National Credit Bill 10 August 2005 Mike Falconer Karen Pinheiro

Introduction Cell C and MTN support the general tenor and purpose of the Bill, however, there are specific areas of concern which need to be addressed in order to: ensure that the stated objectives and the intention of the legislators of the Bill are achieved; and that the services provided by the Mobile Cellular Phone Companies will not be unintentionally or unreasonably impacted upon.

Intention of the Bill The intention of the Bill is essentially to regulate “credit agreements”. The annexure to the Bill titled: “Memorandum on the Objects of the National Credit Bill, 2005” states that: “The Bill identifies two common elements that make an agreement a credit agreement, which together bring it within the scope of the Bill: –Some deferral of repayment, or a prepayment; AND –A fee, charge or interest imposed with respect to deferred payments; OR a discount given with respect to prepayment”.

Intention of the Bill The DTI advised at a meeting with the Mobile Cellular Operators in July 2005, that the intention is not to regulate interest free credit, or contracts for services which are paid monthly in arrears. Payment for services monthly in arrears does not constitute a “deferral” of payment as contemplated in the Bill. However, due to the broad definitions of: –credit facility; –incidental credit agreement; and –instalment agreement; the Mobile Cellular Operators are concerned that service contracts will fall within the scope of the Bill.

Mobile Cellular Services Mobile Cellular Operators and Service Providers provide the following goods and services: Pre-paid airtime and data usage; and Post-paid contracts, which comprise: –a free or subsidised handset; –free minutes and data services; –bundled together in a particular tariff plan.

Mobile Cellular Services: Post-paid The particulars of the post-paid contract: Subscription fee for access to the mobile network is paid monthly in advance. Charges for the airtime and data usage is paid monthly in arrears. This is similar in nature to contracts for the ongoing provision of a multitude of services; including water, electricity, municipal rates and taxes, fixed line telephones etc. As with most service contracts, service provider reserve the right, in their discretion, to charge interest on late payments.

Exclusion: Service Agreements As confirmed by the DTI, the payment for services rendered at the end of each month is not a deferral of payment as contemplated in the Bill. Therefore, in order to ensure that the provision of services, paid monthly in arrears does not fall unintentionally within the ambit of the Bill, we propose that a new sub-section be inserted as section 4(6), as follows: “If a person sells services and receives payment for such services monthly in arrears, the agreement for the provision of such services shall not be deemed to be a credit agreement as defined in terms of this Act.”

Definition: Credit Facility The definition of a “credit facility” includes where: “a credit provider undertakes to supply services…and either defer the consumer’s obligation to pay… or bill the consumer periodically for any part of the services… and any charge, fee or interest is payable in respect of the agreement, or amount deferred… or any amount billed… and not paid on time.” This definition is sufficiently broad to cover all utility services (water, electricity, municipal rates and taxes, fixed line telephones) all professional services (doctors, lawyers, dentists, etc.) and various other services.

Definition: Credit Facility We therefore propose the deletion of the following words in section 8(3)(b): “any charge, fee or interest is payable to the credit provider in respect of – (i)the agreement; (ii) any amount deferred as contemplated; or (iii)any amount billed and not paid within the time provided in the agreement. ”

Definition: Incidental Credit Agreement An “incidental credit agreement” includes an “outstanding account”. The first condition of the definition of “outstanding account” requires that: “a fee, charge or interest becomes payable if payment of any amount charged on the statement of account is deferred beyond a determined period or date.” Again, this definition sufficiently broad to include all utility services (water, electricity, municipal rates and taxes, fixed line telephones), all professional services (doctors, lawyers, dentists etc.) and numerous other services.

Definition: Payment is Deferred In the Bill, the concept of payment being “deferred” is critical in the definitions of “credit”, “credit agreement”, “credit facility”, “incidental credit agreement” and “instalment agreement”. We therefore propose that “payment is deferred” be defined so as to exclude: –the payment for services monthly in arrears; and –the non-payment by the consumer of an arrear account, which may erroneously be interpreted as a deferral of payment by the consumer. We propose the following definition be inserted: “payment is deferred” means payment for goods or services is delayed for any period of time with the explicit approval of the credit provider and the consumer but shall specifically exclude the payment for services provided to a consumer monthly in arrears.

Definition: Instalment Sale Agreement In order to align this definition with the rest of the Bill, we propose that the definition be amplified by the insertion of a new subsection (b) as follows: “A sale of movable property in terms of which – a)all or part of the price is deferred and is to be paid by periodic payments; b)a charge,fee or interest is payable to the credit provider for the deferment of all or part of the price; c)possession and use of the property is transferred to the consumer; and d)ownership of the property either - passes to the consumer only when the agreement is fully complied with; or passes to the consumer immediately subject to a right of the credit provider to re-possess the property if the consumer fails to satisfy all of the consumer’s financial obligations under the agreement;”

Exemption Application Process The Bill is extremely complex in nature. We therefore submit that it will be necessary to ensure that the National Credit Regulator has the authority to exempt specific industries or types of agreements from the application of the Bill in order to ensure that the National Credit Regulator will not be over- burdened with regulating sectors of the economy or agreements that were never intended to be regulated in terms of this Bill. We have accordingly proposed that a separate section be inserted into the Bill and in this regard we respectfully refer the committee to the suggested wording in our written submission.

Conclusion We trust that this submission will motivate the Committee to revise the sections referred to in our submission, and that the necessary amendments will ensure that the objects and intention of the Bill are achieved. We submit that these revisions are necessary in order to prevent the unintended regulation of service agreements, including mobile cellular post-paid contracts.

Thank You We thank you for the opportunity to present to the committee. Mike Falconer Cell C Karen Pinheiro MTN