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Public Hearings at Parliament – Day Five

Far from the grand venue of the previous week’s public hearings (in the glamorous Good Hope Chambers) 40 people gathered in a small boardroom in the old assembly at Parliament to hear the DTI report on stakeholder comments about the National Credit Amendment Bill. Day five of the public hearings by the Portfolio Committee on Trade and Industry was mostly about the DTI and NCR reporting back on what had been said during the public hearings and in some written submissions. The DTI then had the opportunity to comment on concerns raised in these presentations and submissions.

Here are some of the highlights of both the reports and comments on them by the DTI:

Treasury & Reserve Bank :

Report: Both support the Bill but are not sure if the Bill is intrusive enough (into credit provider activity) and are not confident that it is tough enough on pay day lenders. Both called for coordination and cooperation among regulators. An interesting example was given by the DTI in regard to the recent reckless lending fine of African bank that was spread to the media (a proposed R300 mill). The concern raised by the Reserve Bank was that this was announced and put to the NCT before consulting with them. They (Reserve Bank) feel unilateral decisions could affect the Rands value. They would like to see mandatory coordination not just consultation. The DTI responded that they don’t want to see independence of individual regulators lost. Each should stick to their own mandate.

 

 

Credit Providers:

Report: Credit Providers do not want a NCR / Minister issued a code of conduct and dictate to them They wish to self regulate.

The DTI say self regulation has not worked up to this point. They see a need for the Code and guidelines to be binding on the industry. The DTI want the Minister to issue regulations but agree that (constitutionally) there should be consultation with the public.

Report: Credit Providers are anti removal of adverse credit information.

The DTI say that the payment history and current payment profile will still be available; only adverse information (such as comments by creditors classing consumers as delinquent or slow payers) will be removed. Further the affordability guidelines will reduce risk to credit providers. They are happy with the information being removed automatically since most consumers can’t afford to go to court to get adverse information removed once paid up.

It was revealed that FNB, Standard Bank and truworths have been consulting and testing the proposed guidelines at present in a pilot project.

Debt Mediation:

Report:  Credit providers and Treasury want to see Voluntary Debt Mediation introduced as alternative to debt review and don’t want it regulated.

The DTI want to ensure it is regulated by the NCR but feel that ADRs could possibly offer debt mediation. To do so would require some wording changes in the NCA.

In fact, the DTI have given the NDMA (an association that has in the past offered debt mediation (counselling) the go ahead to present proposals in regard to Voluntary Debt Mediation again (since they are now not funded by credit providers) . In essence the DTI are happy with mediation as long as it is regulated and done in terms of the NCA. THey did raise the point that in the past credit providers were not voluntarily helping consumers rather they were abusing consumers. So the DTI find it concerning that now after debt review has been created and been running for years only now do credit providers want to create a voluntary form of debt solution and a form of self regulated mediation. They said they actually find this distressing. It did not work pre NCA. They question will it work now when there is already a solution in place. Thus they want to see the sections relating to debt counselling tightened up to reduce issues at courts and thus lower costs and negative outcomes to consumers.

PDAs:

Report: Complaints were raised in regard to increased costs to consumers and payment delays which can cause terminations etc.

The DTI say that PDAs currently only have service level agreements and limited liability. The DTI wish to see them included in that NCA to formalise these agreements so that the NCR can issue timeline requirements and can issue fines or deregister non performing PDAs. This will help increase personal liability for PDAs, their staff and ultimately even Debt Counsellors.

The DTI warned that it seems that some stakeholders want to go back to pre NCA type regulation. This is not an option. In the past consumers were severely disadvantaged (pre NCA). The Act and particularly the introduction of NCA Section 103(5) is meant to prevent abuse of consumers.  The committee briefly even began to consider if the current Section 103(5) in duplum rule is sufficient. It seems that they are not actually aware that the issue is getting creditors to apply this rule not the rule itself.

Reckless Lending & other issues

The DTI say they are glad to see the NCR taking action against reckless lending since they feel that reckless lending has not been dealt with sufficiently to date. Another area of concern for the DTI and NCR is in regard to their struggle to help consumers who are under administration (due to jurisdiction issues). At present they have to refer consumers to the Department of Justice. They would like to see this changed by the Bill.

There is also concerned about the marketing practises of major credit providers. It is hoped that the Market Conduct Regulator (in Twin Peaks) will eventually act. At present the Consumer Protection Act does give some regulation but at still it is felt that the SMS, email and poster advertising of major lenders may be encouraging reckless borrowing.

Comments by the Committee

The Committee commented that they are concerned about “rule by regulation” as opposed to the intended rule by law. Interestingly, Wonga got a mention in regard to short term loans and the committee’s concern regarding the high limits on the interest rates that can be charged. At this point the NCR revealed that they have already started a study in regard to interest rate caps and possible changes (reductions). The NCR’s plan, for the moment, is to provide affordability guidelines that will eventually become regulations that are binding.

 The Committee will now begin deliberations on all the presentations and the Bill.