The contentious National Credit Amendment Bill has been the topic of much debate in recent months, and 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.
Originally the proposed bill made provision for debt intervention for consumers earning a maximum of R7,500 per month and with less than R50,000 in unsecured debt.
“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,” explained Eugene Bester of law firm Cliffe Dekker Hofmeyr.
“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.”
However, the feasibility of this criteria has been questioned, with National Treasury research showing 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.
The Constitutionality and economic reality of the impact of the bill has also been questioned, with the Banking Association of South Africa (BASA) cautioning that, should the bill be enacted, it could result in a big blow to the banking industry.
However, some proponents of the bill have questioned why the bill sets specific earning and debt limits – effectively cutting out those indebted which do not meet the criteria.
As a result, of these issues it appears that Parliament’s Portfolio Committee on Trade and Industry has gone ‘back to the drawing board’ on some issues, and published specific clauses of the Draft National Credit Amendment bill and the Memorandum on the Objects of the bill for public comment on Tuesday (29 May).
The specific clauses are as follow:
- Clause 12(b) regarding the powers of the Court to reduce interest rates, charges and fees to zero for the period in 86A(6)(d) (5 years).
- Clause 29(a) iro the consultation between the Minister of Trade and Industry and the Minister of Finance on funding for financial literacy and capability programmes.
- Clause 29(b) iro the new subsection (2B) regarding an adjustment to–
- Maximum gross income figure (clause 1 – definition of “debt intervention applicant”, par (b)) in respect of the longer term debt intervention measure set out in clause 13 – section 86A(6)(d) read with clause 14(b) – section 87(1A);
- Maximum total unsecured debt (clause 13 – section 86A(1)) in respect of the longer term debt intervention measure set out in clause 13 – section 86A(6)(d) read with clause 14(b) – section 87(1A).
Members of the public have been invited to submit written comment on only these clauses by 11 June 2018.