NCA Amendments Passed By National Council of Provinces & National Assembly
Debt Intervention took one more step towards reality this month when both the National Council of Provinces and then the National Assembly passed the draft NCA Amendment Bill.
The Amendments propose to create a new debt relief mechanism for the poor and unemployed in South Africa who owe less than R50 000. Debt intervention is a type of debt review done by the National Credit Regulator (NCR) who regulate the credit industry.
The Amendments also make it obligatory and punishable for Debt Counsellors to report any seeming cases of reckless credit. Last minute changes to the wording have made this somewhat more manageable than previously thought. The Act may now say that if there are ‘reasonable grounds’ to suspect reckless lending only then should it be reported.
The Act will now make investigating reckless credit something that has to happen in all debt reviews and this ties in with the NCR’s new reckless credit investigation fee which all Debt Counsellors will now be able to charge in every consumer’s case*.
Many credit providers are still dragging their heels and fighting back against the new fees which the new NCR fee guideline propose. This is evidenced in how many of them are rejecting proposals from Debt Counsellors which include these new fees if this pushes their debt repayments back by an additional month. Credit providers in the past encouraged Debt Counsellors to try to propose plans where they would begin to get payments towards the accounts as soon as possible. This can be delayed for consumers with smaller amounts available to repay debt each month as necessary Debt Counsellor and attorney’s fees are paid upfront.
‘Many credit providers are still dragging their heels and fighting back against the new fees which the new NCR fee guideline propose’
It is also obvious why credit providers would like to avoid Debt Counsellors looking too intently into their lending practices as the NCT can issue fines of R1 million against them should they have issued even R1 recklessly. This can also have a massive impact on share values should investors become nervous (like what happened with African Bank)
Due to the huge added costs and risks of fighting reckless credit most Debt Counsellors have been happy, in the past, to try to look the other way or make an informal settlement agreement rather than fight at court over these matters. Credit providers have also been very aggressive and have threatened financial harm to those Debt Counsellors who do such investigations in trying to get heavy costs orders against the Debt Counsellor (not the consumer who initiated such an investigation).
Debt Counsellors may now be caught between fines from the NCR if they do not report possible cases and fines from the courts when their top notch, fancy legal teams pull apart the simple debt review court applications which Debt Counsellors try to organise for a cheap as possible for consumers.
One More Signature Needed
The final legislative hurdle will now be getting sign off from the President. Once he does so the Act becomes law and will be published (with an effective date) in the Government Gazette. The President’s office has the option not to sign the bill into law if they feel it is not constitutionally sound.
Legal Battles Ahead?
Due to the fact that so many parties felt that the changes were unconstitutional (and because it could cost the banks a lot of money), it is possible that once the Act comes into effect it could immediately be challenged and go all the way to the Constitutional Court. This may then prevent it from being put into practice until all the legal fighting is done.
*Debt Counsellors do not have to charge this fee and/or the full amount of R1500 as set out by the NCR but can do so if they wish.