National Credit Amendment Bill, 2013

1. National Credit Amendment Bill, 2013 Portfolio Committee on Trade and Industry, 4 February 2014

2. Purpose • The purpose of the presentation is to provide the Portfolio Committee on Trade and Industry with responses on submissions made by stakeholders during the public hearings on the National Credit Amendment Bill, 2013

3. Delegation Z Ntuli: DDG M Netshitenzhe: Chief Director-Policy and Legislation M Nonyane: Chief Director-Legislative Drafting N Motshegare: CEO-NCR A Potwana:Director-Consumer policy T Mavhuthugu: Director-Legislative Drafting S Thusago:Director-Regulatory Impact Assessment L Mashapa: Company Secretary - NCR

4. Introduction • The National Credit Act (NCA) 34 of 2005 aims to promote and advance the social and economic welfare of South Africans. • The NCA has made progress in promoting its key policy aims: “A fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry.” • Credit touches the lives of many millions of South Africans, with about 19.69 million (September 2012).  It not only has the potential to create opportunities for individuals to access goods and services, start businesses, obtain education or improve living standards, but also serves as a shock-absorber during periods of financial hardship. • However, while credit can have positive implications for the person accessing it, it can also destroy a person’s financial security. • The NCA further introduced initiatives to prevent reckless credit and a new debt-counselling industry to provide for debt restructuring for over-indebted consumers. • These new initiatives changed the dynamics between the stakeholders, including credit providers, potential new clients, over-indebted consumers, debt counsellors and the payment distribution agencies.

5. Introduction - Continued • Some of the practical outcomes of the NCA suggest that the time has come to re-assess the original policies underlying the NCA. • In this regard, the initial reviews and subsequent policy framework, legislative drafting of the NCA, its interpretation and implementation were considered with the prospect of improving on what has transpired. • The 2012 policy review of the framework, upon which the NCA is founded, has concluded that while the framework is sound and relevant, its intended outcomes have not always materialised as anticipated. • Since the scope and purpose of policy are outcome-based, the evaluation of outcomes indicates that there is a need for the enhancement of certain policies underlying the NCA, which may involve the further development of some of the provisions of the NCA. • NCA ‘cushioned’ SA from the global financial crisis. Innovative measures introduced (e.g. credit assessment, reckless lending rules, pre-agreement disclosure, regulation of agents etc.) • It is against this background that the dti approaches this Parliament for enhancement of some of the provisions of the NCA as per the policy review.

6. Issues raised • National Treasury (NT) & South African Reserve Bank (SARB) • Supports the direction of the NCA Bill • Questions whether amendments go far enough and are intrusive given the lessons learnt after the 2008 global financial crisis • Asks how the NCA relates to the twin peaks system of regulation • Questions whether amendments sets tougher standards for payday lenders • Calls for co-ordination and co-operation amongst regulators • the dti’s Response • The policy on which NCA is based was reviewed independently and confirmed to be sound • NCA ‘cushioned’ SA from the global financial crisis. Innovative measures introduced (e.g. credit assessment, reckless lending rules, pre-agreement disclosure, regulation of agents etc.) • Positive review of NCA by international commentators • Issue of co-ordination amongst regulators already in NCA and is being improved by the Bill. • Despite co-ordination, regulators must always act within their legislative mandate without conflating them into one or losing their regulatory independence

7. Issues - continued Guidelines & Code of Conduct Credit Providers & Industry Associations • Should not be part of conditions of registration and regulations • Will negatively impact affordable housing • Will hamper e-commerce • Code of conduct should be from the industry and not prescribed by Minister • Allow public comments before Minister prescribes code the dti’s Response • Guidelines aims to address weaknesses identified • Elements include expense norms, income verification, use of credit bureau data etc. • Guidelines tested with credit providers, namely FNB, Standard Bank, Truworths • NCR established industry technical committee to finalise guidelines by end of February 2014 • Code and guidelines need to fall within the realm of statutory regulation to be binding on industry and universally applicable • The Act enjoins the Minister to consult with the public before issuing any regulations and guidelines • E-commerce supported, but must observe basic tenets of affordability criterion.

8. Issues - continued • Removal of Adverse Information • Credit Providers & Industry • Associations • Do not support removal of adverse credit information • Limited or no information will be available to assess consumers’ payment history • Unable to distinguish between good and bad paying consumers • Will push up cost of credit and restrict access to credit • Will encourage bad behaviour by consumers • the dti’s Response • Only adverse credit information will be removed (i.e. listings such as slow payer, delinquent, handed over) to enable listed consumers to obtain employment, rental accommodation and new credit if they can afford it • Payment profile information not removed (reflects monthly payment of account) and will enable lenders to assess and price for risk • Reward consumers who pay their accounts by removing paid-up adverse listings and judgments • Affordability assessment guidelines will be implemented after consultation with stakeholders

9. Issue - Continued Voluntary Debt Mediation National Treasury (NT), Credit Providers &Industry Associations • Introduce voluntary debt mediation • Envisaged to be non-statutory and an alternative to debt counselling • Only NDMA prefers it to be regulated by the NCA the dti’s Response • VDM should be regulated by the NCA under the regulatory authority of the NCR • Consumer protection measures available to consumers under statutory debt counsellors should also be extended to consumers in VDM • NCA already provide for a voluntary debt review mechanism and results in consent orders by the NCT

10. THANK YOU !