The final voyage – The amendment to the National Credit Act: Debt relief

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Eugene Bester

Previous articles written on this subject matter dealt with the Bill, its objectives and to some extent, the process that has been followed in getting the Bill to where it is now. After Parliament’s public hearings into the Bill at the end of January and early February this year, the Portfolio Committee on Trade and Industry has been hard at work taking into account the numerous concerns many industry role players raised during the public hearings.

Towards the end of May 2018 further amendments to the Bill were gazetted, and the public once again had the opportunity to comment on certain of the amendments. Certain members of the Portfolio Committee also visited the United Kingdom to do a comparative study on the debt relief measures in place in the United Kingdom.

In the introductory remarks of the Portfolio Committee’s Report to the National Assembly on the comparative study trip, the following is said: “The mandate of the …Committee …covers …the development or processing of legislation that effectively balances the rights of both consumers and the private sector”. In the preamble to the Bill, the following is mentioned: “Whereas the purpose of National Credit Act …is to promote a fair, sustainable, responsible …and accessible credit market industry “ and “whereas to give effect to the purpose…, all consumers must be afforded protection through, transparent, sustainable and responsible processes”.

The debt relief Bill, as it has become known, seeks to assist over indebted consumers, who earn between R0 and R7,500 per month and have a total unsecured debt owing to credit providers of no more than R50,000. The over-indebtedness can be caused by a change in personal circumstances such as retrenchment, death of a breadwinner or other circumstances. Typical examples of unsecured debt include an account at a retailer (clothes, food, appliances and so on), an overdrawn bank account, a credit card account and a personal loan account. Underpinning the debt is a credit agreement as defined in the National Credit Act. Some households owe significant amounts to municipalities for rates, taxes, electricity and the like. In these instances, no credit agreement was ever concluded.

If the mandate of the Portfolio Committee is to develop legislation that balances the right of consumers and the private sector, and the purpose of the National Credit Act is to promote fairness in and accessibility to the credit market industry, then perhaps both the mandate and purpose have been misstated. Take for example a clothing retailer who follows the process to conclude a credit agreement with a consumer. Based on the outcome of the credit affordability assessment, the consumer qualifies for credit. The consumer uses the credit and walks away with the latest in fashion wear and is now indebted to the retailer. Shortly after the transaction, the consumer is retrenched. The retailer has parted with its merchandise and now faces the prospect, assuming the consumer applies for and is granted debt intervention, of having its credit agreement extinguished. There appears to be no balancing of rights in this example.

Numerous articles have been written on various platforms highlighting the impact that this Bill is going to have on the credit industry. The private sector role players that will be affected by this legislation will price in the Bill’s effect into the cost of credit, and credit will become more expensive and less consumers will be able to afford credit. This notwithstanding, it is believed that the Bill will soon be on its final voyage to being signed into law.

Many many years ago, despite several warnings about the proximity of ice bergs during the voyage, the behemoth struck the iceberg, split in two, and sank deep into the frigid waters of the North Atlantic.