CAPE TOWN - The banking industry is divided on its approach to a payment holiday or debt relief as the sector yesterday announced steps it would take to provide support for consumers during the pandemic.
Payment holidays include an undertaking not to pursue aggressive debt collections and limitations placed on asset repossessions of debtors under financial stress.
The Banking Association of South Africa (Basa) met on Wednesday to thrash out a joint response to Covid-19 after Trade and Industry Minister Ebrahim Patel published an exemption notice in the Government Gazette on Monday (March 23), allowing collective discussions by banks on how to strengthen their response to the pandemic.
The exemption, drafted after consultations with the Competition Commission, enables banks to work together to lessen the impact of the disaster on businesses and private clients as well as placing limitations set on repossessions.
Basa said yesterday that its members had agreed “to do all in their power, while operating within the relevant regulatory frameworks, to responsibly support their customers and preserve the safety and soundness of our financial system”.
Banking services would remain open during the lockdown, including call centres and ATMs. Saswitch penalty fees would be waived in coming days, so customers could use any ATM and only pay their bank's usual fees.
Customers would be notified once this came into operation and were encouraged to visit branches only when unavoidable.
“The banking industry reaffirms its commitment to assist its customers in these difficult times and is working with regulators and government to maintain the strength and stability of the financial sector,” Basa said.
Banks were working within current regulations to assist customers and discussions continue with Treasury and the SA Reserve Bank to evaluate the possible further relaxation of regulations.
“We strongly encourage all customers to continue to meet their banking and financial services obligations wherever possible.”
Benay Sager, the chief operating officer for DebtBusters, said yesterday that payment holidays internationally had come with state backing.
However, in South Africa individual banks had offered help to customers who were up to date on their payments, “but I’m not sure they are prepared for the volumes: In just one day, our call volume doubled - we received more than 1200 queries from our customers who are concerned about their ability to honour their debt repayments.”
Sager said that consumers should not stop paying in anticipation of a payment holiday.
DebtBusters had approached major credit providers about payment “pauses” and/or extensions for some of its clients, he said.
DebtBusters was also calling for an extension to the 17.3 cover period, which is a change in circumstances notice, from three to six months, preventing creditors from aggressively pursuing payments.
“I hope that the banks are geared up for this. I’m not hearing information on credit life insurance - lenders should guide consumers on what they can claim from these insurances and the UIF. "We’ll only know next month what the real impact will be.”
Some banks have already announced payment breaks for debtors.
Standard Bank had offered three-month payment relief for small business customers with a turnover of less than R20million, which involves capitalising interest and fees, and has given students an interest-free payment holiday.
Nedbank is deferring loan payments, extending existing loan periods or extending additional credit to manage cash flow shortfalls.
It had also reached out to customers under debt review.
FNB said it could assist SMEs to stabilise their cash flow and customers to cover unexpected expenses. It expects to make an announcement soon.
Capitec would continue to handle credit stress queries on a case-by-case basis, using existing policies and procedures, which it believes are sufficiently robust.
Absa’s managing executive of home loans, retail and business, Geoff Lee, said the bank would take all possible steps to assist customers in financial distress through personalised credit solutions, which include “all-encompassing forbearance offerings, short and long-term payment plans, comprehensive debt review processes and distressed property refinance options.
"The solution would largely be influenced by the customer's situation.”
Precedents for payment holidays and other relief measures have already been set internationally.
Among other countries, in France, payments of rent, gas, water and electricity bills would be suspended, while the UK, which has been criticised for its lethargic response to the crisis, plans to subsidise the wages of workers facing unemployment, while British banks are offering repayment breaks on loans and mortgages. In New Zealand, banks have agreed to give mortgage holders whose incomes have been affected by Covid-19, a six-month payment holiday.