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.