Black Sash warns Committee about illegal lending to the poor

Feb. 17, 2014 (5 years, 7 months ago)

During its deliberations on the National Credit Amendment Bill, the Portfolio Committee on Trade and Industry called in Black Sash, to brief members on the impact of unscrupulous lending on poor communities, specifically individuals who receive grants from the South African Social Security Agency (SASSA).

Black Sash national advocacy manager, Elroy Paulus, told the Committee that there had been an increase in the provision of unsecured credit recently. A report by the National Credit Regulator showed that unsecured credit has increased by 49% the past year.

The controversy stems from lenders or “loan sharks” providing people with loans when they have no assets. The only item they can leverage is the grants they receive from government. These lenders then make irregular, illegal and immoral deductions from the grant beneficiaries by putting debit orders on their SASSA bank account – outsourced to Cash Paymaster Services (as a way of banking with the unbanked).

In terms of the Social Assistance Act, only one type of deduction, a deduction for a funeral scheme is allowed to come off the SASSA card, and not more than 10% of the grant money.

In addition, debt collectors often take more than the guideline fees. After deductions, most beneficiaries have very little or nothing left. Sadly, the result is that borrowers struggle to repay the loans and are stuck in chronic debt and poverty.

Black Sash has argued for a more transparent and accountable access to credit. They have also asked for stronger consequences for non-compliance.

The Committee admitted that they were aware of the SASSA issue, but that the Bill did not directly address the grants. Members agreed that there needed to be consultation with the Department of Social Development and the beneficiaries so that Bill addressed the matter, specifically about penalties for non-compliance and putting a stop to the exploitation of the poor.

Read more about Black Sash’s “Stop SASSA-CPS Debits Campaign” here.



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