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NCR Circular 7 Ends Circular 1 Business Day Extensions

When the Covid-19 Pandemic hit SA and the National Credit Regulator saw the challenges coming due to lockdown they issued a circular which extended or suspended the usual ‘business days’ used in the debt review and PDA space.

This suspension was put in place since (1) the NCR themselves were closing their offices (2) Credit Providers and Debt Counsellors were not going to be able to operate as usual during level 5 (though many shifted their operations to work from home solutions for their staff). (3) Consumers were not going to be able to get documents delivered, printed or commissioned (4) courts were going to be closed and (5) it was anticipated that more consumers than ever might reverse their debt review payments – and they did.

5 Days

In the recent past, regulation has made it necessary for Payment Distribution Agencies (PDAs) to pay out consumers funds to their credit providers 5 days after receiving their money. Consumers pay one large payment and the PDAs split that one payment into lots of smaller payments in differing amounts over time. One challenge is that some consumers reverse the payment after the PDA has already made the payment. Getting the money back from the credit providers has proved difficult and recovering the funds from the consumer through legal means is also expensive. This has lead to massive financial losses for the PDAs as they are left footing the bill for these consumers. It can amount to millions of rands.

‘Anticipating a massive spike in reversals, the NCR made allowance for the PDAs to hold funds for 20 business days’

20 Days

Anticipating a massive spike in reversals, the NCR made allowance for the PDAs to hold funds for 20 business days. While this was much safer for PDAs (saving them many millions of Rand) it meant that credit providers have had to wait longer for payments from debt review clients.

5 Days Again

The initial camaraderie of the pandemic has started to wear off now and the banks and credit providers have been pushing back against letting this 20 day time period stay in place. They seem to have won out and the NCR has now dropped the protective 20 days all the way back to 5 days as before.

‘The initial camaraderie of the pandemic has started to wear off now’

The NCR has also reinstituted the normal flow of business days for people entering the debt review process now as they feel that enough courts and police stations are functioning to help consumers get documents commissioned and submitted to court for hearings for debt review again. They also feel that by now credit providers and debt counsellors are all back at work in some form or another and can get back to work on consumer’s debt review applications.

The Banks Do Actually Want Their Money Back

When the pandemic hit the banks were quick to offer consumers solutions that pushed up their debt balance owed and actually made themselves a lot of money due to interest (and it offered consumers some temporary relief as well). Debt Counsellors were quick to point to the other better options consumers had (such as claiming on certain insurances).

While it has been nice for the banks to see the amount of money they are owed go up …they have also begun to quietly panic as they have seen the amount of money they are owed go up. They are nervous because they know that a wave of retrenchment and defaulting payments is going to dominate the foreseeable future as the Pandemic keeps worsening. They do actually need to be paid in order to make money. So, the small reprieve is now almost over and the collections process is about to open up in earnest (though it did continue to a certain extent even during lockdown).

17 June 2020 (CPs & DCs)

The temporary changes made (in Circular 1) to the ‘business days’ will come to an end on June 17th 2020. This will be the date used to calculate continuing timelines for applications in process.

1 July 2020 (PDAs)

The retention time period for PDAs will revert to 5 days (from 20) on the 1st of July 2020

Getting Back To Work

The NCR offices in Midrand are now open again in Level 3 lockdown (not on public holidays). The new NCR circular sends a signal to the industry that it is now time for everyone to get back to work as “normal”.

 

Download the Circular

Circular-07-of-2020 Update on the NCA-extension of Business Days