Radical changes to NCA laid outComment on this story
Johannesburg - The portfolio committee on trade and industry has issued a radical new set of proposed amendments to the National Credit Act (NCA) that would substantially alter the way credit is granted.
In terms of the proposals, which were distributed to industry players on Friday, the board of the National Credit Regulator would be removed and the cost attached to credit insurance would be closely monitored.
It would be an offence to levy “prohibited charges” and credit providers would have to prove they had sent out section 129 notices to consumers advising them of their rights before taking legal action to recover the consumers’ debt.
The proposed amendments would allow the minister of trade and industry to introduce further regulations aimed at overseeing the conduct of participants in the industry.
Opponents of the amendments said they represented an attempt to legislate the industry as though every credit provider was irresponsible.
“They are creating an environment in which everyone must be treated like a three-year-old,” said one industry adviser.
Opponents also contended that the industry had not been given enough time to consider – and respond to – the radical new proposals.
However, supporters said the proposals represented the only way of ensuring a sustainable credit granting industry.
“When the NCA was introduced in 2007, it was an entirely new area for the government,” said Deborah Solomon of the Debt Counselling Industry, a web-based information platform for debt counsellors and consumers.
“Now it has six years of experience to draw on as it considers amendments to the act.”
She said the widespread problems in the unsecured lending market, as evidenced by recent developments at African Bank, JD Group and other unsecured lenders, had not developed overnight.
“There may be complaints that tougher regulations will discourage lending and stifle economic growth, but the reality is that we won’t have sustainable economic growth unless credit is provided on a sustainable basis.”
The latest proposals were distributed to interested parties on Friday and the deadline for comment was the close of business yesterday.
Joan Fubbs, the chairwoman of the portfolio committee, told Business Report yesterday that the new proposals “arose from the public hearings” that the committee had held over the past 12 months.
Business Report was unable to obtain comment from individual banks. Cas Coovadia, the managing director of the Banking Association of SA, said the portfolio committee “wrote to the individual banks asking for information at extremely short notice”.
“The Banking Association of SA also received the request for information and decided not to provide information at an industry level as each bank responded to the request and there was no logic to overlay an industry response on the individual bank responses.”
The proposed removal of the NCR board reflects the perceived ineffectiveness of the board and the desire to tighten up the lines of accountability between the minister and the NCR. An indication of the board’s ineffectiveness is the fact that it has pursued only one case of reckless lending – against African Bank last year.
While the lines of accountability would be tightened under the proposed amendments, concerns were raised about the capacity of the department to make best use of this provision.
One industry source remarked that the critical issue was not the need for tougher regulations but the need for better implementation of the existing regulations.
“The [department] seems always to believe that if there is a problem then new laws must be introduced, instead of trying to make the existing laws more effective.” - Business Report