Hon Chairperson, the national Minister, chairperson of the committee, Deputy Director-General Miss Zodwa Ntuli and the rest of the Department of Trade and Industry officials, members in the public gallery, first and foremost the ANC supports the adoption of the amending Bill.
Today marks an important milestone in this Parliament: the amendment of the National Credit Act which was adopted in 2005. The process was characterised by robust discussions amongst a number of stakeholders in the industry.
This was done as an integral part of sharing and drawing on lessons learnt since the adoption of the National Credit Act in 2005. The aim of this process is to ensure that there is enhancement of certain provisions of the Act as per the policy review process.
According to the Black Sash Trust, and I quote:
The adverse impact of credit on the quality of life of the poor has been for decades a vexing and deeply concerning issue. The impact of the lack of access to credit, and/or exploitation by those with economic power on the people who either struggle to ... cope with debt repayments ... [or indebtedness] ...
This has been a major challenge. This was the case both pre-1994 and post-1994 - but ...
It is the view of the trust that this has led to a number of devastating effects on a number of households in the past few years.
Credit touches the lives of many South Africans, with there being approximately 20 million credit-active consumers. A credit-active consumer is a consumer who incurs debt for the purpose of purchasing goods and services.
This includes purchases made on credit cards and in-store accounts, as well as loans. While credit can have positive implications for the person accessing it, it can also have a negative impact, including the destruction of a person's financial security.
Jean Jacques Rousseau, the Geneva-born philosopher, once said, and I quote:
Man is born free, and everywhere he is in chains.
During the public hearings held by the Department of Trade and Industry with various credit-market stakeholders, it emerged that some of the challenges faced by South Africans in terms of credit were the following.
The first challenge is the distortions in the credit market. Reckless borrowing and lending are not the only drivers of over-indebtedness. Economic and life shocks, a lack of employment and a lack of a savings culture play a major role; hence the need for remedies to deal with both short-term and long-term debt problems.
There is insufficient capacity to prevent and punish abusive market practices in the debt collection and administration industries.
The second challenge is redress measures for over-indebted consumers.
South Africans and their families are suffering from the consequences of financial difficulties, which are accompanied by embarrassment, worry and humiliation as a result of being pursued by credit providers and debt collectors. This situation is made worse by inadequate debt-relief measures and lack of access to redress, as most of the remedies are court-based.
Access to redress that is court-based is very limited for low-income consumers due to the cost of such redress.
In many cases judgments and emolument attachment orders have been obtained, even where residual net incomes are insufficient to meet even the basic living costs. The spotlight is constantly on the abuse of mechanisms, and this highlights how abusive market practices can plunge consumers into crisis.
While consumers can approach credit providers to restructure their debt, consumers face huge obstacles, which include low bargaining power because of a lack of knowledge, and competing multiple credit-provider demands, processes, policies and procedures. This is only one aspect which demonstrates the bully tactics of credit providers.
The third challenge is consumer education and administration.
The competing mandates and jurisdictions of various regulatory institutions, coupled with a lack of co-operation, make the problem worse. This is why we are calling for greater co-operation from all regulators so as to ensure that the stakeholders don't abuse the gaps that exist in so far as management of processes are concerned. Debt counselling is not a suitable process in all cases, and the cost of administering the process for debt counsellors makes servicing low-income consumers, consumers with no income and consumers who, for personal reasons, do not want it, unviable.
However, in terms of the Act there are certain aspects that seek to redress some of the gaps that have been identified. Also, consumer education has to be intensified in collaboration with all the different role-players in the industry.
The National Credit Act, Act 34 of 2005, aims to promote and advance the social and economic welfare of South Africans. But if we allow bad practices in the credit market, the noble goals of the National Credit Act will be seriously challenged by these abusive practices.
The National Credit Act further introduced initiatives to prevent reckless credit lending and also introduced measures to strengthen the debt- counselling process and debt restructuring, as well as to provide for the protection of over-indebted consumers.
Section 86 of the Act deals with the strengthening of the debt review process. This deals particularly with cases where creditors have, in the past, pulled out of the process after they had initially agreed to the restructuring of the debt.
The Bill provides for a correction of this situation in that once a debt review application has been filed in court or in the tribunal, no credit provider may pull out of the debt review process. This seeks to ensure that we deal with abusive practices and bully tactics.
Section 71 of the Act deals with rehabilitation after the debt review process. This section allows the consumer to re-enter the credit market after the consumer has been rehabilitated. If all other agreements have been settled and the consumer's mortgage is up to date under the rearranged agreement, the consumer can apply for a clearance certificate.
This means that the consumer can be credit-active again and not be imprisoned by debt from which he or she has been rehabilitated. Furthermore, mortgages take up to 30 years to pay off. That is too long a period for a consumer to be restricted from re-entering the credit market.