Reckless lenders could face loan write-offs and criminal charges

Massive relief could be on the cards for over-indebted consumers

Reckless credit providers could find themselves in hot water should the National Credit Amendment Bill, which is currently being tabled in Parliament, be passed.

This is according to Debt Rescue CEO Neil Roets, who told Business Tech that scrapping reckless loans granted to over-indebted consumers is among some of the changes being proposed.

Furthermore, it’s been suggested that credit provider directors who contravene the proposed legislation be held personally liable and face criminal action.

“We see examples of this on a daily basis with individuals who approach us for debt counselling in order to be placed under debt review,” Roets was quoted as saying in the report. “It is patently obvious in many cases that reckless lending was taking place by extending credit to the unemployed and consumers who are carrying an excessive debt load.”

READ MORE: SA debt measures backfire

On Tuesday, MacDonald Netshitenzhe, acting deputy director general at the Department of Trade and Industry (DTI), told Parliament that amendments made to the National Credit Act in 2014 didn’t make provisions to grant the National Credit Regulator (NCR) the authority to enforce the act.

To remedy this, the department plans to extend the powers of the NCR to allow the consumer watchdog to institute proactive investigations and hand down administrative fines to companies.

The DTI also wants Minister Rob Davies to be permitted to execute debt relief measures, such as pardoning debt in specific instances, through regulations.

The proposal to boost the powers of the NCR has been approved by the trade and industry committee in Parliament.

“The NCR should be given the power to order regulated entities to pay administrative fines and give redress to consumers,” Netshitenzhe was quoted as saying in a Times Live report. “The National Consumer Tribunal should serve as an appeal and review body for the decisions of the NCR.”

READ MORE: SA’s ‘Black Diamonds’ riddled with debt

He also argued that the NCR should be allowed to negotiate dispute settlements between consumers and regulated credit providers because “settlements substantially minimise the time periods of resolving disputes and costs for both the regulator and the regulated entities”.

The proposed amendments came about following the outcome of a court case involving Capitec, where the courts ruled that the NCR needed reasonable suspicion of transgression in order to investigate a case. But legislation doesn’t currently provide for that and there are no clear guidelines on what constitutes reasonable suspicion.

NCR CEO Nomsa Motshegare told Parliament’s portfolio committee that the body was considering several debt amnesty programmes, including debt reprieves for students and individuals who have been retrenched.

She said the outstanding consumer credit balance totalled R1,66 trillion at the end of June – up 2,3% since last year – while the number of impaired accounts rose from 19,9 million last year to 20,2 million this year.

READ MORE: Capitec accused of reckless lending

Roets said Debt Rescue has noted “double digit growth” in the number of over-indebted consumers seeking debt rescue over the past three years.

Data released last month by local credit bureau Compuscan on consumer credit behaviour for the second quarter shows that wealthy South Africans are also taking strain, with the number of mortgage accounts with adverse enforcements listed against them rising by 26% quarter-on-quarter – this includes consumers with mortgages over R3 million also skipping payments.

“In the first quarter of the year, we noted that consumers were struggling to keep up with their vehicle and asset finance loan repayments,” said Jacobus Eksteen, a senior Compuscan data analyst. “The fact that the second quarter’s data indicated that consumers were struggling to make their mortgage payments is extremely concerning.

“On the whole, consumers tend to prioritise their mortgage payments, as they usually take this type of debt very seriously. They have a lot more to lose if they don’t make payments on this type of account, so the trends we’ve seen in our data lead us to believe that consumers have really been feeling burdened financially.”