulatory development.

“We did this to such an extent that we can confidently say that we have sufficiently prepared for this. Our current exposure is less than 5% of our book,” Fourie said.

“The banks’ performance is a classic sell-off due to our macro environment,” Casparus Treurnicht, a money manager at Gryphon Asset Management told Bloomberg. “Consumers and South African business are taking strain and investors understand this will filter through to the banks.”

Officially approved last week, the National Credit Amendment Act will allow certain applicants to have their debt suspended in part or in full for up to 24 months.

This debt may then be extinguished altogether if the financial circumstances of the applicant do not improve.

The criteria for meeting this debt write-off include:

  • Where the unsecured debt is not more than R50,000;
  • Where the unsecured debt was accrued through unsecured credit agreements, unsecured short term credit transactions or unsecured credit facilities only;
  • Where the person earned no more than R7,500 a month over the last six months.

Capitec Bank has seen its share price fall markedly over the past few months, in-line with the sector, and due to the country’s economic and fiscal headaches.

Read: South Africa’s new debt relief laws will make it tougher to get a loan

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Capitec says it has prepared for new debt relief law