Debt Counsellors Submit Reckless Lending Fee Comments
The National Credit Regulator (NCR) recently announced their intention to withdraw the fee for reckless lending investigations included in their Debt Counselling Fee Guideline. Before doing so they decided to ask for comments on their decision.
Many Debt Counsellors around the country have now submitted comments (which had to be made by the 31st of October) to the NCR.
Though many Debt Counsellors decided not to make comments or found they ran out of time to do so, the clear majority of those who submitted comments were not happy with the NCR’s decision to remove the fee. An extension of the deadline was requested by the Debt Counsellors Association of South Africa to allow members more time to submit research and further comment but no extension was given.
Common sentiment within the community seems to be that credit providers have pressured the NCR into withdrawing the fee. At Debt Counsellor meetings rather salacious accusations were made of a type of “state capture” by credit providers over the process. Many Debt Counsellors feel that credit providers have been able to twist and manipulate the common NCR approved debt review process to their benefit and the detriment of consumers.
‘it took the NCR 3 years to research and release the fee guideline which included the fee for a reckless lending investigation’
Not all Debt Counsellors feel this way but there is a common consensus that removing the newly granted fee in such haste is unusual. One organisation’s comments to the NCR point to the fact that it took the NCR 3 years to research and release the fee guideline which included the fee for a reckless lending investigation but only a few weeks to scrap it without extensive consultation.
Some credit providers who are currently receiving requests for information regarding accounts (which could be part of a reckless lending investigation) are holding back on providing such information until the Debt Counsellor involved sends them a letter stating that they are not now charging the reckless lending fee*.
DCRS & Reckless Lending
Another comment (or rather question) has asked the NCR why the reckless lending fee was never included in the credit provider run DCRS proposal system? While other changes like the increase in VAT and other fees were included the system was never adjusted to include the reckless lending fee- perhaps this indicates that credit providers had already decided to oppose the inclusion of this fee since it was published. Many industry service providers like the various PDAs had to rush to implement the new fee at great effort and cost. They now face having done so for no reason and these funds will have been wasted.
One association made the observation that out of those credit providers who had been asked to provide information (so that credit agreements can be investigated) 55% had simply not provided this information. This may indicate serious capacity issues or a perhaps a flat refusal to cooperate.
The NCR are worried that the fee was being abused and those in the industry have asked why they have not then issued any compliance warnings to those who the NCR feel were doing so? Others have asked why the NCR have not rather issued a guideline on the investigation process?
Confusion and Discontent
Credit providers were recently flooded with requests for information on accounts. This made a lot more work for them and placed them under pressure (and increased threat of fines from the Regulator). They obviously have not enjoyed this spike in requests. The NCR too, no doubt, have reasons why they have made this decision but it seems that they have as yet not communicated these well to most Debt Counsellors.
It remains to be seen if any of the comments made will have any effect on their decision and the way forward. With the pending changes to the National Credit Act, reckless lending investigations during on all accounts debt review will become obligatory and the NCR have now indicated that these investigations will be paid for out of the normal consumer restructuring fee (the main debt counselling fee). At present, the average fee, based on consumers repayment amounts, is around R2200. The NCR’s 3 year research pegged the investigation cost at R1500 meaning that Debt Counsellors will in the future essentially have to do the rest of their regular initial work for an average value of R700. This will then mean that Debt Counsellors will be doing more work than ever for less than ever. Not a prospect most Debt Counsellors care for.
‘reckless lending investigations on all accounts will become obligatory’
The largest Debt Counsellors association has even warned the NCR that they may need to defend the existing fee on a legal level (to ensure investigations continue) should the NCR actually decide to remove it.
*Please note: no official fee structure has ever been published in the government gazette and individual Debt Counsellors are able to set their own fee structure as long as consumers agree in a contract to such reasonable fees.