Cape Town - All credit providers will be required to register with the National Credit Regulator (NCR) to curb reckless lending.
South Africans are the most indebted country in the world, according to the World Bank, with most borrowing done informally.
Read: Reckless lending rockets despite law
Under the new regulation, credit providers who are not registered will not be able to claim money they lent or credit extended.
Minister of Trade and Industry Rob Davies previously published the notice on the draft determination of the threshold, to cater for public comment, on February 4 this year, where a period of 30 working days was allocated for public comment. This period closed on March 16.
“The desired outcome is to locate, regulate and monitor all credit providers in the Republic, in order to promote responsible credit lending, to curb reckless credit lending and reduce the overindebtedness of consumers,” he said.
Registered credit providers are now prohibited from engaging in unscrupulous conduct. This includes the criminal practices often used by illegal and informal credit providers such as retention of bank cards or IDs as security.
Davies said registered credit providers are able to enforce their right to repayment on unwilling consumers lawfully through established debt-collection procedures to counter any undue enrichment of a consumer unwilling to repay a loan.
DebtSafe managing director Wikus Olivier said that in the past, registering with the NCR was only required of credit providers with 100 or more debtors. But while the threshold will encourage more businesses to comply with the NCR, he said it would take years to completely eliminate reckless lending.
“People’s salaries are not keeping up with inflation. Many South Africans also face retrenchment. People are overindebted and will still resort to reckless borrowing.”
Debt Counsellors Association of SA president Paul Slot said there were 10 million citizens with impaired credit records. “This means that 10 million South Africans are struggling with debt. In 80 percent of the cases, they apply for more debt to repay loans.”
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