1. AACC – Debt Forgiveness May ‘16

2. TREASURY FOCUS AREAS TREASURY FOCUS AREAS National Treasury: A safer financial sector to serve South Africa better – Reform proposals in four priority areas Reform proposals in four priority areas

3. Treasury focus pillars Treasury focus pillars Financial Stability / micro-prudential Combating financial crime Market conduct Access to financial services Reserve Bank to lead on macro-prudential (systemic stability) micro-prudential (safety and soundness of institutions) Group supervision Much wider regulatory net Higher standards applied consistently across all sectors Focus on outcomes for customers: treat them fairly Fit and proper requirements Ombud schemes Financial literacy Treasury to lead Co-operative and dedicated banks and Postbank Microinsurance framework International co- operation (G20 Global Partnership for Financial Inclusion) Financial inclusion forum (2015) Enforcement agencies to lead Investigating and prosecuting abuses Continued work with international partners Ensure coordination, co-operation and information-sharing between regulators particularly if an event threatens the stability of the financial system

4. Addressing household over-indebtedness Deal with unlawful emolument attachment orders Deal with unlawful emolument attachment orders Employers to investigate and address EAOs they are deducting from employees’ pay Employers to investigate and address EAOs they are deducting from employees’ pay Government to implement the Public Service Debt Relief Project Government to implement the Public Service Debt Relief Project Magistrates Courts Amendment Bill Magistrates Courts Amendment Bill Establish norms and standards for debit orders Establish norms and standards for debit orders Enable customers to authenticate debit orders before they take effect Enable customers to authenticate debit orders before they take effect

5. Addressing household over-indebtedness “Blacklist” abusive / fraudulent debit order users “Blacklist” abusive / fraudulent debit order users Penalise debit order collectors with deficient mandates Penalise debit order collectors with deficient mandates Harmonise the treatment of debt collectors, particularly legal firms Harmonise the treatment of debt collectors, particularly legal firms Finalise holistic measures to deal with problems in consumer credit insurance Finalise holistic measures to deal with problems in consumer credit insurance Support banks’ provision of unilateral relief e.g., DCRS, restructured terms Support banks’ provision of unilateral relief e.g., DCRS, restructured terms Expand voluntary debt mediation measures Expand voluntary debt mediation measures Introduce affordability assessment criteria (dti) Introduce affordability assessment criteria (dti)

6. DTI – FOCUS AREAS DTI – FOCUS AREAS

7. DTI Focus pillars DTI Focus pillars Definition of allocatable income is amended to include maintenance payments towards children and those adults that are entitled to it. This change will ensure that maintenance payments will be taken into account as part of the affordability assessment regulations. Maintenance Payments Credit providers to conduct affordability assessment tests in line with the Regulations. R800.00 has been set as a minimum amount. South African Social Security Agency (SASSA) Grant Credit providers to take practical steps to verify the existing financial means, obligations and prospects of consumers or joint consumers applying for credit before extending any such credit to consumers. Verification of Financial Means Disclosure by credit providers of the cost of credit to enable consumers to know in advance how much they will be required to pay for their credit transactions. Revelation of Costs of Credit

8. DTI Focus Pillars DTI Focus Pillars proposed that the threshold is set at R1.00. This is the minimum amount which will ensure that everyone who is extending credit in whatever manner will be subject to regulation in terms of the Act, as amended. This will also include regulating the loan sharks, who previously evaded the application of the Act by reason of Section 42 of the Act, as amended. The court judgement led Parliament to empowering the Minister to determine the threshold on the credit providers’ registration. Determination of a Threshold on Credit Provider Registration Currently, payment distribution agents are in the debt review equation through service level agreements entered into with the National Credit Regulator. These regulations here will be aligned to Section 12 of the Act, as amended, to provide for registration of these payment distribution agents and to further stipulate requirements that they have to comply with for registration purposes. Registration of Payment Distribution Agents These criteria, amongst other things, provide that no registration will take place if a person has been found guilty in criminal or civil proceedings or his/her licence granted by the National Credit Regulator or any other regulatory authority withdrawn. Further, any person who has an adverse finding against his/her name on any financial misconduct or fraud will not be eligible for registration in terms of this Act, as amended. Criteria in Conducting a “Fit and Proper Test”

9. DTI Focus Pillars DTI Focus Pillars For the purpose of registration and renewal, PDAs are required to comply with the following registration fees: A non-refundable application fee of R500 payable upon submission of the application form; Initial registration fee of R100 000.00; Branch fee of R250 per location or premises; Registration renewal fee of R100 000 payable annually by the date of anniversary of the registration For the purpose of registration and renewal, ADRs are required to comply with the following registration fees: A non-refundable application fee of R500 payable upon submission of the application form; Initial registration fee of R50 000.00; Branch fee of R250 per location or premises; Registration renewal fee of R50 000 payable annually by the date of anniversary of the registration. Applicable Fees Regulation 14 prescribes requirements and standards for tailor made training for PDAs; Das. Training will cover arrears such as: Financial and Business management; Governance and compliance; Accounting and Customer service Training Requirements

10. Right to Confidential Treatment These regulations provide that any information relating to a debt that has extinguished in terms of the Prescription Act, 1969 (Act 68 of 1969) may not be submitted to any credit bureaus. Credit bureaus will also not be allowed to enlist again adverse credit information that was previously removed or has prescribed under a different status code. Furthermore, credit bureaus should not add adverse information on their data base if the arrears owing in a particular account are paid within a period of 20 days after a notice indicating such areas have been received. Prescription of Consumer Credit Information held by Credit Bureaus The Chairperson of the Tribunal will be authorised to make practice directives which will be regarded as binding to parties who are subject to Tribunal proceedings. the Tribunal will be required to provide a record of review proceedings for purposes of promoting just administrative action. Tribunal will also be given wider discretion to allow and admit evidence given by expert witnesses in proceedings before the Tribunal. The Tribunal will also be empowered to summons expert witnesses. This will be done sparingly so that it does not lead to depletion of financial resources as these witnesses would have to be paid. Amendment of National Consumer Tribunal Rules

11. PRE-AMBLE TO DEBT FORGIVENESS

12. First amnesty - 2006 National Credit Act made provisions for a Credit Amnesty when enacted in 2006 National Credit Act made provisions for a Credit Amnesty when enacted in 2006 All judgements granted prior to 1 Sept 2006 All judgements granted prior to 1 Sept 2006 Amounts less than R50 000 Amounts less than R50 000 That has not been paid That has not been paid Credit Amnesty option Pay verified outstanding amount Pay verified outstanding amount Request removal of judgment from Credit Profile Request removal of judgment from Credit ProfileResult Not enough consumers was impacted Not enough consumers was impacted Access to Credit still a problem Access to Credit still a problem

13. Lessons from 2006 amnesty 8m consumers impacted 8m consumers impacted Only 3.2% more credit agreements done Only 3.2% more credit agreements done 64 % of consumers that were impacted by the amnesty took on more debt. 64 % of consumers that were impacted by the amnesty took on more debt. 48% of this group defaulted on an account / had a judgement against them within 5 years of the amnesty. 48% of this group defaulted on an account / had a judgement against them within 5 years of the amnesty.

14. Purpose of previous amnesty ‘ To provide renewed opportunity through the removal of barriers to finance to those adversely affected by the global economic recession during the period 1 January 2006 to 31 December 2011 (the “Period”). “

15. Reasons for previous amnesty Reduce credit impairment - address its causes; Reduce credit impairment - address its causes; Removing barriers to credit for consumers Removing barriers to credit for consumers who can afford credit. Restorative justice - consumer – credit Literacy / reckless lending Restorative justice - consumer – credit Literacy / reckless lending Assist consumers impacted by economic recession Assist consumers impacted by economic recession Redressing failure in credit granting to consider broader Redressing failure in credit granting to consider broader economic factors Removing barriers to employment, rental and schooling Removing barriers to employment, rental and schooling Reducing over pricing for the 47% of consumers with Reducing over pricing for the 47% of consumers with impaired credit records To stimulate economic growth To stimulate economic growth To broaden access to credit providers To broaden access to credit providers

16. Details for previous amnesty As at 1 April 2014 all credit bureaux were required to remove the following from their records: a) All adverse credit information of consumer behaviour such as “delinquent”, “default,” and “slowing paying information.” b) All adverse credit information of enforcement action taken by the credit provider such as “handed over to collections” or “written off.” c) All adverse credit information (as defined in a and b above) contained within the payment profile of a consumer. d) All paid-up civil judgments where the consumer has settled the capital amount. Furthermore the removal of paid-up civil judgements is to happen on an on-going basis.

17. Lessons from previous amnesty Paid up judgements removed +_ 80 000 Defaults removed +_ 4 000 000 Defaults removed +_ 4 000 000 Within 3 months – more than 20% had new defaults registered again. Within 3 months – more than 20% had new defaults registered again. Consumers in default did not approve. Consumers in default did not approve.

18. Current statuses Paid up judgements removed +_ 80 000 Defaults removed +_ 4 000 000 Defaults removed +_ 4 000 000 Within 3 months – more than 20% had new defaults registered again. Within 3 months – more than 20% had new defaults registered again. Consumers in default did not approve. Consumers in default did not approve.

19. A BRIEFING TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY NCR STRATEGIC PLAN 2016/17 – 2020/21; 3 YEAR ANNUAL PERFOMANCE PLAN 2016/17 – 2018/19; THIRD QUARTER FINANCIAL AND NON FINANCIAL PERFORMANCE REPORT ENDING DEC 2015 PRESENTED BY NCR CEO, MS NOMSA MOTSHEGARE 15 MARCH 2015 NATIONAL CREDIT REGULATOR 19

20. 20 STATE OF THE CREDIT MARKET The total gross debtors book to date is R1.63 trillion. The total Rand value of new credit granted was R123.93 billion, with mortgages comprising R39.39 billion (31.78%). Unsecured Credit increased by 13.28% from R18.23 billion for the quarter ended September 2014 to R20.66 billion for the quarter ended September 2015. The total Payment Distribution Agents’ (PDA) distributions to credit providers from April 2015 to February 2016 was R6.1 billion.

21. LEGISLATIVE MANDATE OF THE NCR 21 To promote a fair & non-discriminatory marketplace for access to consumer credit: to provide for general regulation of consumer credit & improved standards of consumer information; To prohibit certain unfair credit and credit marketing practices; To promote responsible credit granting and use to prohibit reckless credit granting; To provide for debt re-organisation in cases of over-indebtedness; To regulate credit information; and To promote a consistent enforcement framework relating to consumer credit.

22. To promote responsible credit granting. To protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness. To enhance the quality and accuracy of credit bureau informationTo improve NCR’s operational effectiveness NCR PROGRAMMES: A SNAPSHOT To ensure effective implementation of the National Credit Amendment Act (NCAA). 7

23. 23 Programme 1: To promote responsible credit granting. Compliance monitoring Investigations on total cost of credit Programme 2: To protect consumers from abuse and unfair practices in the consumer credit market and address over- indebtedness. Reckless lending investigations Awareness campaigns on misleading advertisements 3 YEAR ANNUAL PERFOMANCE PLAN

24. 24 Programme 3: To enhance the quality and accuracy of credit bureau information Credit Bureaux investigations Credit Bureaux audited reports Programme 4: To improve NCR’s operational effectiveness ICT uptime of 96% Service Delivery Improvement Plan 3 YEAR ANNUAL PERFOMANCE PLAN

25. 25 Programme 5: To ensure effective implementation of the National Credit Amendment Act (NCAA): Workshops with relevant stakeholders Multimedia awareness campaigns (TV & Radio interviews and newsprint) Outreach programmes (Imbizos, mall activations, exhibitions, roadshows) Special investigations (Raids; prescribed debt; Garnishee orders; unregistered new entrants) 3 YEAR ANNUAL PERFOMANCE PLAN

26. Debt Forgiveness Programme Presentation to the Portfolio Committee on Trade & Industry By Ms Nomsa Motshegare, NCR CEO Date: 03.05.2016 26

27. 27  Investigate the feasibility of a debt forgiveness programme in South Africa based on the level of over-indebtedness of consumers;  Research is based on desktop review of a range of debt relief measures globally;  Impact of these programmes;  Recommendations

28. DEBT RELIEF MEASURES IN SA 28 Sequestration – Insolvency Act: Debtor’s assets insufficient to satisfy the claims of creditors; Debt Administration – Magistrates’ Court Act: Outstanding debt <=R50 000; admin charges a fee of 12.5%; involves restructuring of a debt; not regulated; Debt Review – National Credit Act: Main aim include addressing and preventing over-indebtedness & providing mechanisms for resolving over- indebtedness; involves restructuring of a debt;  Credit extended responsibly: over-indebted consumers do not receive a debt discharge but can negotiate alternative payment arrangement  Debt Counsellor uncovers reckless lending: Credit agreement set aside of restructured.

29. 29 DEBT FORGIVENESS PROGRAMMES: INTERNATIONAL CASE STUDIES Croatia A “Fresh Start” scheme (2015) To provide a debt discharge to the poorest individuals; Objective: to provide stimulus to employment and economic growth; Municipalities, utility and telecoms providers, tax authorities, banks required to clear some of the debt & absorb the losses themselves; Eligibility: Must have had debt <R76 000, monthly income <R2 770, no property and no savings; Results: Scheme was applicable to 60 000 citizens (2% of the adult population), at approx. cost of R467 million. Impact: Too soon to assess – Could have effect on economic growth; requirement that banks and other private sector institutions write off debt might lead to imposition of higher interest rates/fees to other consumers; increased reluctance by credit providers to lend to worthy low income consumers in the future.

30. 30 DEBT FORGIVENESS PROGRAMMES: INTERNATIONAL CASE STUDIES India: Debt Waiver and Debt Relief Scheme to Small & Marginal Farmers (2008) Target: Over-indebted farmers in rural areas (justified in part by suicides); Over-indebtedness caused by unpredictable rainfall, high interest rates; One of largest debt relief schemes in history: affected 36-40million farmers; Covered outstanding debt of R156billion Criteria: - Loan issued before December 2007 still due as of Feb. 2008; - Borrowers who pledged < 2 hectares of land as collateral = unconditional 100% debt relief; - Borrowers who pledged > 2 hectares = 25% conditional debt relief: subject to repayment of o/balance The government recapitalized the loans written off for the full amount. Impact: World Bank published a study on the effect of the debt forgiveness scheme: Borrowers in areas with high-number of debt relief cases started defaulting in large numbers; banks reallocated their credit away from these districts.

31. 31 DEBT FORGIVENESS PROGRAMMES: INTERNATIONAL CASE STUDIES USA: Obama Student Loan Forgiveness Scheme (2010) Assists student borrowers to manage repayments so that loan debt is not a deterrent for pursuing higher education Target: Students with study debt obligations; borrowers that are permanently disabled; private loan borrowers not to benefit. Applies to federal loans: loan consolidations, revised payment plans, loan and interest forgiveness; Student pays diligently (according to agreed payment plan): balance at end of loan period (typically 20-25 years) is written off by State; Income adjusted for family size; Additional vocational-based student debt relief benefits were made available to former students engaged in certain professions; E.g Public Service employees: if in public service for at least 10yrs, made 120 payments – balance of student debt discharged.

32. 32 DEBT FORGIVENESS PROGRAMMES: INTERNATIONAL CASE STUDIES continued USA: Obama Student Loan Forgiveness Scheme The loan program offers five different repayment plans: Standard Repayment: Fixed amounts are paid each month for the life of the loan; Graduated Repayment: Amounts <Standard repayment plan are made, but gradually increase every 2 years; Income contingent (ICR): Payments are based on borrower’s income, family size, loan balance, and interest rate; The borrower is required to pay 15% of their discretionary income to their federal student loan; Income Based (IBR): Payment is strictly based on borrower’s income and family size. Consideration on loan balance and interest are excluded in calculating the monthly payments. Pay as you Earn (PAYE): This is usually the lowest monthly plan and is based on the borrowers income. It uses 10% of discretionary income (IBR is 15%) as a payment.

33. 33 Impact: - In September 2015, 295k borrowers were on track to have their debt forgiven; number is projected to increase to 600 000 over next decade. Typical borrower in the programme owes R853k to R995k in student debt. REPAYE ( revised pay as you earn) plan (December 2015) – To enable 5 million more debt loan borrowers to cap their monthly payment of 10% of monthly discretionary income; REPAYE PLAN: provides new interest subsidy benefit to prevent ballooning balance for those whose payments cannot keep up with accruing interest. DEBT FORGIVENESS PROGRAMMES: INTERNATIONAL CASE STUDIES continued

34. 34 MECHANISMS FOR DEBT RELIEF: INTERNATIONAL CASE STUDDIES New Zealand, England and Wales: No Income, No Assets Debt Relief (NINA debtors) According to the World Bank, it is better to avoid discrimination by providing the same relief to all debtors when dealing with NINA debtors. NINA process is targeted at the debtor whose over-indebtedness has resulted from changes in circumstances rather than unnecessary borrowing. New Zealand is reported to have been the first jurisdiction to have specifically provided for the NINA debtor. Bankruptcy process is inappropriate to NINA debtors; Appropriate mechanisms for these debtors to apply for debt relief if unable to pay their debt obligations. Common Characteristics: - Debt relief if liabilities are < certain threshold; - Monthly income and disposable income is <certain threshold; - Debtor has not previously been admitted to the NINA process (N/Zealand) or has not been admitted in the last 6 yrs (England and Wales).

35. 35 Debt Relief orders also subject to certain restrictions wrt individual behavior Debtor fails to notify relevant authorities of change in circumstances that would allow debtor to repay towards debt – Offence committed and maximum prison term of one year and/or max. fine of R50k; If debtor adheres to all requirements of NINA process – debts discharged; In N/Zealand, this happens after 12 months of the inception of the process. MECHANISMS FOR DEBT RELIEF: INTERNATIONAL CASE STUDDIES

36. 36 New Zealand, England and Wales: Mechanisms for debt relief for debtors with No Income and No Asset (NINA debtors) - For debtors who are unable to pay their debt obligations due to change in debtor’s circumstances rather than irresponsible borrowing. Criteria for eligibility  Debt relief granted if the debtor has liabilities < certain threshold;  The debtor has monthly income & disposable income < certain threshold;  Value of assets held by a debtor <certain threshold; and  The debtor has not previously been admitted to the NINA process (N/Zealand) or not been admitted in last 6 years (England & Wales). MECHANISMS FOR DEBT RELIEF: INTERNATIONAL CASE STUDDIES

37. 37 1. DEBT RELIEF UNDER THE NCA: Prescribed Debts Social grant beneficiaries Loans to students under NSFAS scheme Garnishees Mis-selling of insurance Reckless lending Proposal: extension of NCR powers 1)Other regulators in RSA have been granted such powers resulting in effective and efficient cost effective regulation of their respective jurisdictions:  Reserve Bank Act: section 10A(9) empowers the Governor to impose fines on the banks  Tax Administration Act: section 210 empowers SARS to impose penalties for contraventions of its legislation  FSB Act: section 10A allows the FSB to establish an Enforcement Committee which has the powers to impose penalties/fines RECOMMENDATIONS

38. 38 1) Once the NCR has determined whether the entity has contravened the NCA, instead of referring such case to the NCT, it must instead be allowed to impose the necessary sanctions. 2) The sanctions imposed by the NCR may be appealable to the NCT and High Court 3) In imposing sanctions the following considerations must apply:  Nature, duration, gravity and extent of the contravention  Any loss suffered as a result of the contravention  Behavior of the entity  Degree of cooperation  Previous fines or sanctions imposed  Profit derived from the contravention RECOMMENDATIONS

39. 39 1. DEBT FORGIVENESS PROGRAMMES Program for NINA debtors; Graduate debt forgiveness program; African Bank Bad Book; Retrenched Steel and Mine Workers; Moratorium on Gauteng E-tolls; Proposal: further detailed research to be conducted, especially on NINA debtors program; engagement with relevant key stakeholders in all above programmes. RECOMMENDATIONS

40. Elections timelines in South Africa 2004 – General Election 2006 – Municipal Elections 2009 – General Election 2011 – Municipal Elections 2014 – General Election 2016 - Municipal Elections 2019 – General Election Amnesty Data Amnesty Debt Forgiveness

41. What now?  Industry participation key  Data available to make informed decisions

42. www.cpbonline.co.za