The National Credit Amendment Bill has officially been passed by the National Council of Provinces and has now been sent to President Cyril Ramaphosa to be signed into law.
The bill aims to provide relief to over-indebted South Africans who have no other means of extracting themselves from over-indebtedness.
Specifically, the bill 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;
The bill also introduces a number of new offences related to debt intervention.
Under the bill, it will now be an offence for a person who intentionally submits false information related to debt intervention.
Any person who intentionally alters his or her financial circumstances, or persons who intentionally alter their joint financial circumstances, to qualify for debt intervention, will also be guilty of an offence.
Banks not happy
The National Credit Amendment Bill has gained significant attention after it proposed writing off billions of rands worth of debt from every-day South Africans.
However, it could be hugely problematic for the banking sector.
The Banking Association of South Africa (Basa) made it clear that it does not support the principle of debt forgiveness – for very obvious financial reasons, but also for what it would do to the lending and credit industry.
Aside from the costs banks would incur writing off the debt, the most likely reaction from banks would be to make lending conditions much tighter which would make it more difficult for the poor to secure credit, Basa said,
A figure on how much the bill would cost local lenders has not been nailed down, but according to Intellidex analyst, Peter Attard Montalto, the bill, if implemented, could force losses at local banks in the region of R25 billion.
“This bill is of serious concern to the banking sector and could, through the imposition of a new income-based personal insolvency and debt affordability regime, force losses on the banking sector of around R25 billion,” he said.