CRAIG DODDS

NEW legislation is on the cards to further crack down on dodgy lending practices, including the selling of credit life insurance at inflated rates, granting of credit against social grants, collection of prescribed debt and high interest charged by attorneys for debt collection.

This comes after investigations by the National Credit Regulator uncovered massive abuses in the industry, especially relating to the sale of insurance products covering debt incurred by consumers.

Last year this resulted in Lewis Stores agreeing to refund R67.1 million to customers.

The regulator found instances where retrenchment cover had been sold to pensioners, the self-employed and people on government disability grants, Parliament’s trade and industry oversight committee heard yesterday.

There are outstanding investigations into Finbond Mutual Bank, Joshua Door Trading and Shoprite Investments.

New regulations are to be submitted to Finance Minister Pravin Gordhan which will limit the amount that can be charged for credit life insurance, to between R2 and R4.50 per R1 000 of credit, excluding the cost of credit.

This is compared to the “practice in the market” of charging up to R50/R1 000 of credit, said Department of Trade and Industry director for credit law and policy Siphamandla Kumkani.

The biggest problem affecting indebted consumers was the continued collection of prescribed debt.

The Justice Department was preparing an amendment to the Prescription Act to ban collection and sale of prescribed debt, already prohibited under the National Credit Amendment Act of 2014, said acting deputy director-general for Trade and Industry MacDonald Netshitenzhe.

A draft Courts of Laws Amendment bill had been approved by the cabinet, which would direct magistrates to consider whether an affordability assessment had been done before credit was granted in cases where the credit provider was seeking a garnishee order.

Netshitenzhe said creditors were also getting consumers to unwittingly give consent for their credit agreements to fall under a jurisdiction far from where they lived, which meant they were not notified when orders were being considered against them in court.

The draft legislation would also deal with this.

A Debt Collector’s bill had been published for public comment which would limit the interest charged by attorneys for debt collection Netshitenzhe said.

However, there was opposition to this from lawyers and the department anticipated “strong lobbying” against it.

Meanwhile, regulations governing affordability assessments had included a requirement that an income buffer of R800 be left in cases where credit was obtained against certain social grants.

The Social Development department had sought to place strict limitations on funeral cover deductions against such grants, but had been taken to court by an insurance company, Netshitenzhe said.