Here’s how many South Africans could have their debt written off in 2018

Parliament’s Portfolio Committee on Trade and Industry continued its public hearings on the National Credit Amendment Bill on Tuesday, with a number of parties weighing in on the possible effects of the proposed legislation.

According to legal experts, the Amendment Bill, should it pass, is expected to have a significant impact on the lives of thousands of ordinary South Africans as well as large parts of the finance and banking sectors because of the wide-scale debt relief it will provide.

The proposed Bill makes provision for debt intervention for consumers earning a maximum of R7,500 per month and with less than R50,000 in unsecured debt.

In its presentation, National Treasury together with Eighty20 – which conducted research on the targeted credit market – provided the first indication of just how far-reaching the Bill is likely to be  – stating that as the proposed Bill is currently crafted, 16 million loans could qualify for debt intervention.

The research showed that 59% of loans to consumers in this earnings category who are able to service their debt may qualify for debt intervention and have their loans extinguished. They noted that only 29% (4.7 million) of these loans are three or more months in arrears.

Following these findings, Treasury proposed that the Bill be transformed to provide a limited form of “poor man’s sequestration”, with clear indications about who can apply for this debt intervention, such has those who can under no circumstances afford to pay off their debt.

It further proposed that the debt mechanism should provide for ongoing and continuous relief to chronically over-indebted South Africans.

Who qualifies?

“In simple terms, the draft Bill permits a person who, as at 24 November 2017, earns less than R7,500.00 per month and who owes less than R50,000 in unsecured debt relating to credit agreements, to make an application to the National Credit Regulator for debt intervention,” said Eugene Bester of law firm Cliffe Dekker Hofmeyr.

“If the National Credit Regulator is of the view that the applicant requires assistance, a single member of the National Credit Tribunal can suspend all qualifying credit agreements in part or in full for a period of 12 months.”

“If the financial circumstances of the applicant do not improve, the Tribunal can declare the debt under the qualifying credit agreements extinguished. All or part of the debt under the qualifying credit agreements can be extinguished,” Bester said.

Read: 3 reasons why South Africa is one of the toughest places in the world to collect unpaid debts