Further Panel Beating to Debt Relief Bill likely
by Gerrit Viviers
Following our article published on 7 December 2017, dealing with the Draft National Credit Amendment Bill, 2018 (the Bill), the Portfolio Committee on Trade and Industry held their public hearings on 30, 31 January and 2 February 2018, where various stakeholders within the credit industry presented their submissions to the committee members.
According to a media statement by the National Assembly’s Trade and Industry Committee, “There was general agreement around the need to address over-indebtedness and assist lower-income consumers to escape debt traps. However, there were widely divergent positions on how to achieve this. A number of key points were raised and largely constructive recommendations made in this regard.”
Some of these “divergent positions” identified by the stakeholders, included, among others that:
- By amending section 3(g) relating to one of the purposes of the National Credit Act, 34 of 2005 (“NCA”), which requires the NCA “addressing and preventing over-indebtedness of consumers, and providing mechanisms for resolving over-indebtedness based on the principle of satisfaction by the consumer of all responsible financial obligations” and by adding the sentence “where the consumer’s financial situation so allows, or may so allow in the foreseeable future” may likely result in consumers deliberately absconding from their obligations to repay their loans, which is the cornerstone of a healthy credit industry;
- The proposed extinguishing of debt raises the concerns about the constitutionality of the Bill in terms of the deprivation and expropriation of property in terms of section 25 of the Constitution of the Republic of South Africa, 108 of 1996 (the “Constitution”). A credit agreement or the right to collect on credit is seen as ‘property’ for this purpose and the Constitution specifically protect a property owner’s rights to be protected against the deprivation thereof, except in terms of the law of general application and that no law may permit arbitrary deprivation of property. Deprivation can be loosely defined as the “effect on a person’s property when the state uses their police power to limit the use of that property, without compensation”. The Constitution goes further to state that where the property is expropriated in terms of the law of general application, it must be for a public purpose or in the public interest and it is subject to compensation. According to an article by Business Day, the Treasury already indicated that it will seek the opinion of a Senior Counsel to assess the constitutionality of the Bill in respect of the deprivation of credit provider property.
- Credit providers may not be in a position to assess whether a previous credit agreement entered into with another credit provider, was reckless in that they will have no knowledge of the other credit provider’s application process and whether the consumer had a general understanding of his or her rights and obligations under the proposed credit agreement.
- Insurers may decline to develop and offer the ‘mandatory credit life insurance’ products envisaged by the Bill where the credit agreement exceeds six months and the principal debt is R50 000 or less. This credit life insurance may not be commercially viable, given the credit life insurance regulations limitation of R4.50 per R1 000 for unsecured debt, that may result in the targeted consumer group being excluded.
- Consumers are already protected against the collection of prescribed debt, where they can raise it as a defence in civil proceedings and there was no need to criminalise these practices.
From the public hearings and the nature of the concerns raised by the stakeholders, it is clear that the Bill requires some panel beating before it can be promulgated into law. The legislator will need to find a balance between protecting the rights of consumers and credit providers alike, while still adhering to the protection afforded by the Constitution.
Gerrit Viviers is Moonstone’s NCA Specialist who renders NCA compliance services to its clients and prospective clients. You can contact him on 021 883 8000.
Paul Kruger: Moonstone Compliance (Pty) Ltd
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