South Africa’s new National Credit Amendment Act will have have an unintended impact not only the banking sector but also consumers.
In an interview with CNBC Africa, FNB Wealth’s Wayne McCurrie said that under those who apply to have their debt written off will also have their credit history wiped.
“The problem is you are never going to get credit ever again in your life from the formal sector if you go this route,” he said.
“This need for credit is not going to disappear which means that (these consumers) will go to the loan shark industry.”
Despite these concerns and any hits that South African banking stocks may take, McCurrie said that the actual impact of the bill will be relatively marginal.
“There is not that much physical money caught up in this, and you can’t just sign a form and get debt relief. It’s actually quite a long process you have to go through – it’s not an automatic thing.
“A few people will not bother to go through the whole process of getting relief because they understand that once they have done so they will no longer be able to access credit.”
Signed into law earlier in August, 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.