Parliament’s Portfolio Committee on Trade and Industry has called for public comment on its legislative proposal to amend the National Credit Act of 2005. The Bill was gazetted recently and aims to provide for debt interventions for low-income, over-indebted consumers.
Currently, qualifying consumers can apply for insolvency, debt review or debt administration to obtain some relief from over-indebtedness. However, the mechanisms often exclude vulnerable consumers due to the cost associated with these procedures and/or a lack of benefit for credit providers.
Committee Chairperson Ms Joanmariae Fubbs said a need was identified for the National Credit Act to make provision for the introduction of capped debt intervention measures to further alleviate household over-indebtedness and prevent the widespread abuse of consumers by unscrupulous lenders. Current proposals include consumers who are earning less than R7 500 per month with minimal asset value, as these consumers were unlikely to be assisted by debt counsellors due to the cost associated with administering debt review.
The Bill aims to provide for a once-off debt intervention for qualifying consumers. It proposes that consumers will apply to the National Credit Regulator (NCR) for a debt intervention for existing, cumulative, unsecured debt of no more than R50 000. If a consumer meets all the criteria, the NCR may recommend to the National Consumer Tribunal (NCT) that the consumer’s debt should be suspended for a period of up to 24 months, pending review, and possibly be extinguished in part or in full depending on changes in their circumstances. The NCT may also order that debt-review-type relief be given to a consumer by capping interest rates, repayments and/or credit life insurance charges on loans for a period of time.
Consumers receiving debt intervention measures may be required to undergo financial literacy and a budgeting skills programme. They may be precluded from accessing credit for a period of time not exceeding 36 months to facilitate their rehabilitation. Intervention proposals include allowing the NCR to suspend credit agreements considered to be reckless, pending a declaration from the NCT. Debt counsellors and credit providers will also be required to report any suspected reckless credit agreements. It also empowers the NCT to declare an unlawful credit agreement void.