1. Affordability Assessment Regulations Compliance Department
Mmabatho Senyarelo

2. Agenda Background to the Affordability Assessment Regulations
Application and Exclusions
Principles of the Regulations

3. Background to the Regulations
In 2012 the NCR commissioned a study by Compliance & Risk Resources (Pty) Ltd into the growth in unsecured personal loans;
The study identified “limited regulatory specifications or industry guidance…of affordability assessments”;
The study recommended “high level principle based guidance to credit providers”;
The first draft of the affordability guidelines was published for comments in June 2013;
The final draft guidelines were completed with industry participation and limited impact assessments;
The draft regulations were published for public comments by the dti in July 2014;
The final regulations were published in March 2015 and came into effect on the 15th September 2015

4. Application & Exclusions
The regulations apply to:
Current, prospective and joint consumers;
All credit providers; and
All credit agreements to which the Act applies, subject to Regulation 2.

5. Exclusions
The Regulations exclude loans to juristic persons and the following:
Developmental credit;
School or student loan;
Public interest credit agreement;
Pawn transaction;
Incidental credit agreement;
Emergency loan;
Temporary increase of a credit limit under a credit facility;
Any change to an agreement/deferral or waiver as per section 95;
FLISP Subsidy Linked Mortgages and credit for housing that falls within the thresholds set from time to time

6. Principles of the regulations
Existing financial means and prospects:
Credit provider must take practical steps to assess “discretionary income”
Take practical steps to validate gross income
(a) Salaried consumers
(i) latest three (3) payslips; or
(ii) bank statements showing at latest three (3) salary deposits;
(b) Non-salaried consumers
(i) latest three (3) documented proof of income;
(ii) latest three (3) months bank statements;
(c) Self employed, informally employed or where no payslip or proof of income as contemplated in (a) or (b) above
(i) latest three (3) months bank statements;
(ii) latest financial statements. .

7. Principles of the regulations… continued
Existing financial means and prospects:
Where the income shows material variance the average gross income for at least three (3) pay periods must be used.
The consumer must:
disclose accurately to the credit provider all financial obligations;
provide authentic documentation.

8. Principles of the regulations… continued
Existing financial obligations
Credit provider must calculate the consumer’s existing financial means, prospects and obligations as envisaged in Sec. 78 (3) and (81) (2) (a) (iii) of the Act.
The minimum living expense norms must be utilised when calculating the existing financial obligations.
In exceptional cases the credit provider may accept consumer declared minimum expenses that are lower than those set out in table 1. In such cases the Questionnaire must be completed.
When conducting the affordability assessment the credit provider must:
calculate the consumer’s discretionary income;
take into account all monthly debt repayment obligations as reflected by a registered credit bureau.
Consider maintenance obligations and other necessary expenses.

9. Principles of the regulations… continued
Minimum Expense Norms

10. Principles of the regulations… continued
Examples
Enter "Gross Monthly Income" R
Minimum Fixed Factor R
Monthly Fixed Factor = % of Income Above Band Minimum. R
Minimum Living Expense R
Enter "Gross Monthly Income" R
Minimum Fixed Factor R
Monthly Fixed Factor = % of Income Above Band Minimum. R
Minimum Living Expense R
Enter "Gross Monthly Income" R
Minimum Fixed Factor R
Monthly Fixed Factor = % of Income Above Band Minimum. R
Minimum Living Expense R
Enter "Gross Monthly Income" R
Minimum Fixed Factor R
Monthly Fixed Factor = % of Income Above Band Minimum. R
Minimum Living Expense R

11. Principles of the regulations… continued

12. Principles of the regulations… continued

13. Consumer declaration Monthly Expense Items Accommodation Transport
Food
Education expenses
Medical expenses
Water and electricity
Maintenance expenses

14. Questions?

15. Thank You!