Public Hearings on National Credit Amendment Bill – Day Two report
Public Hearings at Parliament – Day Two
The Second day of public hearings into the proposed amendments to the National Credit Act saw only 3 Debt Counsellors present. Interestingly on the way in to the hearings one of the Security guards said he has heard that consumers debt is going to be written off. This shows the level of misunderstanding in regard to the coming credit information amnesty. The public audience was made up mostly by Credit Providers and the NCR and DTI as well as the Parliamentary Committee.
The Department of Trade and Industry
The day began with the DTI presenting an in depth look at the National Credit Amendment Bill. They’d discussed some of the background to the proposed changes to the NCA and went through key areas of the Bill as it stands.
One interesting comment made was that the DTI want to make clear that Alternative Dispute resolution is not debt restructuring.
The Banking Association of South Africa
BASA then took their place in the front row of seats. The row quickly filled up with multiple representatives from all the major banks.
Cas Coovadia took the lead in speaking about how BASA have obviously made written submissions but wanted to highlight some items they disagree with. What they call “Key differences”.
BASA say they want to create their own code of conduct which they would then like the NCR to approve. They do not want to be dictated to. They feel that the NCR published code of conduct is trying to introduce legislation rather than through amending the NCA.
Seemingly BASA are scared of the NCR being able to legislate by means of guidelines if as proposed the NCR will not register a credit provider until they subscribe to an industry code of conduct. At the same time BASA say they are “happy to receive guidelines” but just not ones as proposed by the NCR.
Continuing their concerns about the NCR BASA said that the proposed NCR affordability guidelines do not need to be included in any fashion and they do not want to see automatic de-registration for certain contraventions , rather would like such a matter to go to the NCT first.
Like most other parties responding to the Bill, BASA are not in support of removing payment history on paid up accounts (referring to the credit information amnesty) since it will make it difficult to discern good from bad payers (consumers). They say that it simply “makes a mockery of the credit bureau system“.
Regarding Section 86 (the Section about debt counselling) BASA say they still want to exclude 129 matters. A Section 129 letter advises consumers to among other things go to a debt counsellor. At present though this would only be for all the consumers other accounts not the one in the letter.
BASA also want to be able to continue to terminate their participation in a debt review as set out in the NCA as it is at present. They do not want to have to resolve matters at court. This is because they are concerned that consumers may take matters to court and then delay repayments for a while with no intention to actually go through with the debt review. They feel that this is not fair to credit providers. FNB who added a few comments say they also don’t like the proposed Section 86(10) changes. In the past they say that “10’s of thousands of consumers ( those under debt review ) were not paying their cars and bonds” before the Collette ruling. They feel this leaves them open to non paying consumers putting the matter into court and then not paying. Since at present the NCA does not allow Debt Counsellors to end a consumers debt review this could under some very unlikely circumstances occur. Most Debt Counsellors however feel that the banks have simply abused section 86(10) so much in the past that they now have no credibility in making demands regarding this section.
In regard to Alternative Dispute Resolution Agents (ADRAs) BASA want to see ADRAs only deal with matters that fall under under the NCA. They do not like to see Ombuds called ADRAs. If they are the NCR might gain authority over them.
FNB ( Mr. Niewoud) then added that they would like to see DCRS ( a computer system that helps restructure debt in a way credit providers like) included in industry codes of conduct.
The Committee made a direct comment when they said that looking at BASAs submissions on each and every amendment they feel that BASA are simply saying that they reject every change and want the Act to stay the same.
Cas Coovadia assured the Committee that this is not the case and that they only are opposed to 5 particular amendments. Nedbank then commented that responsible lending goes hand in hand with responsible borrowing and that they would like to see more consumer education which they feel is vital.
BASA would like to see home loans treated much the same as rental obligations in a debt review consumers budget. In other words they want bonds to get a full payment as it was prior to the debt review.
Committee chairperson had a few stern words to the banks to watch their advertising which entices people to borrow funds they don’t need.
The DCI
The Debt Counselling Industry a information portal about debt and Debt Counselling made the only presentation by any Debt Counsellor thus far. They surprised the audience by saying that Consumers, CPs and even Debt Counsellors are losing faith in the process even mentioning how the Courts have let consumers down. As such they welcome changes to the Act.
Moving on to specific parts of the Bill and NCA theDCI expressed it’s concern about some missing definitions in the NCA as well as behaviour and responsibilities of ADRAs. Further theDCI feel that many of the activities of an ADRA could be performed by Debt Counsellors and that if ADRAs are registered the requirements should be same as that of Debt Counsellors. However it became clear that theDCI would like to see a separation of duties and functions between Credit Providers, Debt Counsellors and ADRAs and not see one party registered in more than one function. (what woudl that mean for companies such as the NDMA?)
TheDCI also want to see a Sect 129 letter to show the capitol amount owed.
They expressed their concerns over so called “consolidation” loans and how these are misused.
This was when things began to hot up as they reported to the Committee that NCR complaints are ineffective (form 29) that the NCR are not responding timeously and that there is also a large backlog in regard to NCT matters. They would like to see the NCR investigated and additional training done to streamline processes. Also mentioned was how they would like to see reporting on Form 29 complaints and NCT decisions to DCs and CPs to help set precedents. All this was said while in the background was a large slide showing NCR performance as POOR.
Some other statements were made that caused the committee to sit up and listen such as that PDAs and currently unreliable and cause many of the problems. ” The PDAs have been the predominate cause of terminations in debt review” was another comment made. TheDCI are clearly not in favour of their inclusion in the Bill pointing to costs to the consumer in debt review which are higher paying debt through PDAs as compared to other existing switches.
Next credit providers came under fire and theDCI explained that CPs are giving incorrect info about debt review and the process to consumers under debt review. The presentation included an SMS from FNB that refers consumers to Debtbusters and then moved on to the Old Mutual website which says “Working together with our Debt Counselling partners, Old Mutual has created a solution to help you overcome your debt worries” TheDCI complained that clearly the NCR should be going after these people. TheDCI then mentioned how often many CP legal department continue or begin litigation even though debt review department have agreed to a proposal. TheDCI would like to see more matters resolved through the NCT and support the amendments to Section 86 about debt review matters.
The National Debt Mediation Association
The NDMA began their presentation by clearly spelling out that in the past (and still currently) they are offering debt mediation which services include negotiating debt restructuring and repayment plans and offering information on informal debt restructuring options. Interestingly these would constitute activities only allowed to NCR registered Debt Counsellors under the National Credit Act.
The NDMA feel that low income consumers do not have access to inexpensive debt remedies and that it is not financially viable for Debt Counsellors to assist such consumers. They thus would like to recommend alternatives to debt review. They pointed to how many consumers had accounts terminated from debt review by creditors and feel that court fees and PDA fees only add to a consumers debt. They would like to see these fees reduced. One option they feel could work is if the costs could be shared between consumers and credit providers or if NGOs and charities could fund counselling.
The NDMA managed to get in some NCR bashing as well saying that the NCR has capacity constraints and when dealing with VDMS and the NCR Task Team report suggestions. They say the NCR did not have the capacity to understand the issues and could thus not engage properly. In regard to progress made by the industry they feel the NCR took these real solutions and made them redundant without proper analysis and explanation. They say the NCR did not participate in the way it should have. Ironically it was comments like this that soured the NCR to supporting the NDMA in the past. Going further they added that consumers need to get more detailed and neutral advice on dealing with debt than that provided by the NCR at present.
Since the NDMA has operated as ADRAs for some time (and of course as debt counsellors) they had a lot to say about this section of the amendments. They do not want a list of do’s and don’ts in the amendments which will restrict what ADRAs can do.
In regard to PDAs they feel that consumers should be offered the choice to use one but warn that PDAs have caused payment issues and increased consumer risk in the past. They would like to see PDAs paying liability claims where consumers have faced legal action or loss of assets. All in all they are not very ‘pro’ PDA.
Other presentations ran on later than expected by the Credit Bureau Association (who are not chuffed about the proposed Credit information Amnesty), The Associations of Debt Recovery Agents as well as Credit Provider, Home Choice.