Portfolio Committee Hearings at Parliament About NCA Amendments
The Portfolio Committee on Trade & Industry is trying to get amendments to the National Credit Act (NCA) passed in an effort to bring into existence something called Debt Intervention. This plan allows the National Credit Regulator (NCR) to reduce or delay payments on debt for up to 2 years and ultimately ask the NCT to write off the debt entirely for some of the poorer members of the credit using population.
Discussions have been held at Parliament this month in regard to concerns by various parties that the draft Bill as was first proposed was unconstitutional.
The banks and other credit providers say they have a constitutional right to their debt as property. They do not want to see a 3rd party (The DTI minister or NCT) have the ability to write off their debt (which will massively impact on their balance sheet and make the banks rework who they will give credit to in the future. It might be the case that low-income consumers (who use a lot of credit) might become too risky for the banks to lend to in South Africa.
MicroFinance South Africa (MFSA) have warned that this will drive consumers back into the hands of loan sharks who do not care about the law.
In response to various submitted written comments and presentations from the industry and public, the Committee has made some changes to their first draft which are now being discussed at Parliament. The Portfolio Committee was much more pleased with presentations from some parties this time (last time the NCR, NCT & DTI got into trouble for their all too brief presentation which was very vague).
Some of the initial concerns over possible constitutional problems have been addressed by some changes but others still remain. An argument was made that as long as both parties (the consumer and credit provider) get to have a fair say in the matter (something that was not previously included) then the process may be constitutional.
Who Could Get Help?
Consumers who have credit but no assets and who earn R7500 or less each month as a household are an initial group who have been identified to possibly qualify for assistance.
The Portfolio Committee have thrust the NCR & NCT front and centre in their plans to provide help to low-income credit users. In the many proposals made in January and February, concerns were made about the NCR’s capacity to potentially help a large number of people who will (1) apply for help even though they may not qualify (2) actually do qualify but need help gathering the needed paperwork (3) actually have all the needed paperwork right away and can be assisted to apply to the NCT.
One of the suggestions made right at the end of the March Cape Town Parliamentary hearings was for the NCR to hire some of their own Debt Counsellor registrants to vet incoming requests for help. Obviously, there might be a serious conflict of interest that arises in regard to regulating these possible counsellors. It may also inadvertently put the NCR in competition with their own registrants. Much like the NCR starting to hand out loans or credit while trying to regulate other credit providers.
Can the NCR & NCT Handle The Workload?
It is estimated that between 1.5 million to 5 million credit users may apply (or try to apply) or may even eventually qualify. When word of possible relief gets out then not only will people head to the voting polls to support Government but also they will try to find out if they might qualify (even if they don’t).
Suggestions were been made that the NCR be allowed some extra money (maybe the establishment of a Fund much like the road accident fund – which was heavily slated as being abuse) and hire in or contract out to 70 Debt Counsellors to help with appraisals on the potentially millions of applications being made.
‘Suggestions were been made that the NCR be allowed some extra money…hire…70 Debt Counsellors to help with … potentially millions of applications…’
In the last year, the amount of registered Debt Counsellors has fallen by nearly 40% due to efforts by the NCR to deregister (or not renew registration) by Debt Counsellors who do not actively practice or did not pay fees on time. Registration fees were greatly increased and it seems as if this year even more Debt Counsellors will be removed from the NCRs roll of registrants.
Annual Reviews And Updates
Also of consideration is that every person who does receive help will have to have their matter reviewed after 12 months and dealt with again. This basically repeats all the previous work done in regard to every previous matter. So, this involves a MASSIVE amount of work for both the NCR and NCT.
When the NCT saw an increase in debt review applications they were quickly overwhelmed by the growing backlog and had to arrange roving motion courts to travel the country and design an online case submission interface to cope with the uptick in cases by a few thousand. The NCT now faces potentially hundreds of thousands if not millions of applications all on top of one another.
Big Improvements Already
There was a lot of concern that the Committee might be unmovable in regard to the wording of their draft Bill and the matter might end up in lengthy legal battles at the COnstitutional Court one day in the near future. It seems however that changes might be made to the draft Bill and even further changes may be on the books after these further hearings. One attending Cape Town Debt Counsellor said that he felt the hearings and presentations, especially that of Treasury, were very positive and encouraging.