Thank you very much, Speaker. The National Credit Amendment Bill, which we are tabling today, is the product of an intensive assessment of the effectiveness of the National Credit Act of 2005, an assessment which involves extensive consultation with various stakeholders, both within and outside government.
All reviews agreed on one fundamental thing: The National Credit Act passed in 2005 was a groundbreaking, quality piece of legislation that has stood the test of time, and has been very prescient in view of the global financial crisis.
Fundamentally, the National Credit Act requires credit providers not to engage in reckless lending transactions, and if they did, it provided for the possibility that that transaction would be declared null and void.
To this end, the Act requires credit providers to conduct an affordability assessment and to provide for ways in which over-indebted consumers could have access to debt counselling and services to restore them to credit health.
I think this piece of legislation has been widely accepted as having stood our economy in very good stead in the face of the onset of the global financial crisis in 2008.
The origins of that crisis were precisely in reckless lending transactions undertaken in other jurisdictions, which were enabled to continue because the providers of those credit transactions simply turned the debt into securities and on-loaned debt. That was the origin and the source of what became known as "toxic debt".
In the light of that particular crisis our Act was a subject of much international interest and indeed commendation. However, the reviews highlighted that there was a need to amend a number of provisions of the Act, and to strengthen regulations and develop industry codes of practice to improve its effectiveness and fully achieve the intended outcomes of a fair, transparent and accessible credit market and industry in South Africa. All of this takes place against the background of a significant increase in unsecured lending in this country.
Within that broad category, some of these issues involve the extension of expensive consumer credit to poor people without conducting proper affordability tests, resulting in increasing over-indebtedness and impaired credit records, particularly among working people and the poor.
We also have seen a proliferation of noncompliant activities. An example is that the National Credit Regulator conducted an inquiry in the Marikana area and found that there were 11 credit providers who were noncompliant. They have been referred to the authorities for prosecution.
Gaps in the implementation of debt counselling and debt-review processes were also identified, leading to credit providers using parallel legal processes, including repossessions of homes, in total disregard of the mechanisms that were put in place by the Act to assist consumers to meet their obligations.
Hon Speaker, it is a matter of concern that more than half active consumers' records in this country are impaired. That means there are probably 10 million people with an impaired credit record in this country.
These listings on credit bureaus are difficult and costly to remove, even if the debt is repaid. This can have a very serious impact on many of our people, not just in terms of access to credit, but also in terms of access to employment and even things like access to rental property.
During the public hearings we heard many sad stories of consumers with financial troubles; consumers who needed jobs to be able to repay their debts, but were not able to get jobs because they were blacklisted at the credit bureaus. I think that term is appropriate, because most of the people who are listed at those credit bureaus are black people!
It is against this background that we are introducing the National Credit Amendment Bill, and it covers the following areas. It is intended to improve the effectiveness of debt counselling and debt reviews. As I mentioned earlier, there is a loophole in the existing law. This loophole was created by a court interpretation of section 129, which allowed credit providers to take action against those in default, even if they were undergoing debt counselling or a similar procedure. This has resulted in people having their houses attached, and so on.
The amending Bill seeks to alleviate this situation by introducing a provision that allows a consumer to be issued with a clearance certificate if this consumer has paid up all other debts except for the mortgage payment, and has no arrears on the mortgage payment. What has been happening up to now is that if somebody has a mortgage payment and other debts, and those debts were the subject of debt counselling, an action would be taken against the person, namely seizing their property too.
Our research and investigations by the National Credit Regulator have revealed a serious gap in how affordability assessments were conducted; if indeed, they were conducted at all. The architecture fundamentally requires that a credit provider must conduct an affordability assessment to ensure that the consumer can pay.
Credit providers, in terms of the existing law, are allowed to develop their own affordability assessment models. In many cases we found that lazy use of credit bureau information had become the quick and dirty way of deciding. Basically, if someone had an impaired credit record then they would not be given credit; if they did not, then anything goes.
The amending Bill will empower the Minister to prescribe affordability assessment regulations to achieve uniformity, consistency and a higher standard in this respect. The Bill also provides for improving standards of service and procedures for debt counsellors; for the regulation of alternative dispute resolution agents; and for the registration of payment distribution agents. It also extends the powers of the National Consumer Tribunal in respect of matters falling under the National Credit Act.
These matters take time as one awaits the normal court procedures, and they are very costly in terms of court procedures. The National Consumer Tribunal will be able to provide a speedy redress to consumers in this regard. A major provision in the Bill amends sections dealing with removal of adverse credit information to allow for this adverse credit information to be removed automatically and immediately on payment on an ongoing basis.
As things stand now, even if you repay your debts, you are not removed from the adverse-credit-information record. You have to go through a costly process involving access to courts, lawyers, and so on to remove your name.
We think that this provides a number of disadvantages. Firstly, it is very difficult for one to clear one's name. Secondly, it provides a perverse disincentive against repaying the debt, because repaying the debt doesn't clear your name. So why should you repay the debt if you still are unable to clear your name?
What we will be providing for is an automatic removal of adverse credit information on the payment of the debt in question. This particular provision is linked to the announcement, which we made through the Government Gazette, in notice No 37 386. We had responded to the work which should be developed in the NCOP to remove, on a once-off basis, all adverse credit information and all information pertaining to paid-up judgments. This will take effect on 1 April 2014, when no credit bureau will be permitted to use or supply that information to anybody in the industry, and then they will have two months to get that completely off their records.
We believe that this is an important step forward in allowing many of our consumers and many of our people to restore themselves to credit health. The amending Bill provides for improved co-operation among regulators.
The portfolio committee has indicated that they are going to require through the memo they have introduced - which we are happy to endorse - that within six months of the passing of this Bill the cost caps on interest and associated charges will be reviewed.
There are prohibitions on predatory and deceptive advertising of credit to consumers. There are provisions for dealing with illegal credit providers and the prohibition of the selling and collection of prescribed and extinguished debts. There is also going to be an important reform in that we are abolishing the board as part of the process of bringing regulators into a closer relationship with the department.
I have pleasure in commending this Bill to the House. I think it is an important piece of legislation and an important reform which will be to the benefit of our consumers. I look forward to this debate. The hon McIntosh has already warned me that he is going to give me a big "klap". I hope this is not a savaging by a dead sheep, which I suspect it will be. Thank you very much.
Hon Speaker, hon members of the House and compatriots, greetings to you and to the people of our great country, South Africa. Indeed, we bring you good news with this Bill, as every member in the multiparty Portfolio Committee on Trade and Industry will confirm.
It is good news because when this Bill is passed today, it will fundamentally transform the lending landscape of our country. [Applause.] Just as the National Credit Act of 2006 protected us against the ravages and the contagion spread ... [Interjections.] ... not by you, hon Hill- Lewis, but by more eminent people in the West, where many of the banks went under. What the Bill seeks to do ... [Interjections.]
Order!
Speaker, on a point of order: The hon Fubbs referred to "Hill-Lewis" and we have just had the hon Naledi Pandor also referring to the request for using "hon" when referring to a member.
I thought I did.
No, you did not.
My apologies. I seem to use that more in my committee.
Speaker, on a point of order: My name is Ollis. The hon Hill- Lewis is not even in the House.
Proceed, hon member.
Well, I happen to know that he is a very diligent member of the committee ...
If I may move on, what this Bill seeks to do, as it contributes to economic freedom, is to develop and nurture an environment that balances responsible lending and borrowing with access to affordable credit.
The Bill now will ensure that credit providers do not adopt or continue with the cavalier attitude they have had so far where, when you want a loan, you can give them any income you choose and the loan is granted. In fact, you can get the loan just by using a telephone or at an automated teller machine.
It has been far too easy for credit providers, including the financial houses of our country, simply to provide credit - easy loans. You do a little dance, we see it on television - "Come and get it. Come and get it."
What they don't tell you is that the moment you have taken that loan, you will begin to incur initiation fees and administrative charges. If you are not careful with short-term loans and also, of course, long-term loans, you would be forced - forced! - to obtain what is called credit loan insurance. No one should be forced to go that route, especially with short-term credit.
To come back to this culture, the Minister has already indicated that his thinking is in line with what we are, to a large extent, looking at.
Therefore, on behalf of the committee, I would like to congratulate the Minister on taking forward the process that started with the NCOP's resolution, as all the provinces, without exception, requested a review of adverse credit information, as well as seriously looking at its removal.
I stress that it is the removal of information and not the fact that you still owe the capital or the debt. It's not that at all, but the way in which people sometimes talk in this House you would think they were giving them an amnesty with regard to the capital overnight.
We are not doing that! All we are saying is that from now on you won't be imprisoned by your debt to the extent that you cannot secure employment. We all - including members to the left and the right of this House - know of people, even among our own families, who cannot get jobs as a result of this practice. And I am glad to see some members nodding over there.
The ANC is exerting its full energy to build an inclusive economy. [Interjections.] Yes, I am glad to hear that.
On the other hand, we find irresponsible and reckless credit providers and money lenders who defy legislation. We also heard from the SA Reserve Bank and National Treasury that regulatory arbitrage has become a common practice. In fact, the Department of Trade and Industry, through the National Credit Regulator, also agreed that this was the case.
Regulatory arbitrage has become a game of, "Hum, we don't fit here under national. Haw, but we fit there." And between the humming and hawing they escape through the gap. Well, that is going to be stopped. You all know about them. [Interjections.] You all know! I see hon Marais laughing over there.
I do want to say that what the Minister has done, which he has shared with the House today, is to agree to the removal of all adverse credit information and paid-up judgments. The fact that it will come into effect from 1 April, hon Minister, should not discourage anyone.
I want to share with this House that my only son got married on 1 April, and he has been happily married for more than 12 years. So it is a very good date for me, thank you very much!
On behalf of the House and everyone sitting here - and I am sure you would share in this with me - I want to appeal to all the stakeholders that provide credit, big and small, to consider the country they are creating with this edifice of indebtedness. For one moment consider the problem of impaired debt and acknowledge that this is not the way to create a sound economy.
It is not the way to grow the economy. It is simply the way to fall over the precipice. Think about the call made by our late icon, Tata Madiba, whom we are all inspired by as we sit here. He called upon us to ensure that the poor and the working class truly benefit from the material fruits of the freedom for which we had fought in different ways. Now this Bill can help realise that.
I come from a farming background and one knows only too well that the greedy credit providers should take one thing into consideration. In fact, I feel like taking them to a farm so they can take a look. You can look after the tree, you can nurture it and get a tree full of fruit. However, deprived of nurturing, hemmed in and crowded by interest and administration fees to the point where the tree cannot grow, what fruit do you get? [Interjections.]
Nothing! You all know it. Absolutely no fruit! And our people who work as labourers on the farms have a very clear understanding of that. Someone once said to me, "You know what these credit providers remind me of? They remind me of something I heard in my village: Guess what? Why buy a cow when you can get free milk? Why remove interest rates, administrative charges and initiation fees when it's coming in for free?" I'm telling them now, they had better buy cows. [Applause.]
The amendments to the Bill have incorporated codes of conduct. [Interjections.]
Order, hon members!
Mr Speaker, it's clear that they have never been to a farm.
We learnt with some surprise that there was a growing industry, a grouping of payment distribution agencies, PDAs. That does underline the creative spirit of people - identify a gap, in you run and make quick money.
The problem is that they were never registered and to a large extent they were linked directly to the banks or to credit providers where the debt was incurred. However, they were not registered, and they didn't have to be registered, so they could run wild while they added on their fees.
What will happen now is that it is a process of formalising the arrangement, and they will be required to comply with strict registration requirements such as holding a trust account and being compliant with the National Payment Systems Act. Furthermore, credit providers will not be allowed to have a direct or indirect interest in the management or control of the operations of a PDA.
Then of course there is the rehabilitation of debt providers. Up to now it has been extremely easy when someone has gone into a debt review process - the creditors come in, they have a look at the terms, and they withdraw. Suddenly, they jump in first and probably run to the Sheriff to start attaching half your property.
Now, however, once they to come to the party, as it were, and agree that the person is in debt, that they would like to get some of their money back and that they would also like to enable the person to get employment, they can't jump out. Now I think that that is a major step forward.
Some of the words used, such as "prescribed debt", are only identifiable if you look them up in the dictionary. A lot of us think of medical prescriptions and the like. Very few people know what prescribed debt is.
When they then get a letter out of the blue after having being retrenched for two or three years, or after some awful tragedy had befallen the family, they get a letter demanding the money back. They do not realise that in spite of the threat that they will be taken to court, the likelihood of that happening is nonexistent.
The debt has been prescribed. They may pay it back, but unfortunately they are not at all familiar with what it actually entails.
Some of us in the committee were not familiar with that process. If you go to your own neighborhood, an estate, a flat next door or a townhouse, you will learn that not everyone is familiar with this term. We have had to intervene here.
I see that we have about one minute left. Therefore I want to point out that this Bill will go ... [Interjections.] I am now talking to the people of South Africa and not those who want to scream and shout. It will go a long way to restoring economic freedom.
It will go a long way in giving back some of that economic independence you may have lost by being so overindebted that you became enslaved to a credit provider with no hope of ever getting out of his clutches.
I would like say to the Minister that it took courage to bring this Bill here, but I am happy to say that a multiparty committee actively contributed to and supported the provisions. There was one member from Cope who could not cope with one of the clauses, but as a whole they supported the entire Bill.
Furthermore, I would like to thank people such as Deputy Director-General Ms Z Ntuli and her band of economists and helpers, and the National Credit Regulator's Ms Nomsa Motshegare, for also coming to the party.
It is important for all of them to realise the importance of working together, including all departments. We have a co-operative governance clause in our Constitution. We need to show the world that we can co- ordinate our work for the benefit of all South Africans. I thank you. [Applause.]
Thank you very much, Speaker. How on earth can I compete with a speech like that? [Laughter.] There is absolutely no way. Hon Fubbs, it's very unfair of you to present such a speech and then I have to compete with that. It's just not possible. [Laughter.]
Speaker, the industry sector for smaller loans and credit transactions emerged over a long period; and it gave opportunities mainly to individuals and smaller businesses to access regular and emergency credit, predominantly as unsecured loans and credit transactions.
This was a very important development, as it gave many individuals access to credit who otherwise would not have had that access.
Although some unsecured micro loans and credit transactions have been controlled by legislation and regulations, it became apparent that there was a huge increase in personal debt, specially amongst the vulnerable and poor communities. This was due to an increasing number of transactions falling outside the current provisions for which there were legislation and regulations.
The explosion of easy, unsecured credit - often extended unscrupulously and without proper checks - has left many South Africans owing more than they can afford to repay.
According to the National Credit Regulator, NCR, more than nine million South Africans have more debt than they can afford to service on a monthly basis; and more than 16 million South Africans have an impaired credit account, which means that they have fallen behind on their monthly payments or have stopped paying.
Many poor South Africans have been exploited by credit providers, reckless lenders and loan sharks who charge exorbitant interest and handling fees, as well as adding on premiums for credit insurance, regardless of the consumer's risk profile and despite the loans being for small amounts.
Some credit providers still illegally confiscate customers' property, force them to hand over their automated teller machine, ATM, and SA Social Security Agency, Sassa, cards and even force customers to sign voluntary garnishee orders.
Access to credit, both secured and unsecured, is a necessary ingredient in any growing economy. In the South African context, government has a responsibility to ensure that consumers are protected against exploitation.
Dit het vir die komitee duidelik geword dat ondersoek ingestel moes word na slaggate wat in die wetgewing gelaat was, nie met die doel om verbruikers te beperk en om aan hulle voor te skryf hoe, waar en wanneer hulle van krediettransaksies gebruik mag maak nie, maar om 'n verpligting op die bedryf te plaas om aan sekere beginsels en regulasies te voldoen wat tot 'n groot mate reeds binne die formele deel van die kredietbedryf toegepas word.
Alhoewel die oop geleenthede tot lenings en krediettransaksies vir alle verbruikers gesteun moet word, is dit die regering se verpligting om te verseker dat daar nie onverantwoordelik gehandel word deur kwesbare en arm gemeenskappe uit te buit nie.
Hierdie voorgestelde stukke wetgewing het ten doel om te verseker dat veral mikro-uitleners en kredietverskaffers verantwoordelik en aanspreeklik gehou word vir onbillike en onregverdige krediettransaksies, waardeur voldoening aan die wetgewing en regulatoriese vereistes baie meer verpligtend gemaak sal word met baie ernstige gevolge indien dit in gebreke sou bly. Die komitee het hierdie netelige kwessie ondersoek, openbare onderhoude gehou en tot laat in die nag gedebatteer oor die inhoud van die voorgestelde wysigings.
Ek moet die voorsitter komplimenteer want ek het dit nooit ervaar dat politieke belange en ideologie voorrang geniet het nie. Dit was deurlopend om die beste belange van die verbruikers te prioritiseer terwyl die bedryfsektor ook nie lamgel moes word nie.
Indien daar onbedoelde en onbeplande gevolge is wat dalk negatief op beide verbruikers en die industrie-rolspelers mag impak waarvoor ons nie voorsien het nie, versoek ons dat dit hanteer moet word sodra dit opkom.
Die voorgestelde wetswysigings gee ruimte vir regulasies wat die operasionele deel van die wetgewing moet help om effektief te funksioneer. Ons versoek die Minister om sensitief te wees wanneer die regulasies uitgevaardig word, spesifiek om te verhoed dat die bedryf onbedoelde skade ly.
Gelukkig is daar tydens die komiteebesprekings ooreengekom dat die voorgestelde regulasies aan die komitee voorgel moet word, om te verseker dat sulke uitdagings hanteer en bestuur word in lyn met die bedoeling van die oorwegings. (Translation of Afrikaans paragraphs follows.)
[It has become clear to the committee that loopholes left in the legislation should be investigated, not with the intention to limit consumers and to prescribe to them how, where and when they might make use of credit transactions, but to place responsibility upon the industry to comply with certain principles and regulations which, to a great extent, are already being implemented within the formal sector of the credit industry.
Although open opportunities to loans and credit transactions for all consumers should be supported, it is the government's responsibility to ensure that the matter is not dealt with in an irresponsible manner by exploiting vulnerable and poor communities.
These proposed pieces of legislation aim to ensure that micro lenders and credit providers in particular are held responsible and accountable for unfair and unjustified credit transactions, whereby compliance with the legislation and regulatory requirements will be made more compulsory, with very serious consequencess if such compliance is lacking. The committee investigated this contentious matter, conducted interviews and debated about the content of the proposed amendments late into the night.
I must congratulate the chairperson, because I never experienced that precedence was given to political interests and ideologies. It was a case of consistently prioritising the best interests of consumers while at the same time not paralysing the industry sector.
If there are unintended and unplanned consequences that might impact negatively on consumers and industry role-players for which no provision was made, we request that they be dealt with as soon as they arise.
The proposed amendments to the Act leave room for regulations that should be of assistance in making the operational part of the legislation function effectively. We request the Minister to be sensitive when regulations are promulgated, specifically to prevent the industry from suffering unintended damage.
Fortunately it was agreed during the committee discussions that the proposed regulations should be submitted to the committee to ensure that such challenges are dealt with and managed in line with the intention of the considerations.]
The objectives of these amendments include the empowerment of the NCR and its chief executive officer, inclusive of all the relevant responsibilities and accountabilities. This is to ensure that the entire industry - including the until now unregulated, unregistered and often illegal micro lenders and credit providers - complies with the same principles and requirements when dealing with consumers and their right to protection from exploitation by unscrupulous loan sharks and credit providers.
It will also arrange for the organisation and operation of the national consumer tribunal in support of the National Credit Act's objectives. Other important principles supported in the proposed amendments include the following.
First, provision is made for the removal of the board from the governance structure of the NCR. This implies that a noneffective burden has been removed, while all the other essential governance, accountability and oversight structures remain in place.
Second, provision is made for the registration and voluntary cancellation of all payment distribution agents, so that no-one can operate informally, unscrupulously or illegally. This will give some assurance to consumers under debt review and debt rearrangement that they will not be exploited.
Third, it will tighten measures relating to debt counsellors and the conduct of their practices. This will ensure compliance by all role-players and stakeholders in the best interests of consumers and the industry.
The fourth principle ensures the removal of adverse credit information once the consumer, under a debt review and debt rearrangement, has fulfilled his obligations or has been rehabilitated under those agreements, except for mortgage agreements, under the debt review process.
Fifth, the primary home is protected when distressed debt must be evaluated and rearranged under a debt review process.
Sixth, there are affordability assessment regulations to address the problem of irresponsible and nonjustified granting of credit. Lenders and credit providers are now obliged to consider the affordability of debt for the consumer. Seventh, the registration of any person or party, including micro lenders and so-called loan sharks who offer credit, is prescribed. Entry levels will be lowered via regulations to ensure that all lenders and credit providers are included and are registered inclusive of all the relevant compliance requirements.
Eighth, there may be no termination of a credit agreement when the dispute is before a court or during debt counselling or mediation. This will allow for a process of proper consideration and restructuring, if need be, to assist the consumer to eventually be able to fully settle the distressed debt. The intention is not to put the industry at risk or for them to forfeit on collections in terms of a credit agreement.
The ninth principle pertains to the prevention of the sale of debt, continued collection of payments or reactivation of debt under an agreement to which this Act applies, which debt has been extinguished previously under the Prescription Act.
Tenth, debt counsellors will be obliged to issue rehabilitation certificates once the consumer has complied with the requirements of the rearranged debt agreement.
Eleventh, the Minister will prescribe an industry code to regulate the interaction between the industry stakeholders in offering their services to consumers, consistent with the purpose and principles of this Act; and finally, it also provides for the capping of costs, interest, levies and credit insurance costs via regulations by the Minister in consultation with the Minister of Finance.
We have agreed in the committee that the regulations, as provided for in this Bill, must be brought back to the committee for oversight and inspection.
We urge the Minister to be cautious and not to burden the industry unnecessarily with regulations that might dilute the purpose, intent and merits of the amendments discussed and considered.
Regulations must be in support of improved and responsible opportunities to consumers, specially those from vulnerable and poor communities.
Voorsitter, alhoewel ander wette reeds in plek is waardeur sekere misdrywe ondervang moes word, is die voorgestelde wysigings aan die Nasionale Kredietwet nogtans 'n poging om 'n bedryf te steun waar verbruikers optimaal ondersteun kan word om verantwoordelike en geregverdigde toegang tot krediet en lenings te kry waaruit hulle volle verpligtinge nagekom kan word. Verantwoordelike verbruikersbesteding via kredietooreenkomste kan 'n sterk katalisator vir volhoubare ekonomiese groei en werkskepping wees. [Applous.] (Translation of Afrikaans paragraph follows.)
[Chairperson, although other Acts are already in place that provide for the prevention of certain crimes, the proposed amendments to the National Credit Act are yet another attempt to support an industry where consumers can be supported optimally in order to get responsible and justified access to credit and loans that will enable them to take full responsibility for their obligations. Responsible consumer expenditure via credit agreements can serve as a strong catalyst for sustainable economic growth and job creation. [Applause.]]
Thank you, Madam Chair. The hon Fubbs might not realise it, but Minister Gugile Nkwinti has just bought my farm - well, not the Minister personally, although he probably has a farm somewhere near Indwe - but I do have some cows for sale if hon Fubbs wants to buy some. [Applause.]
Madam Chair, this Bill is a very important one. In fact, one of the achievements of this Parliament in the past 20 years has been to pass important and world-class legislation for financial, banking and credit reform. In fact, a lot of it is regarded as the best in the world.
Without credit an economy cannot grow and flourish. The Grameen Bank in Bangladesh has shown that. The National Credit Act is credited - no pun intended - with being one of the factors enabling our economy to weather the 2008 global crisis.
We must have a fair balance between lenders' risks and borrowers' needs for credit, and this applies to the rich borrowers as well as poor borrowers or low-income borrowers.
We must remember that the regulated micro-lending industry plays a genuinely important, even vital, role of providing credit for many members of our society. They provide a kind of bank overdraft facility.
There are concerns. Let us remember that it was the hon Mario Oriani- Ambrosini who brought an amending Private Member's Bill to the House in late 2012. He then came here again in February 2013, but his ill health made it difficult to proceed further. The Bill and this amending Bill have the support of Cope. There are some very, very good improvements in it.
However, what is of concern is the process; the way in which it was rushed through from early on in January. In fact, proof of this is that the Minister released a press statement this morning at 12:00, in which he said that he was already going to regulate Notice 387.
I have one or two questions for the Minister for when he replies. Is it not ultra vires to pass a Notice in terms of a Bill that has not been passed? Is he satisfied that he has the correct authority to do so; and when was that Notice drafted? Was it drafted in January or was it drafted during the past few days?
The other concern that we have is that this Bill is a challenge to the Twin- Peaks policy in terms of governance. The Treasury and the Reserve Bank were obviously a little twitchy about it. The Department of Justice was also affected by it, and I believe that the Department of Trade and Industry is going to encounter certain problems along the way, although we did our best in the committee.
Let me say that in the committee ...
... en laat ek dit sommer in Afrikaans s: die DA het geskitter in hul afwesigheid! [... and let me just say it in Afrikaans: the DA were conspicuous by their absence!]
However, we did our best with the Bill to address the concerns of Treasury and the Reserve Bank. [Interjections.] Now at the last minute we have a really interesting and important Bill. However, the provision for the complete expunging of credit records is short-sighted.
There was important evidence from the Credit Providers Association which the Minister and chairlady of the committee chose to ignore. I believe it is dangerous to put our reputation in terms of credit bureaus at risk.
Madam Chair, on a personal level, this is my last speech in Parliament. I first came here in April 1974. I am very well aware that the gap that a politician leaves is similar, hon Sisulu, to when you pull your hand out of a bucket of water! [Laughter.]
In the past 40 years I have made four maiden speeches. However, my real pleasure is to speak in this debate and say that I can look back on 20 years of democracy.
My commitment to achieving a nonracial democracy started 50 years ago when, in 1964, I joined the Liberal Party of Alan Paton. I think that he, Edgar Brookes, Jordan Ngubane and Peter Brown would have been thrilled, just as I am, to be living in South Africa today.
I have been privileged to have been part of and to have lived through these changes. I have enjoyed myself tremendously.
There is no utopia in any human society, but there is no doubt in my mind that a parliamentary democracy with regular and free elections is the finest flower of human civilisation. It is a beautiful but a fragile flower. The price we have to pay is constant vigilance. That is the price of liberty.
I am confident that there are more than sufficient members in this House, and in all our political parties, who are deeply committed to protecting and deepening our democracy and its Constitution.
South Africa, Madam Chair, I believe is in safe hands. The cause for which I entered politics half a century ago has been achieved, so there is no sense in hanging around any longer. [Time expired.] [Applause.]
Madam Chair, may I have your attention please? I thought there was a protocol in Parliament that the last speech of any member would be extended by twice the length of time allowed. [Applause.]
Well, I actually extended it by four minutes.
Madam Chair, the IFP supports this Bill with some reservations and sadness. It is worthwhile noting how this Bill came about.
The hon Dr Mario Oriani-Ambrosini, MP, fought for two years through extended litigation to introduce a much more limited set of amendments to the principal Act - effectively consisting of only two amendments.
Thanks to the excellent stewardship and chairmanship of the hon Joan Fubbs, MP, Dr Mario Oriani-Ambrosini's Bill was processed in an excellent manner, which constitutes a proper example of how Private Member's Bills ought to be processed.
Public comments were received and they were all in favour of Dr Oriani- Ambrosini's amendments. The department itself indicated that it saw merit in Dr Oriani-Ambrosini's Private Member's Bill, but rejected it on the basis of not wanting to have a piecemeal approach to the amendment of the principal Act, which, in their minds, required a broader overhaul.
This led to a negotiation between the committee and the department in which the department finally committed itself to bringing forward this Bill, also as a response to Dr Oriani-Ambrosini's Bill.
The committee reported to the House on Dr Oriani-Ambrosini's Bill, indicating that it rejected it on the basis of its contents being incorporated in the present amending Bill.
Yet the present amending Bill does not contain the two amendments of Dr Oriani-Ambrosini's Bill in spite of the people of South Africa having indicated that they wanted them.
One amendment would have enabled the court to suspend the accrual of interest for those under debt review so as to give the struggling people of South Africa a financial break in these times of economic harshness.
One must conclude that the only reason why the two amendments were not taken up in this Bill was that Dr Oriani-Ambrosini was not present in the committee to argue for them himself.
One wonders what this Parliament is made of if it takes the absence of one of its members, no matter how bright, for a committee to be in breach of the commitments it made to this House. One must also wonder how the department could be permitted to get away with having misled the committee.
I now want to turn my attention to the contents of the Bill. It is a welcome step in the right direction, but more must be done to alleviate the burden on our citizens who are currently under debt review. In this regard, the IFP suggests that the department begins by taking a serious look at the amendments as introduced by hon Oriani-Ambrosini's amending Bill. I thank you.
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.
Hon member, your time has expired.
The ANC supports the Bill.
Mandigqibelise ngelithi, phaya kwiBhayibhile kwincwadi yeZililo isahluko sesihlanu kuthiwa "kukhumbule, Yehova okusehleleyo, ubheke, uyibone ingcikivo yethu." [Let me finish off by saying in the Bible, the book of Lamentations, verse 5, says, "Remember, O Lord, what has happened to us, and see our disgrace."]
Your time has expired, hon member.
I-ANC iyawuxhasa lo Mthetho osaYilwayo. Izile yaza kuhlangula. [The ANC supports the Bill. It is here to rescue.]
Thank you, Chair.
Die VF Plus is 'n party wat glo dat die vryemark beskerm moet word en onbelemmerd moet funksioneer. Tog is daar gevalle waar 'n onbelemmerde mark geweldige ontberings kan veroorsaak. Dit is dan ook die geval met kredietverlening. (Translation of Afrikaans paragraph follows.)
[The FF Plus is a party which believes that the free market should be protected and must operate unrestricted. Yet there are instances where an unrestricted market can cause enormous hardship. This is also the case with the granting of credit.]
No modern economy can function without credit. However, there must be a balance between credit exposure and savings. In that regard we are quite positive about the Minister of Finance's plan to increase savings and provide for compulsory retirement planning.
As for the credit industry itself, and given the abuses that take place, we welcome the National Credit Amendment Bill as an instrument which strengthens consumer rights.
As much as we do not agree with excessive market intervention, we also recognise that protection against unscrupulous creditors is required. Creditors also need to be protected against themselves, as reckless credit provision harms them and ultimately, on a collective basis, harms the country as a whole.
Suid-Afrika se ekonomiese uitdagings kan soveel beter aangepak word indien ons meer sou spaar. Aan die een kant beteken dit dat roekelose kredietverlening ingeperk moet word, en aan die ander kant dat kredietverskaffers wat wel hieraan deelneem, gestraf moet word.
Dit is veral die banke en mikroleners wat te maklik krediet toestaan en dan sonder genade toeslaan op verbruikers wat gewoonlik nie geletterd genoeg is om te verstaan wat die implikasies van die lenings is nie.
Dit het veral in Marikana sy kop uitgesteek. Daar is egter nog baie Marikana's wat wag om te gebeur en daarom is die wysigings op die Kredietwet van groot waarde. Die kriminalisering van onwettige heffings sal veral 'n duidelike boodskap aan kredietverskaffers stuur om nie gewone mense in slawerny van skuld te dompel nie. (Translation of Afrikaans paragraphs follows.)
[South Africa's economic challenges could be tackled so much more effectively if we were to save more. On the one hand this means that the reckless granting of credit must be curtailed, and, on the other hand, that credit providers who are party to this must be punished.
It is in particular the banks and the micro lenders who grant credit too readily and who then come down without mercy upon consumers who are usually not literate enough to understand the implications of these loans.
This was particularly evident in Marikana. However, there are still may Marikanas waiting to take place, and the amendments to the National Credit Act are therefore of great value. Criminalising unlawful levies in particular will send a clear message to credit providers not to plunge ordinary people into a slavery of debt.]
As I have stated before, hon Mrs Fubbs, it is a pleasure for me to serve on this committee. We agree on most issues, save for the grave interventions in broad-based black economic empowerment, and it is good to see that together we can fight injustices against consumers. It is after all part of the philosophy of the FF Plus to fight injustice wherever we can.
Thank you, hon Chairperson. I agree with the FF Plus that it is a blessing to work for this committee.
The ANC and the progressive people of South Africa, ie the South African rainbow nation, are proceeding to take our country forward to the nation that our icon, and the world's icon, Tata Rolihlahla Nelson Mandela, referred to as an ideal. In his own words he said, and I quote:
I have fought against white domination and I have fought against black domination. I have cherished the ideal of a democratic and free society in which all persons will live together in harmony with equal opportunities. It is an ideal ...
And I repeat, "an ideal" -
... which I hope to live for and achieve. But if needs be, it is an ideal for which I am prepared to die.
The ANC calls on all South Africans to vote right on 7 May 2014, and "right" means to vote ANC, because this is the only way to sustain and intensify the good story we are currently telling.
The good story continues as we amend various Acts of this House to ensure the protection of beneficiaries and to make it difficult for abusers to take advantage of the living standards of our previously disadvantaged people.
Today's debate is about the National Credit Amendment Bill. In this debate I wish to speak about credit as a concept, the different levels of credit and, briefly, its advantages and disadvantages.
More importantly, I want to speak about consumer credit in South Africa and the importance of this amending Bill, if time allows. I also want to talk about the process that has taken place to get us to where we are. [Interjections.] Thanks, we are there.
What is credit? I am saying that credit is an agreement between the borrower on the one hand, and the lender on the other hand, according to which the borrower receives money, goods or services from the lender.
This is done with the view that the borrower will pay back to the lender the principal amount plus interest in a manner, and on dates and times as agreed to by the parties, and provided that the whole process is in line with the relevant legislation. The granting of credit takes place in different forms and depends on different levels.
Firstly, at a global level, countries borrow from each other, from the World Bank or from the International Monetary Fund. It is mainly for the development of those borrowing countries.
Second, at business level, credit is acquired for developmental purposes, ie to start a new business, to sustain an existing business or to expand an existing business.
Third, at the household level, credit may also be acquired for developmental purposes. This developmental credit includes, but is not limited to, educational loans, the development of small businesses and the acquisition, rehabilitation, building and expansion of housing, etc.
Lastly, at the individual level, credit is also acquired for purposes other than development. This includes, but is not limited to, in-store clothing accounts, furniture accounts, money lending, credit cards, etc.
Credit has advantages if well managed. Developmental credit is paramount and it promotes entrepreneurship; assists households; contributes to the growth of the economy; boosts the purchasing power of the borrower; assists in the event of emergencies; and assists in the growth and development of society, for example, education, health and the establishment of small businesses, etc.
If credit is not well managed, it may lead to overindebtedness, which in turn may lead to the ruining of your credit score. Credit can tempt you to spend more money than you have.
Consumers may easily roll over the debt, ie paying and borrowing again and again, which might lead to their having a legacy of debt. Poor management of credit may also lead to defaults, thereby causing you to pay default fees and interest charges, thereby increasing the amount you owe.
Let me return to consumer credit in South Africa. I have just given a picture of credit at different levels and how it comes about.
The national consumer credit market report on credit results tabled in September 2013, reveals that of the approximately 20,29 million active credit consumers in South Africa, 48% have impaired records. For the information of the public, "impaired record" means that the record of a consumer shows he or one of his accounts is classified as either being three or more payments or months in arrears, which has an adverse listing, or reflects a judgment or administration order. That would mean you have an impaired account.
High debt levels resulting from unemployment, partly caused by the global economic slowdown, are a cause for concern and often warrant government intervention.
The adverse impact of overindebtedness must be prevented. Government must intervene in such a manner that it benefits both the consumer, on the one hand, and on the other, the other half of the market, which is the creditors.
The National Credit Amendment Bill is one of the methods of government intervention that we are referring to. The importance of this amending Bill has been outlined by a number of speakers who spoke before me, but it is also included in the long title of the Bill, and I will therefore not speak on it. It has been referred to.
I want to use the remaining time to say that the National Credit Amendment Bill has been with the committee since October 2013. The committee has been grappling with it, and a whole lot of activities have taken place. As a result this particular Bill is ready to come before the House. The Bill was referred to the committee; the department briefed the committee; media statements were released; adverts were published in regional newspapers, and national submissions were made; members were engaged in radio interviews; adverts were placed on parliamentary websites, Facebook and Twitter pages; public hearings were held and people made their comments.
As I speak now from the southernmost corner of Africa, I know that in all the villages of the most northern corner of this country where I come from, they know that we are dealing here with this Bill. In the far northern part, which is Limpopo, the people in those villages know that we are dealing here with this Bill. So I do not understand where this idea comes from that we are rushing, rushing.
I am sorry to have to say to those who say we are rushing: please accept that this process must go through. It is a very good story. [Applause.]
Hon Chairperson, the ACDP supports the National Credit Amendment Bill, which will definitely change the whole landscape for credit retailers.
As the previous speaker has said, this is a very blessed committee. Unfortunately we were unable to participate in it. But it is interesting, as Romans 13:8 says:
Don't run up debts, except for the huge debt of love you owe each other.
So it's interesting that we are approaching this topic and we are considering the matter of debt.
I was very interested in the issue of prescription. I think that we, as MPs, really need to understand it. I will therefore spend the time available to me just to speak in support of the clause that relates to the banning, sale, collection or reactivation of debt that has been extinguished.
Now what does this mean? It is very important for us to understand it because, firstly, in terms of the Prescription Act - and each one of us should read that Act - debts will prescribe in 30 years in respect of any mortgage bond, any judgment debt, any debt in respect of taxation or any debt owed to the state; secondly, 15 years with regard to any loan that you take out to the state; thirdly, six years in respect of a debt, a bill of exchange; and finally, for most of the other types of debt it is three years.
This means that when you buy furniture or something else on credit, it will be a three-year period, which will run from that day.
Firstly, if you sign an acknowledgement-of-debt form on that first day, it will run for three years. After three years it is extinguished and it is finished. But then, if you are sent a letter of demand and you make one payment of R1 on that debt, the debt relives from that date. It is very important for us to understand that.
Secondly, if a summons is issued after that three-year period and you ignore the summons and you sit back and say that it is extinguished and it is finished, they can still take judgment against you.
You then have to go to court and plead in your documents that this debt has prescribed. It is very important for us to have an understanding of what happens when it comes to the acknowledgement of debt, if you make a payment or if a summons has been issued against you. Then we can tell our constituents about that.
I would suggest that many debts have been prescribed in this period of three years and that many people, because they don't know this, are intimidated into making a payment; or, when they receive a summons, they do not respond to it; or, in fact, they sign a new acknowledgement of debt. Then that three-year period starts running again.
So let's be wise and let's advise our constituents about this crucial aspect of prescription. We in the ACDP fully support this. It is unconscionable for people to sell debts on that have already prescribed and then put pressure on debtors to pay debts that have already prescribed. The ACDP supports the Bill. Thank you very much. [Applause.]
Hon House Chair, hon Minister Rob Davies, all Ministers present and hon members of this august House, I would like to acknowledge the presence of our Deputy Director-General, Madam Ntuli.
Firstly, I want to deal with an issue raised by the hon Nkomo of the IFP. She said that she didn't understand what type of people were in this House, because after the hon Oriani-Ambrosini was no longer on the committee, two sections were not dealt with.
I want to assure the hon Nkomo that hon Oriani-Ambrosini's contributions were highly appreciated by all of us in the committee. I also want to say that I think it is the responsibility of the party to make sure that if its member is not present, they replace that member. It is not the responsibility of the committee; it is the responsibility of the party. I think she is welcome to replace the hon Oriani-Ambrosini when he is not present there.
Ndzi lava ku vulavula na vamanana lava nga eBushbuckridge na le Limpopo mayelana na Nawu wa Swikweleti wa 2005 lowu wu antswisiwaka. Nawu lowu i Bili leyi vekiweke hi Comrade Rob Davies leswaku wu antswisiwa. Ndzi lava ku va hlamusela leswaku hikwalaho ka yini. Mhaka hi leswaku ku fanele ku langutisiwa timhaka ta "reckless lending" [malombele ya vusompfa] laha vanhu va nyikiwaka swikweleti leswi va nga kotiki ku swi hakela, tirhekhodo ta vona ti nga kambisisiwanga ku tlhela ku nga langutiwanga leswaku xana miholo ya vona yi nga swi kota ku hakela swikweleti swoleswo. Nawu lowu wu lulamisa swoleswo.
Nawu lowu wu tlhela wu langutisa na timhaka ta swinavetiso leswi hi swi vonaka hinkwako lomu hi fambafambaka kona, leswi hi vitanaka leswaku hi ya teka swikweleti. Swinavetiso leswi hi swi vona eka thelevhixini, TV. Masikulawa swi nghenisiwa na le ka tiselifoni ta hina. Loko u tshamile u kuma mahungu ya leswaku tana u ta teka xikweleti hikuva a xi karhati naswona a xi lavi leswaku u ya kamberiwa eka "credit bureaus" [tibyuro ta swikweleti]. Va yenga vanhu vo tala leswaku va nghena eka swikweleti leswi va nga ta ka va nga swi koti. Hikokwalaho, Nawu lowu i malamulele, wu ta lamulela hina lava hi nga swi tiviki.
Xin'wana nakambe hileswaku loko se u nghenile eswikweletini swoleswo ku cheriwa swilo leswi vuriwaka 'credit interests' [mitswalo ya xikweleti] leswi va nga swi hlamuseleki loko va ha ku gangisa leswaku u ta teka xikweleti xolexo. Hikwalaho u tlimbeletiwa leswaku u hakela swilo swoleswo laha a wu fanele u nga hakeli.
Nakambe ndzi lava ku vulavula hi mhaka ya swikweleti loko swi hundzeriwile hi nkarhi. Endzhaku ka malembe manharhu xikweleti xa fa, kambe ku na vutsotsinyana lebyi byi nga kona bya leswaku vanhu va tshama va karhi va xavisa swikweleti leswiyani eka van'wana. Va xi hundzisa xi ya eka un'wana. U kuma leswaku u beriwa rigingho hi magqweta man'wana u nga ma tiviki, a wu si tshama u vulavula na vona, va vula leswaku u fanele ku hatlisa u ya hakela. Vanhu va ka hina hi ku pfumala vutivi u kuma leswaku va ya, kumbexana va ya hakelanyana R5, kutani xikweleti xi tlhela xi pfuka xi yima hi milenge.
Nawu lowu wu tisiwaka hi African National Congress wu ta lwa na maxangu yalawo hinkwawo. Hi ntiyiso Comrade Rob Davies laha mina ndzi humaka kona eHoedspruit na Bushbuckridge va vula leswaku loko Nawu lowu wo pasa, siku ra kona va ta ri tsala eka khalendara leswaku va ta hamba va ri tlangela ku fana na Siku ra Ntshunxeko. Va ta ri vula siku ra 'economic freedom' [ntshunxeko wa swa ikhonomi]. Loko ho kota ku pasisa Nawu lowu, i ntiyiso leswaku va ta kota ku swi vona kahle leswaku hakunene hi na xitori xa kahle xo xi vula. Inkomu. [Va phokotela.](Translation of Xitsonga paragraphs follows.)
[I would like to talk to women who are in Bushbuckridge and Limpopo with regard to the National Credit Act, Act 34 of 2005, which has been improved. This Act was presented by Comrade Rob Davies so that it can be improved. I want to explain the reason why. The thing is that we have to look at the issue of reckless lending, when people are given credit that they cannot afford to pay back. Their credit records are not checked and it is not established whether or not their salaries can afford such credit. This Act corrects that.
This Act also addresses the issue of advertisements that we see all over, wherever we go, which invite us to go and get credit. We see these advertisements on television. Of late they are sent through to our cellular phones. You get information that you should go and get credit because it is easy and there is no need for any credit check from credit bureaus. They entice so many people to obtain credit that they will not be able to afford. For that reason, this Act is a deterrent; it will protect those of us who are less informed.
One other thing is that once you are in such debt, they add what is referred to as credit interest, which they do not disclose when they recruit you to take that credit. This is why you are forced to pay such interest that you were not supposed to.
Once more I would like to talk about debt that has expired. Debt expires after three years, but there is fraud that is used to make people continue to provide the same debt to other people. They pass it on to others. You would find that certain lawyers that you do not know of, that you never spoke to, would phone you and inform you to go and pay urgently. Due to lack of information, our people would go and pay as little as R5, and then the debt will be renewed.
The Act that is brought forth by the ANC will fight against that scourge. Truly speaking, Comrade Rob Davies, in Hoedspruit and Bushbuckridge, where I come from, people are saying that should this Bill be passed into an Act, they will record it on their calendars so that they can commemorate it like Freedom Day. They will call it Economic Freedom Day. Should we manage to pass this Act, it is clear that they will see that there is a good story to tell. I thank you. [Applause.]]
Madam Chairperson, firstly, before I start I just have a few words to say to the hon McIntosh, who has now made his last speech. I want to say a few words of respect. Sir, we respect your unbelievable contribution to this House and to South African politics for the past five decades. I think all of us bow our heads to you for that and say thank you very much. [Applause.]
All of us know and would agree that access to credit in the economy is crucial for economic growth and success in our economy. That is a given.
The overall impact of this legislation will be - I think this is a good thing for South Africa, as I will explain in a minute -that there will be a slightly reduced access to credit for those South Africans who really cannot afford to access credit in the formal markets, but who, in many cases, have nonetheless been offered credit, sometimes recklessly, by credit providers, knowing full well that they cannot really afford it.
I think in that respect this piece of legislation is to be welcomed and that is by and large why the DA supports it.
Much has been said about the quality of South Africa's credit legislation and credit regulatory regime, and I don't think that bears repeating.
However, let's make this clear: If people want credit and they cannot get it in the legal markets, they will try to get it elsewhere. If they cannot get it from a registered lender, they will go to an unregistered, illegal lender.
We all know that there are at least 10, if not more, illegal lenders for every legal lender in South Africa. Therefore we do have a massive problem in the illegal space.
Chairperson, we can have the best laws that we want - and this is a really good law - but unless we are ready to properly regulate, enforce and police that law, all that will happen is that the legal credit market will shrink and the illegal market will flourish.
We have to take very careful and special note of that. In this regard I cannot help but express my very sincere and severe doubts about the capacity of the National Credit Regulator to deal with the illegal industry.
I am very aware that Madam Regulator is with us in the House today. I don't mean to put her on the spot, because I know that she does the very best that she can with the resources that she has at hand.
The fact is that we cannot close the loopholes in the credit industry in the legal space and leave the illegal space to flourish as much as it wants. We have to make sure that illegal lenders are not allowed to operate and that we stamp that industry out as much as we possibly can, on the one hand, and on the other, that the legal lenders operate within the law and don't rip off consumers.
Too often we hear complaints about the National Credit Regulator, NCR, not answering correspondence, not honouring meetings and simply not taking adequate action against illegal lenders.
All of us - every one of us in our constituencies - know that there are dozens of illegal lenders advertising themselves openly on every street.
Why is it that the police do not take action against those lenders? Why is it that the NCR inspectors are not there on a daily and weekly basis to make sure that those lenders are reported and prosecuted to the fullest extent of the law?
Let me give you just one example of a debt counsellor, not a lender, who is in flagrant breach of the National Credit Act as it currently stands - and I don't care that I'm mentioning them by name because they are operating illegally.
There is a business called ADMS, a debt counselling service, and a member of the public wrote to me that ADMS has been charging this South African lady R1 600 a month for six years. However, not one cent of her principal debt has been paid off. No one can get hold of the company called ADMS. I reported this to the NCR on 5 May 2013, again in July, again in August and again in January 2014. On Monday I received their response saying that they could not find my earlier correspondence and that I please have to submit it again. [Interjections.]
This law is a good one, and I congratulate everyone involved in drafting it. But if we are going to write fantastic laws, we have to back them up with the ability to enforce them on the ground. [Applause.] Again I just want express my sincere concern about the ability of the NCR to be able to handle the illegal market.
I congratulate the committee on this piece of legislation. Thank you very much. [Applause.]
Madam Chairperson, I also want to agree that the hon McIntosh has played a very constructive role in the committee, and I think all of us want to wish him everything of the best for the future.
Having said that, I also quickly want to respond to the assertions of the hon McIntosh that the process was rushed. In fact, I believe that we, as a committee, exhausted the discussion; and our public participation was very generous, as the hon Selau has spelt out.
How can we tell a man or a woman who is being held hostage by adverse information or by loan sharks, many times unfairly, many times being exploited and maybe not being able to get a job because of that, that they must wait because we mustn't rush the process? No, we in the ANC want to move with this good story to tell. [Applause.]
Madam Chairperson and hon members, the sound regulation of South Africa's financial institutions has been credited with ensuring that our country was able to withstand the onslaught of the global financial crisis, which, as members of this House would know, was triggered in the US and Europe mainly through subprime lending or what we call "reckless credit".
Less credit is given to the National Credit Act of 2005, which the ANC government introduced to protect vulnerable consumers against reckless credit. Its role in shielding us from the worst of the crisis must also be acknowledged.
It should also be acknowledged that in many respects South Africa is considered a world leader in the field of consumer protection against reckless lending practices. We must commend Minister Davies and his department for the foresight that they have shown.
To protect the consumer is, however, one side of the coin. The other side of the coin is that we have to ensure that the debtors books of credit providers reflect recoverable debt, as opposed to being filled with growing bad debt, which, if unchecked, puts those institutions and our macroeconomic stability at risk.
The provision of credit in our economy is vital. It is the lifeblood that feeds the economy; that provides the equity for business to create wealth and jobs; and provides for ordinary consumers to pay for a roof over their head, for a car in which to get to work, school fees to give their children a good education or to cover any medical emergency.
All of this will come to nought if there is not a well-functioning credit market. At the same time, the economy will come crashing down if, as a country, we do not have a firm grip on reckless lending that ignores affordability, is simply too expensive to sustain and eats into disposable income to the point where one's wages simply fund previous debt, with nothing left over to properly sustain oneself or one's family.
Household debt has risen dramatically over the past couple of years, to the point where 75% of disposable income is spent on servicing debt. If not kept in check, this could be disastrous for the economy in the long term.
One needs only to look at last week's financial results from the major retailers to see that there has been a lot of inappropriate lending that has not only harmed consumers, but is putting their own performance and sustainability at risk.
This is what makes the debate on the National Credit Amendment Bill in the House today so important. We need to protect the consumer, and in doing so, we would also be protecting the credit industry.
We can point to many instances where plain greed, or the push to maximise profit without taking into account the long-term effect of irresponsible lending on our economy, is clearly evident.
Madam Chair, let us be clear about this: This Bill is not a threat to credible, ethical and responsible credit providers. In fact, those credit providers have, during the public participation process, supported the provisions of the Bill.
The credit providers that need to worry are the greedy, unscrupulous, irresponsible ones; the loan sharks that do not hesitate to feed on the poor and vulnerable to satisfy their own greed.
The creation of wealth is essential for a growing economy, but greed is its destruction. I want to focus for a moment on the high cost of credit. There have been provisions for capping interest rates and other related costs. But it has not gone far enough to deal with the cost creep.
Interest rates have been innovatively topped up with initiation fees, administration fees, credit life charges, and, and, and! Let me cite an example - the friendly characters on the well-known TV advertisement who brag about their "fast little loans".
Frans, one of the characters in the advertisement, looks so happy in his newly acquired leather jacket. What we didn't see, however, is the faces of Frans and the gogos [grandmas] when they have to pay back that loan.
We were presented with the costs on those loans. On a short-term borrowing of R1 655 over just 20 days, interest and fees charged by that institution amounted to R358,83 - annualised, that is a staggering 395%. That is unacceptable.
To the hon members of this House, it is most probably not a lot of money. But to the poor, battling pensioner who took out that loan out of desperation, maybe to help a sick relative, it's a sizeable chunk of his or her means of life and the beginning of a downward spiral into a debt trap.
The committee probed the cost of debt, and is insistent that the total cost of credit, not just the component parts, needs to be capped. It will now also be an offence to charge above these rates.
Some in the unsecured micro-lending space are less happy. They argue that the high cost also has to do with the extremely high default rate. What they do is they add to their charges provisions for bad debt.
When you take out a loan from a micro lender, in its back-room costing it adds a provision in the charges to you to recover the costs of bad debt on their books, regardless of whether you, as an individual, are a good or bad payer.
Part of the costs that you have to pay back is a provision for bad debt. This begs the question: Why do the good payers have to be penalised for nonpayment by bad payers?
Surely the people that need to carry the can for bad debt are the lenders themselves. Business is about risk. If you make bad business decisions, you must bear the consequences. But what some of these micro lenders are doing is that they are making their payers carry the burden for their own bad business practices, namely risk-free lending at the expense of the poor and vulnerable.
They argue that if they were not able to provide for such high costs, their businesses would go under. I argue that if they did proper affordability tests before recklessly dishing out the cash, they would not be incurring all that bad debt in the first place, and they would be able to lower the cost of credit.
We acknowledge that it is a necessary service to help people to pay for their child's school fees or clothes at the beginning of the year, to pay for the funeral after an unexpected death and to deal with a crisis. All of this is necessary, but exploitation of the vulnerable is not.
It is therefore welcomed that the Bill now makes provision for the NCR to make findings on reckless credit. Until now it has only been the courts that could do so, which we know is a long and expensive process. This has proven impractical for the poor. Now they can follow the far quicker, easier and less expensive channels of the NCR.
Hon Speaker, some people, including the hon Graham McIntosh, have voiced their concerns about the automatic removal of adverse credit information at the credit bureaus.
The impression is created that credit providers will no longer have the means to judge a bad payer from a good payer, and that if this information is removed, credit will dry up. This is not so, and I want to correct any false impressions.
Firstly, the payment profile remains. Credit providers can still do a proper risk analysis. The integrity of the credit market remains intact.
What this amendment does, however, is to make the provision that once the debt under review has been paid - it is important to note the debt has to have been paid off - then adverse designations such as "bad payer", "defaulter", "delinquent" or whatever, will be automatically removed from the credit records of the consumers.
Why is this important? Because in practice, when one does a credit check, you will find someone classified as a delinquent or whatever, and an immediate value judgment is made about that person. This could even put a job application at risk.
The designation does not say that Mr X was a bad payer because he lost his job or his wife fell seriously ill and thus he battled for months to do the honourable thing, which is to pay off his debt. No, it just says "bad payer".
Would it be fair to brand Mr X as a bad person, whilst in reality life dealt him an unforeseen and nasty blow, but he nevertheless hung in there to clear his debt? It is plainly wrong, Madam Chair.
A simple designation does not necessarily speak to the true nature of one's character. And what's more, if a person has a judgment against him or her and the debt is cleared, one can, under the current rules of the courts, apply for a rescinding order and that information will be wiped from the records of the credit bureaus.
So what is the problem with being consistent by removing the designation "bad payer", "delinquent" or whatever? And it should be done automatically, so that the poor and those who do not have an understanding of complex legal processes can benefit equally. It does not remove the credit provider's ability to do a proper risk analysis.
Credit providers worth their salt have nothing to fear, but those who feed on the vulnerable, operate illegally and are driven by greed, take note, your days are numbered.
HON MEMBERS: Yes!
I would like to thank the chairperson of the portfolio committee, for the efficient and inclusive manner in which she has driven this process. The ANC supports the Bill. Thank you, Madam Chair. [Applause.]
Chairperson, let me start by thanking all the members of this House who have generally supported this important piece of legislation.
I also would like to add my voice to those who have wished the hon McIntosh well in his life after Parliament, which awaits all of us at some point or another.
I also would like to comment on one or two matters. First of all, in response to the hon McIntosh, I think Mr Swanepoel gave us a very good indication just now of what the removal exercise is about.
I would just add one more consideration. I think that if Mr X is sitting there and he cannot get his name cleared at the credit bureau or can't get the removal of these labels unless he goes to court and pays a fortune, why should Mr X bother to settle the debt in the first place? So it can have a perverse effect of that sort.
I think that we are going into a much more rigorous but also a sensitive process of dealing with this important matter. I just want to say to him that the regulations that we published yesterday were done in terms of the existing National Credit Act and were not dependent on the amendments.
However, they are regulations that are in line with the spirit of the amending Bill, so we thought that the timing of signing them off and bringing them in at this time was appropriate. Nonetheless, I should just say they were certainly not in any way rushed through.
We held consultations at great length with the select committee, and the proposed notice was put out for consultation on 30 September 2013. So there has been a lot of thought and a lot of effort that has gone into it.
In response to one of the remarks of the hon Marais, I should say that we had a lot of engagement with the credit bureaus; we listened to what they had to say and understood their administrative processes. That is why, although they will not be able to use that adverse information and supply it to anybody after 1 April 2014, they will have a further two months to remove it from their records so that it is compatible with their administrative processes.
In response to the hon Nkomo, I would say that the proposal that came from the hon Oriani-Ambrosini was moving in the right direction, but I think what we understood here is that the interest charges, which are already regulated, are but one part of the whole picture.
There are a series of other charges and some of those fees are not subject to regulation. In particular, one of those we included was the life assurance provisions related to credit. I think what we have said is that there will be a review of all those charges and that new regulations will be issued within a period of six months.
I want to say that the hon Hill-Lewis is of course correct that the whole issue of implementation and enforcement is quite critical. I don't know about the particular case he mentioned. He has handed it over to the credit regulator.
Of course, what we do want to see is enforcement. I don't think enforcement is simply a matter of expecting regulators, police and people like that to do all our work for us. If we get to know that there are illegally operating micro lenders in our constituencies, I think we should transmit that information to the NCR. I will ask them about the case that the hon member mentioned because, of course, what we want to see is that there is a prompt response where information is provided.
Let me just say by way of conclusion that I think we have a series of messages. We are saying to credit providers in this country that we expect them to engage in responsible and not reckless credit-lending, and that requires of them to conduct a proper affordability assessment.
Secondly, we are saying to consumers that we are not excusing them of the debts that they have incurred, but we will make it easier and simpler for them to rehabilitate themselves by removing all these impairments that have been hanging around their necks and that are at the moment very costly to remove. Those are the adverse credit records and the fact that even if they have paid off everything that is owed, their names are still stuck at the credit bureau for ages and ages.
I think that we have a good story to tell everybody. I would like to thank the DDG, the NCR and the portfolio committee for all the work that has been done on this Bill. I am pleased to see that at this stage of the parliamentary calendar, we are able to agree on something that is an important step forward for the people of this country. Thank you very much. [Applause.] Debate concluded.
Bill read a second time.