ABOUT US Truworths Ltd Listed Company with over 300 stores Over R3b Turnover with 1.3m customers R1b debtors book Focussed on fashion retail Primary credit product 6 months interest free

The National Credit Bill Truworths respect the principles around the bill and welcome many aspects of this, including : The aspects of full disclosure The avoidance of over indebtedness Discouraging of reckless credit Fair extension of credit to those that have been precluded in the past

Background New accounts Application score used in conjunction with a bureau score Application scorecards do not use race but criteria such as time at existing job, contactibility, time at place of residence Salary and risk determine credit limit given Due to volume some applications are approved automatically Existing accounts Accounts scored every month Internal – score calculated by ourselves – how you currently manage your Truworths account External (bureau) indicated how you currently manage your Truworths and other accounts Based on score (risk) applications are granted additional credit Similarly score predicts when to contact a client in arrears

Backgound to credit (example) Odds are calculated from recent previous history Some applications are automatically approved Can process more than 50,000 applications in a month Income and odds determine credit limit

Backgound to credit (example) Accounts are scored regularly Only those who utilise their accounts and have a good risk are increased Increases are automatic unless client has indicated no to increases

Sec Right of information in an official language Must make documents available in at least two languages Can propose to make use of same two Issues Documents not defined in the bill Large cost implications and difficult to do Recommendations Bill should define “documents” Preferably one language (preferred) but if not One of the languages should be stated as English 2 nd Language selected by credit provider should be capable of application throughout the country 3 rd possibility is that sufficient time given to phase the language requirements in (if multiple per region). Not preferred.

Section 71 – Removal of record of Debt adjustment A consumer whose debts have been re-arranged may apply to a debt councillor for a clearance certificate Debt councillor may issue this if consumer has satisfied his obligations Consumer can approach bureau to expunge his record Issues As retailers rely on scorecards and models to make decisions this removal may impact our ability to make accurate risk decisions Expunging the record may be worse for the consumer, as it would take away history indicating his ability to repay Recommendations Keep the existing arrangement (3 and 5 years) Alternatively take off the default / judgement but keep consumer payback history when under rearrangement

Sect.73 (2) – No negative option marketing for credit limit increases Cannot offer to increase the credit limit on the basis the limit will be automatically increased unless the consumer declines the offer Issues Retailers evaluate risk on an ongoing basis Typically start with a small (R400) credit limit and increase gradually after 6 months Increase only those who are using facility and paying well (int & ext) Taking this away could severely impact retail turnover It is very costly to score individually Also impact on customer service Recommendations For credit grantors to continue to automatically increase credit limits as long as they have a formal process in place to evaluate affordability, e.g. internal and external scorecards to determine risk

Sect. 78 (3) – Interpretations relating to reckless credit The term “financial, means and obligations” includes income or any right to receive income, regardless of the source, frequency or regularity of that income and the financial means and obligations of other adult persons within the consumers immediate family and household Issues This definition is too broad Cannot practically be evaluated Recommendation Definition should change to incorporate “regular income from consumer and spouse or partner only”

Section 81(2) – Prevention of reckless credit A credit provider must not enter into a credit agreement without first taking reasonable steps to assess the consumers general understanding and appreciation of the risks of credit Issues Although required the bill does not determine how this should be done, leaving it open to abuse on both sides When processing large numbers, e.g. 50,000 applications per month, one cannot take every customer through this Store staff are not experts at credit risk Recommendations To utilise scorecards and history to gauge the level of understanding, for example a good bureau record with a number of credit lines would indicate a good understanding

Sect.119 (1) Increases in credit limit (credit facility) A credit provider can automatically increase a credit limit once per year, by an amount not exceeding the lessor of the average monthly purchases or payments over the past 12 months Issues This is likely to result in declines in retail turnover with resultant job losses Increased amounts stipulated are infrequent and very low Doubt if an impact analysis has been done in this area Recommendations To continue to use worldwide best practice by making use of scorecards and models to determine when an account should be increased Alternatively to have these more frequently than once per year, and to increase the amount that can be given

Example of spend levels subsequent to a credit limit increase

Conclusion There are a number of issues in the bill that we believe will add to our costs There are also areas that could affect the reliability of bureau information This could penalise companies such as ourselves that have issued responsible credit for many years and lead to a decline in profitability This could result in less appetite for risk, slowing down the access of credit and therefore sending consumers to the informal lending markets

InaccurateInformation HigherCosts Less appetite for Risk Less credit given Chase lenders to informal market +

Conclusion We thank you for your time and hope our comments have been taken as constructive criticism We will make ourselves available if required