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Public hearings at Parliament – Day One

A last minute change to the starting time of yesterdays day one of public Parliamentary hearings on the National Credit Amendment Bill saw several interested parties waiting for hours outside the facilities unsure of the actual starting time. It seems some who were scheduled to make presentations had received notice via email late the previous evening but the public did not. Proceedings eventually got underway after lunch was served. with about 70 people in attendance at the opening session. During the proceedings number continued to grow. Those attending were an eclectic mix of credit providers, attorneys, debt counsellors and government department representatives.The National Treasury, DTI and NCR were well represented.

The Presentations

 

The National Treasury

The National Treasury presented first and gave support to the proposed amendments. They commented among other things on pay day loans and how they view them as creating a form of financial slavery where consumers are consistently having to take a loan each and every month. The Treasury feel that having a growing amount of over indebted consumers in SA points to continued reckless lending.

During the discussion, which was helpful in setting a general background to the hearings and the Amendment Bill, Treasury discussed how the FSB to be phased out and a new Market Conduct Regulator is to be put in place (2nd Peak in twin peaks model). Treasury took a moment to appeal to the NCR to focus on consumer protection above all other concerns.

Treasury would also like to see some sort of mechanism to find a way for poorer people to access low cost debt assistance. They complained that the sad truth is that it takes longer to open a savings account in SA than to get a loan.

Credit Providers Association

Next was a presentation by the Credit Providers Association who are a not for profit organisation (in the midst of a name change due to confusion over the Consumer Protection Act -CPA) They focus mainly on data recording and reporting to members. The clear message which came out during the presentation was actually concerned about the upcoming credit information amnesty.

MFSA

MFSA’s Hennie Ferreira made an impassioned presentation and explained how the MFSA is the voice of reputable micro financiers who have over 1800 registered offices country wide. He stated that the MFSA are “Anti loansharking”. Mr Ferreira said that reckless credit is a danger to all credit providers and that “over indebtedness is the beginning of the end for the credit industry”. The MFSA do not agree with DTI & Treasury media statement regarding payday loans as it stands and wish to see a clear distinction between themselves and unregistered loansharks. They explained how there is a massive amount of informal loansharking being done country wide including by trade unions.

One interesting graphic shown demonstrated that the NCR’s info shows that short term lending has not increased much over the last 6 years while unsecured lending has shot up exponentially. They say that the increased mention in a negative light of short term loans from registered micro lenders is thus unwarranted.

The MFSA conservatively estimate there are 50 000 unregistered loan sharks / mashonisa s compared with total 5500 NCR registered credit providers. They say that some of these lenders are loaning funds with an effective interest rate of 480%/annum. The MFSA would like to see all lenders regardless of size or amount of accounts registered and thus regulated. Some of the other concerns they raised are that they feel the monthly service fee cap needs to be raised as it has remained the same for 7 years now. they also feel their members are being picked on by the NCR as opposed to how the banks are treated. They are worried that industry codes of conduct being made up are being used to try introduce regulation not conduct and once again reiterated that they are opposed to credit information amnesty and give it a thumbs down.

The presentation took an bit of an uncomfortable turn for a moment or two when comments were made that many MFSA members who felt victimised by regulators and bad press from the DTI and Treasury were even considering taking their businesses underground. The Committee quickly assured the NFSA of their support for reputable micro lenders. Interestingly the MFSA have seen a drop in membership numbers due to economic pressures on their members and the need to constantly grow their book to stay profitable.

Standard Bank

Standard Bank say they generally agree with the Bill and had decided to focus in on the particular issue of home loans (They hold 29% of the bond market). They explained that while ownership of homes is important all banks had noticed that home loans granting have not really grown over the past few years.

They stated that they feel that there have been some unintended outcomes from the National Credit Act which has made banks feel discouraged from pursuing homeloans. Particularly in regard to debt review, NCA Sect 103(5) and the proposed affordability assessment guidelines.

Standard Bank now propose that when debt is restructured through debt review that the loan not be viewed as in default. They called for a clear definition of “default” in the Act.
According to their projected calculations the foresee that the affordability assessment guidelines will very negatively affect the amount of bonds granted in the “affordable housing market”. They pointed out that these consumers are traditionally very good payers and are low risk. They would like to see a separation of how home loans are dealt with vs other smaller loans. The presentation was the most brief and direct presentation of the day.

This brought the hearings to a close for Tuesday (Day One).

Hearings begin again at 9 on Wednesday with presentations by the Banking Association of South Africa and theDCI and Credit Bureau Association among others.