“All progress is based upon a universal innate desire on the part of every organism to live beyond its income.” — Samuel Butler , English composer, novelist and satiric author (1835- 1902).
“All progress is based upon a universal innate desire on the part of every organism to live beyond its income.”
— Samuel Butler , English composer, novelist and satiric author (1835- 1902).
“The business of a moneylender … has no where nor at any time been a popular one. It is an oppression for a man to reclaim his own money: it is none to keep it from him”
— Bentham, British reformer, 1787
SOUTH AFRICAN NATIONAL CREDIT REGULATOR
RURAL HOUSING LOAN FUND 14th ANNUAL WORKSHOP
Topic: General compliance to the NCA, reflections on consumer indebtedness
Ramabaka Abel Tshimole
15 October 2010
Consumer Credit Market
Legislative framework before National Credit Act
There was no single unitary legislation regulating the credit market
There were different pieces of legislation such as the Usury Act & Credit Agreements Act
Exemption Notice promulgated under the Usury Act established a regulatory body to regulate micro lenders
Legislative framework before National Credit Act
National Credit Register
Consumer credit institutions
National Credit Regulator
National Consumer Tribunal
10 x Credit
Credit Providers = 4,301
Branches = 33.875
e.g for credit providers
Intention is to stimulate provision of developmental credit focusing on small business development/support, low income housing and educational loans
166 Development Credit Providers Registered with an approximate total principal debt/loan book amounting to R42bn.
1. Statutory Reports Processing
2. Compliance Analysis of Statutory Reports
3. Conditions of Registration
4. Market Conduct – Flavour of the Quarter
5. Compliance Research and Education
5.1 Compliance Research
2.1 Significant Entities (Top 20)
3.1 Language Policy
1.1 Statistical Returns
3.2 Commit-ment to BBBEE
2.2 Remaining Significant Entities (Biennially)
1.2 Other Statutory Reports (AFOR, AFS, AER, ACR)
5.2 Industry Workshops
3.3 Combat of over indebtedness
2.3 Cyclical Reactive Review (Other entities)
3.4 Review of Conditional Registrations
Currently we are concentrating on desk top analysis (Off-site analysis)
Credit providers submit returns and reports
Plans to introduce on-site analysis
Assess the level of compliance in terms of the documents submitted to us in comparison to what is really happening in the companies by interviewing management team and staff
Proactive general assessment and evaluation of business practices and business models to identify areas of concern and aspects that may be good for the industry (best practices in a way)
Market conduct studies
Focus on initial inspection before the files could be escalated to investigations and enforcement to lessen the workload on them
Compliance Framework to inform the sequence, standards and methods to use
Advertisements/ Marketing materials
Following up on the non-compliance reported by IRBA on the reportable irregularities received
Complaints and call centre reports
On going depending on the non-compliance received
This will be the focus of complaints department
All registrants are required to submit reports at given times
Guidelines and industry workshops are provided to enlighten registrants
Consistency, accuracy, correctness, reliability, validity
Consultation requirement relating to enforcement action on banks, but note does not apply to insurers
Independence of some of the reports
The NCA somewhat rely on independent professionals like auditors or accounting officers
i.e. Assurance Engagement report
Current state of the consumer credit market
Statutory Statistical Returns submitted by Credit Bureaus & Credit Providers (including banks)
DEBT COUNSELLING ASSOCIATION
OF SOUTH AFRICA
A new profession was born in 2007
The aim is to assist the over indebted consumer
For some role players in the credit market this was an unwanted baby
Discussions between Credit Providers and Debt Counsellors
New rules and standardized procedures
Response to Debt
Sec. 86 (10)
Group 1 = informal sector, domestic workers, social grant recipients & agricultural sector
Low credit exposure, mainly furniture & unsecured. BUT – more significant relative to income!
Position may be improving if new credit limited
Often unaware of protective measures, e.g. UIF, insurance or counselling
Group 2 = Entry level workers in public & private sector, earning R1.8k to R6.1k/m
Significant exposure, both unsecured (< 3 years), vehicles & mortgages
Short term credit exposure ‘self-correcting’ over time, but mortgages & vehicles require assistance
Group 3 = middle income, R6k to R17k/m
High level of exposure to all products & high debt stress
Most vulnerable, to debt stress & loss of house if affected by either job loss or reduced income
Group 4 = high income, R17k/m +
high credit exposure, mainly mortgages, vehicles & credit facilities. Also 2nd properties. Income reduction biggest threat.
Greater ability to resolve own problems. But often resorts to DC assistance / protection.
Low income groups least aware of protective measure, whether counselling, UIF or others.
Awareness programme important – also on ‘self-protection strategies’
Debt counselling huge role in resolving cases of reduced income –legal problems major obstacle
Debt counselling little value in case of job loss, no income to service debt … some form of personal bankruptcy, while protecting housing?
Challenge is to recognise these realities, and to find mechanisms to reconcile the conflicting claims.
Engagement between debt counsellors and credit providers critical.
Monthly payments to creditors
Training & support: Accredited specialised training institutions & provided initial material. Implemented before effective date of Act. Also arranged follow up courses & workshops, to support debt counsellors & improve expertise.
NCR capacity: NCR appointed special call centre agents & complaints officers specialising in debt counselling – to deal with problems, intervene when things go wrong, protect homes from repossession wherever possible.
Payment distribution: NCR accredited specialised payment distribution agencies. To separate debt counselling from payment distribution. To limit risk of fraud & theft of consumer payments.
Audits & inspections: Performing ongoing audits & inspections on debt counsellors, PDAs and credit providers (including banks)
University of Pretoria review to identify problems
Audits on PDA’s
552 on-site visits + 65 investigations
NCR Task Team to investigate problems
Despite these challenges, debt counselling already made a significant contribution in creating a mechanism to ‘mediate’ between consumers and multiple creditors,
& limiting losses through repossession of houses & cars
BUT: cannot allow consumers to abuse process for payment holiday!!
Thank You !www.ncr.org.za