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DCASA Suggest BASA Extend DCRS Rules

DCASA small logoDuring a discussion before the Parliamentary Portfolio Committee on Trade and Industry, the Debt Counsellors Association of South Africa (DCASA) suggested that the bank’s preferred way of doing debt review be extended to accommodate those who are deeper in debt.

DCASA received a last minute invitation to attend and present on the topic of debt forgiveness options before the Portfolio Committee along with organisations like the Banking Association of South Africa (BASA) and Cosatu. Unable to gather suggestions from members in time, the National Executive Committee (NEC) of DCASA put in a lot of last minute work to be able to make suggestions on the topic of debt alleviation to Parliament. The Portfolio Committee were specifically looking for solutions not currently provisioned for under the National Credit Act or other acts.

While Cosatu were proposing writing off debt for many types of consumers (including those who have received reckless lending – something which the National Credit Act already empowers the Courts to do) BASA warned that if they faced debt being written off in this way they would be forced to only lend to a very small profile of consumers in the country which would cause economic ruin for consumers, the banks themselves and possibly the country’s economy as well.

presentationDCASA made proposals that sat more in the middle of the two extremes of (1) forgive debt and (2) do nothing.  Mr Paul Slot (a member of the Credit Industry Forum) speaking for DCASA suggested that the banks preferred way of doing debt review (called DCRS) be opened up to a larger group of consumers. At present, the admittedly funding troubled DCRS system only allows for some consumers who sit within a certain pocket of having debt but being able to repay it within 60 months (if the banks kindly make lots of concessions to their clients).

DCRS For More Consumers?

Mr Slot suggested the creation of DCRS Plus which would allow for consumers to repay their debt over 72 months (rather than 60) and then potentially have them written off at some point. For example, if the consumer paid off 80% of their debt they might then be able to be rehabilitated and the balances written off. This would allow credit providers to recover most of their funds rather than none and would allow consumers avoid the nasty collections process. It would also allow consumers to potentially get back on their feet and be able to repay all their debt normally at some point during the process. This would provide relief for consumers when they need it and also allow credit providers to remain profitable.

A key part of the proposal for DCRS Plus (you will recall this is a proposal in regard to matters not currently covered in the NCA) was that there  might be no need for these matters to go to court. At present all debt review matters go to court or the National Consumer Tribunal. Though similar to a process which the NCR shut down in the past, DCASA pointed out that this would greatly reduce costs to consumers (though perhaps at the cost of reduced legal protection).

African Bank

African Bank made a very similar proposal with the exception that they recommended that debt be repaid for 60 months with the balance written off entirely. This would not include consumers with bonds.

What Now?

Sensing an opportunity to address some glaring issues, DCASA further called on Parliament to force credit providers to be more forthcoming with Prescription of Debt information, as well as, to resolve debates surrounding NCA Section 103(5). The Committee will now prepare a memorandum based on these hearings to be presented to the rest of Parliament in the near future for consideration in planning and stratergising.