theDCI welcomes NCR decision
theDCI support the regulators decission
The Debt Counselling Industry portal, theDCI, welcomed the NCR’s findings and has agreed that for millions of families personal debt is a bigger problem today than it was a few years ago. The NCR’s investigations have uncovered significance evidence of reckless lending by credit providers contrary to their commitment as enshrined in their code and in the Act.
“Millions are swamped in debt,” says Deborah Solomon a registered debt counsellor and founder of theDCI. “But our courts are not swamped by lenders being charged with reckless lending. Yet officials air their concerns about possible lending ‘abuses’ and debt counsellors have regularly raised concerns with the NCR.
“The mismatch between sky-high debt and these codes speaks to the credit provider’s lack of enforcement of their code and the NCA. The banks have refused to accept law such as the in duplum rule. Debt counsellors welcomed how the NCR has applied the law with vigour, as so not to create sham protection.
Solomon recently led a successful appeal to the NCR to force credit providers to respect the NCA by suspending their planned Voluntary Debt Mediation Solution (debt rehabilitation minus some NCA consumer safeguards). The code of conduct, how they came into existence as well as the relationships between all parties was also questioned in Solomon’s legal letters sent to the NCR.
She says worsening debt statistics are a warning that something is amiss. The NCR also stated that rapid increase in unsecured lending, in a highly credit impaired environment is a significant cause for concern.
One problem, she says, is that credit applications are not checked properly by senior bank officials.
Solomon adds: “Our recommendation is that there must be 14-day cooling-off period after a consumer signs a loan agreement. If two unsecured debts have already been taken out during any 24-month period, a consumer should be required to see a debt counsellor for an independent assessment before taking out a third.
“The average consumer entering debt review has 10 credit agreements. The DCI believes five unsecured credit agreements constitute reckless lending by the banks who entice desperate consumers with their “help” options.
“The Minister of Finance has stated that the banks are greedy financial monsters. It is easy to see why such a statement was made.”
Solomon says paying down debt is impossible for many families as unsecured loans attract interest charges of up to 32%, way above home loan charges. This, she adds, is the reason banks have ramped up highly profitable unsecured lending instead.”
Credit retailers are also big players in this market.
The Credit Bureau Monitor says the number of retail borrowers in good standing (with no accounts more than two months in arrears) was down to 53% by mid-2012. This is the lowest level since records began in 2007. At that stage, 63.6% of account-holders were in good standing.
The total outstanding amount owed by consumers stands at R1.36 trillion while NCR figures show South Africa’s ‘credit active’ population totals 19.6 million. If 47% have impaired records then 9.3 million struggle with payments, says Solomon.
She adds: “Currently about 6400 consumers a month seek debt counselling. Given that there are 9.3 million consumers with impaired credit records we should actually have about 100 000 consumers coming into debt counselling to service all the over-indebted people.
“The conclusion is inescapable – the NCR must enforce and regulate the NCA when organisations deliberately breech the Act. Offenders need to be taken to task and action should be taken against them sooner rather than later. The NCR is the only regulator and everyone needs to respect this.”