SUBMISSION: NATIONAL CREDIT AMENDMENT BILL PRESENTED BY KEN BREDENKAMP ATTORNEYS

1. SUBMISSION: NATIONAL CREDIT AMENDMENT BILLPRESENTED BY KEN BREDENKAMP ATTORNEYS

2. CURRENT HOUSEHOLD OVER INDEBTEDNESS • EMPLOYED = 13.6 MILLION • UNEMPLOYMENT = 4.6 MILLION • CREDIT ACTIVE = 20.08 MILLION • CREDIT IMPAIRED = 9.53 MILLION • 7.2 MILLION DEFICIT • HOW DID THIS OCCUR ? • LACK OF ENFORCEMENT BY THE NCR • SOUTH AFRICANS ARE FINANCIALLY ILLITERATE

3. AMENDMENTS TO THE NATIONAL CREDIT ACT ADDRESS & CORRECT INEFFECTIVE & INEFFICIENT ASPECTS OF THE NCA AMENDMENT TO THE NCA, EFFICIENT FUNCTIONING OF THE NCR & THE TRIBUNAL • TO REGULATE & IMPROVE THE PAYMENT DISTRIBUTION AGENCIES REGISTRATION & REGULATION OF PDA’S & THE NATIONAL PAYMENTS SYSTEM TO IMPROVE THE DEBT REVIEW PROCESS FOR ALL STAKEHOLDERS DEBT REVIEW PROCESS ADR’S, MEDIATION CODES OF CONDUCT

4. OBJECTIVE 1: TO ADDRESS & CORRECT THE INEFFECTIVE & INEFFICIENT ASPECTS of the NCA THE AMENDMENT TO THE DEFINITIONS WILL ASSIST IN ENSURING THAT THE NCA IS ACCURATELY INTERPRETED AND THAT THE AIMS AND OBJECTIVES OF THE ACT ARE MET CORRECTION OF PATENT ERRORS IN THE LEGISLATION REMOVE CONTRADICTORY & NON-SENSICAL RESULTS ENSURE THAT AMENDMENTS RESULT IN INCREASED EFFICIENCY ENSURE AN EFFECTIVE FUNCTIONING NCR & TRIBUNAL UPHOLDING THE AIMS & OBJECTIVES OF THE NCA This is an example text. Go ahead and replace it with your own text. It is meant to give you a feeling of how the designs looks including text.

5. DEFINITIONS: • MORTGAGE: DEFINITION OUT OF LINE WITH COMMON LAW • ADR’S: REMOVE OR ALLOW FOR REGISTRATION • INTEREST: DEFINE FIXED, VARIABLE AND MAXIMUM ALLOWABLE INTEREST RATES • IN DUPLUM: DEFINE FIXED, VARIABLE AND MAXIMUM ALLOWABLE INTEREST RATES • SURETYSHIP: DEFINED AS A CREDIT AGREEMENT • DEVELOPMENTAL • CREDIT: REGULATION • CONSOLIDATED • LOANS : CONSUMER INTICEMENT This is an example text. Go ahead and replace it with your own text. It is meant to give you a feeling of how the designs looks including text.

6. KEY DEFINITIONS: ALTERNATIVE DISPUTE RESOLUTION – ADR’S OPTION 2 DEFINE WITH REGARDS TO REGISTRATION ”DEBT COUNSELLOR BASIS” NO DUAL REGISTRATION OPTION 1 REMOVAL & ADR FUNCTIONS BE INCORPORATED IN DEBT COUSELLOR FUNCTIONS A PROPER DEFINITION NEEDS TO BE INCLUDED IN THE NCA ADVANTAGES WITH DEBT COUNSELLOR’S ALREADY SET UP REGULATED BY ACT & NCR ALERT TO CHALLENGES AWARE OF PROPOSAL FRAMEWORK CAN DETERMINE RECKLESS CREDIT NO CONFUSION ADVANTAGES COULD PROVIDE ALTERNATIVE RELIEF FOR CONSUMERS DISADVANTAGES MORE REGULATION SET UP COSTS CONFUSION IN PUBLIC INDEPENDENCE BEST INTEREST DISADVANTAGES

7. KEY DEFINITIONS: INTEREST RATES A PROPER DEFINITION NEEDS TO BE INCLUDED IN THE NCA MAKE PROVISION FOR THE PROPER DEFINITION OF FIXED, VARIABLE INTEREST & MAXIMUM ALLOWABLE INTEREST RATE IN EACH SCENARIO CLARIFICATION OF APPLICABILITY OF STATUATORY IN DUPLUM RULE – SECTION 103 (5) • ADVANTAGES • BETTER THAN CURRENT FORMULA • FIXED AT A MAXIMUM RATE • CAN ALLOW CREDIT PROVIDERS TO DETERMINE OWN INTEREST RATE BASED ON CONSUMER ASSESSMENT • INCREASED COMPETITIVENESS BETWEEN CREDIT PROVIDERS • CERTAINTY FOR CONSUMERS • ASSIST IN REPAYMENT PLAN CALCULATIONS • STATEMENT OF CAPITAL AMOUNT ON SECTION 129 LETTER DISADVANTAGES

8. KEY DEFINITIONS: CONSOLIDATION LOANS CLARIFICATION OF APPLICABILITY OF STATUATORY IN DUPLUM RULE – SECTION 103 (5) A PROPER DEFINITION NEEDS TO BE INCLUDED IN THE NCA PREVENT ENTICEMENT OF CONSUMERS OUT FROM DEBT REVIEW • EXPERIENCE • The credit provider proposes to consolidate all the debt of the consumer • into one account • The credit provider pays the consumer an amount in terms of the loan in • order for the consumer to settle outstanding debt • The credit provider charges the consumer a lower interest rate than what • the consumer would be paying on the outstanding debts in terms of • the debt review order DISADVANTAGES

9. KEY DEFINITIONS: CONSOLIDATION LOANS PREVENT ENTICEMEN OF CONSUMERS OUT FROM DEBT REVIEW EXPERIENCE Often the consumer does not pay the outstanding debts with the money loaned and utilises it for other purposes. This is particularly so in light of the fact that the consumers would not have had access to such an amount of money for some time and they often spend the money on unnecessary items and luxuries which they were not able to do before As consequences the consumer loses the protection afforded by debt review The consolidation loans need to be monitored and dealt with in a manner to ensure that the consumer’s outstanding debts are paid by the credit provider and that the consumer is not in a worse position than while under debt review DISADVANTAGES

10. NATIONAL CREDIT REGULATOR COMPLAINTS NOT INVESTIGATED PROPERLY ENFORCEMENT PROPOSED AMENDMENT TO SECTION 136 AGREEMENT TO CODE BY REGISTRANTS PROVISION OF COSTS AWARD PROVISION OF PENALTIES TO REPEAT OFFENDERS SUCH AS A FINE OR DEREGISTRATION – PROPOSED AMENDMENT SECTION 140 REPORT DECISIONS TO INDUSTRY PLAYERS APPEAL PROCEDURE FORM 29 PROCEDURE INEFFECTIVE NO PROPER INVESTIGATION NO REPORTING TO INDUSTRY STAKEHOLDER NO CERTAINTY REGARDING MATTERS PROVISION OF “ANY PERSON” ALLEGING RECKLESS CREDIT – NOT ADVISABLE DEBT COUNSELLORS ARE EMPOWERED TO DO THIS DISADVANTAGES

11. NATIONAL CREDIT REGULATOR COMPLAINTS NOT INVESTIGATED ROPERLY ENFORCEMENT PROPOSED AMENDMENT TO SECTION 136 • SOLUTIONS • EFFECTIVE TRAINING • SKILLED STAFF TO BE EMPLOYED • EFFECTIVE COMPLAINTS / RESOLUTION CODE WITH DEFINED TIME LINE • PENDING OF TIME PERIODS PROVIDED FOR IN THE NCA PENDING LITIGATION • TRANSPARENCY DISADVANTAGES

12. OBJECTIVE 2: TO REGULATE AND IMPROVE THE PAYMENT DISTRIBUTION AGENCIES INSERTION OF SECTION 44A REGISTRATION OF PAYMENT DISTRIBUTION AGENCIES CURRENT PAYMENT DISTRIBUTION AGENCIES NOT REGISTERED, INEFFECTIVE AND LEAD TO BREAKDOWN IN THE DEBT REVIEW PROCESS AND INCREASED TERMINATION, STRESS AND LITIGATION COSTS FOR ALL NATURAL OR JURISTIC PERSONS VS ACCREDITED PARTIES

13. OBJECTIVE 2: TO REGULATE AND IMPROVE THE PAYMENT DISTRIBUTION AGENCIES • NATURAL OR JURISTIC PERSONS • ADMINISTRATION ISSUES WOULD CONTINUE CAUSING SYSTEMIC RISK • PAYMENT SYSTEMS UTILISED MAY BE INEFFECTIVE • ADDITIONAL COSTS TO NCR CHECKS & REGULATION • HAVE TO MAKE NEW REGULATIONS • ACCREDITED PARTIES • TRIED AND TESTED • REGULATION PROVIDED FOR BY (SARB) • LEGISLATION IN PLACE – NATIONAL PAYMENT SYSTEM ACT 78 OF 1998 • NO ADDITIONAL COSTS TO NCR • CERTAINTY

14. AVERAGE COST TO FINANCIALLY STRESSED CONSUMERS PDA 10 Credit Agreement 2 Distributions @ R7.00 = R14.00 4 Distributions @ R15.00 = R60.00 Switch 10 Credit Agreement 2 Distributions @ R8.40 = R33.60 4 Distributions @ R8.40 = R33.60 4 Distributions @ R8.40 = R16.80 Total R84.00 4 Distributions @R25.00= R100.00 Total R174.00 SAVINGS OF R90.00 PER CONSUMER MONTHLY

15. Savings To The Industry & Consumers • THE SAVINGS BETWEEN THE SWITCH AND PDA AS PER THE SCENARIO WOULD BE R90.00MONTHLY PER CONSUMER. • IF 100,000 CONSUMERS WERE GIVEN THIS ADVANTAGE THERE WOULD HAVE BE A COLLECTIVE R9,000.000 ADDITIONAL MONTHLY THAT COULD BE PAID TOWARDS CONSUMERS DEBTS. • OVER A 24 MONTH PERIOD THERE WOULD BE A R216,000.000 SAVINGS AND AFTER 60 MONTH PERIOD A R540,000.00 SAVINGS. • IF VOLUMES WERE GIVEN TO THE SWITCHES, THE COST OF R8.40 PER DISTRIBUTION COULD BE FURTHER NEGOTIATED AND BROUGHT DOWN SUBSTANTIALLY.

16. OBJECTIVE 3: TO IMPROVE THE DEBT REVIEW PROCESS FOR ALL STAKEHOLDERS CONSUMER REQUIRE CHEAP AND EFFECTIVE METHOD TO REARRANGE DEBTS CREDIT PROVIDERS REQUIRE CHEAP AND EFFECTIVE METHOD TO OBTAIN REPAYMENT STAKEHOLDERS NCR REQUIRE COMPLIANCE PROVIDE ASSISTANCE RECORD KEEPING DEBT COUNSELLORS REQUIRE PROCEDURE TO PERFORM FUNCTIONS IN TERMS OF THE NCA

17. COMMON FEATURES DEBT COUNSELLORS: QUICK FAIR TREATMENT DEFINED RULES ASSISTANCE CONSUMERS: FAIR TREATMENT CHEAP QUICK REARRANGEMENT AND RELIEF CREDIT PROVIDERS: QUICK CHEAP FAIR TREATMENT ASSISTANCE CONSUMERS ARE LOSING FAITH IN THE DEBT REVIEW PROCESS DEBT COUNSELLORS ARE LOSING FAITH IN THE DEBT REVIEW PROCESS CREDITOR PROVIDERS ARE LOSING FAITH IN THE DEBT REVIEW PROCESS DELAYS NO SUPPORT EXPENSIVE CHANGING ENVIRONMENT AND UNCERTAINTY IN FINANCIAL DISTRESS EXPENSIVE FINANCIALLY UNEMPOWERED NO SUPPORT STRESS CHANGING ENVIRONMENT AND UNCERTAINTY

18. ROOT CAUSES OF WHY STAKEHOLDERS HAVE LOST FAITH IN THE DEBT REVIEW PROCESS COSTS UNCERTAINTY DELAYS Changing environment Lack of information No resolution process Legal Process Terminations Adverserial PDA’s Termination costs Codes Conflicting information Court process No rehabiliation

19. UNCERTAINTY CAUSES: Alternative proposals outside of debt review Different arrangements with credit providers for similar debt Court process & terminations PRACTICE: Offers to consumers to stay out of debt review or to mediate Variation regarding norms – consumers with immovables targeted No assistance from ncr = litigation SOLUTION: Enforcement of the provisions of the nca – no mixed interests Code setting out minimum standards applicable Proper resolution process to avoid court – ncr to perform function in terms of the act

20. CREDIT PROVIDERS TEAMING UP WITH DEBT COUNSELLING FIRMS ------ SMS ------ From: +27820070155 Received: Aug 21, 2012 12:02 Subject: FNB Home Loans have partnered with... FNB Home Loans have partnered with DEBTBUSTERS to develop a home loan solution for you. Contact DEBTBUSTERS 0861 663 328 or fnb@debtbusters.co.za Old Mutual – “Our strategic partners' trained Debt Counsellors are registered with the National Credit Regulator and the Debt Counsellors Association of South Africa (DCASA)”

21. DELAYS 1 CAUSES: Lack of information Adversarial Court process & terminations PRACTICE: No proper certificates of balance, no distinction between capital and interest No proper communication process No assistance from ncr = litigation SOLUTION: Enforcement - information Code setting out minimum standards for restructuring – parties will have a proper framework within which to negotiate - binding Delays in justice system, no proper mechanism to avoid court & costs

22. REGULATORS RESPONSE TO PDA’S NOT DISTRIBUTING AS PER COURT ORDER “ After many deliberations with the credit provider herein, they still refuse to reinstate the matter and responded as per the attached. The matter should then be referred to court and seek a remedy to enforce them to comply in terms of the order. Since the account was terminated due to pda not making payments in terms of the court order, I am still waiting for Snethemba of our office to provide me with their findings. Take note that unless you come your debt counselor provide the bank with a revised proposal, they will proceed to rescind the court order. Should you still feel that I am being biased in handling this file, you may proceed and contact my supervisor at tmudau@ncr.org.za.”

23. DELAYS 2 CAUSES: No resolution process – simply disputes can be resolved quickly Pda’s – payment issues cause terminations Codes – no standard terms available, conflicting offers PRACTICE: Complaints to ncr ineffective, matters are resolved in court at cost No proper record keeping, no information available, incorrect payments No certainty with propsals or restructuring agreements SOLUTION: Quick and effective resolution process with feedback will cause number of referrals to decrease Properly monitored pda systems will prevent terminations Codes – standard structure allows for simplified negotiation and certainty

24. COSTS CAUSES: Legal process – can become expensive if no prior ground rules Termination costs No rehabilitation PRACTICE: IS COSTLY AND CAN TAKE TIME TERMINATIONS LEAD TO LITIGATION – EXPENSIVE FOR CONSUMERS – SECTION 86 (11) CONSUMERS ARE UNABLE TO RESTRUCTURE SOLUTION: QUICK AND EFFECTIVE RESOLUTION PROCESS WITH FEEDBACK WILL CAUSE NUMBER OF REFERRALS TO DECREASE PROPERLY MONITORED PDA SYSTEMS WILL PREVENT TERMINATIONS CODES – STANDARD STRUCTURE ALLOWS FOR SIMPLIFIED NEGOTIATION AND CERTAINTY

25. UNITY AMONGST DEBT COUNSELLORS, CREDIT PROVIDERS AND THE REGULATOR WILL MOVE THIS INDUSTRY FORWARD.