1. PRESENTATION ON THE NATIONAL CREDIT AMENDMENT BILL [B 47B OF 2013]

2. Purpose The purpose of the presentation is to brief the Select Committee on Trade and International Relations on the National Credit Amendment Bill, 2013

3. Introduction Credit Regulation in South Africa Regulation of Consumer Credit Market is one of the constitutional imperatives advocated by the Constitution of the Republic of South Africa Act, 1996. Credit regulation is but one way though which consumer protection can be realised in South Africa, as provided for in Part A of Schedule 4 of the Constitution. This mandate and responsibility has been entrusted upon the Department of Trade and Industry (the dti).

4. The role Role and Responsibility of the dti One of the strategic objectives of the dti is to create a fair regulatory environment that enables investment, trade and enterprise development in an equitable and socially responsible manner. The Consumer and Corporate Regulation Division of the dti (CCRD) develops and implements regulatory solutions which must be coherent, predictable and transparent to be able to facilitate easy access to redress for its economic citizens. Through its Policy and Legislation Unit, CCRD develops and reviews regulatory systems in consumer protection, company and intellectual property areas, as well as public interest regulation.

5. The National Credit Act 34 of 2005 The National Credit Act, 34 of 2005 (NCA) fully came into effect on 1 June 2007. The NCA was developed from A Policy Framework for Consumer Credit, finalised by the dti during 2003. The NCA replaced the Credit Agreements Act and the Usury Act. The NCA introduced a new era in preventing and curbing reckless credit practices and a new debt counselling dispensation. The NCA has had a significant impact in regulating the credit market and increasing consumer protection against unscrupulous lenders. The NCA has undoubtedly sheltered the South African economy from the effects most countries, including developed countries, suffered during the financial crisis. The NCA has been successful, but areas of improvement have been identified to make it more effective. Background

6. Review of the NCA Review of the NCA & Public Consultations Positive impact of the NCA has not been without implementation challenges hence the need to review the policy and amend the NCA. From June 2012 the dti embarked on a comprehensive review of the policy framework on Consumer Credit with the purpose of analysing and amending the current policy. The main objective of the exercise was to analyse the policy upon which the NCA is founded and with a view to: Identify whether the necessary legislative amendments have a policy basis and where necessary provide a policy basis for the amendment of the sections of the NCA that have given rise to implementation problems Develop policy where necessary to guide and inform the necessary legislative amendments Amend the existing policy where it is imperative to do so

7. Review of the NCA the dti appointed Business Enterprises at the University of Pretoria (Be@UP (Pty) Ltd) to conduct the analysis of the existing policy. Final report by Be@UP (Pty) Ltd was submitted during December 2012. The draft policy review document was finalised during March 2013, and the dti proceeded to draft the Bill on the proposed amendments. Both the policy framework and the amendment Bill were then presented to Cabinet by Minister and approved on 17 April 2013. The draft policy framework was published on 29 May 2013 for public comments under General Notice 559 of 2013 (Government Gazette No.36504) whilst the amendment Bill under General Notice 560 of 2013 (Government Gazette No.36505). Public consultations with various stakeholders were then arranged in 7 provinces in the country from 10 June 2013 until 28 June 2013.

8. Review of the NCA the dti extended the deadline to 15 July 2013 and the dti received written submissions/comments from 45 stakeholders. The final draft policy framework and the amendment Bill was approved by the Minister and then tabled before Cabinet on 31 July 2013 for approval and for introduction of the amendment Bill to Parliament. However, the documents were later withdrawn from Cabinet at the request of the National Treasury for bilateral discussions between the dti and National Treasury on various issues raised by National Treasury. The documents were re-tabled later deliberated by Cabinet and approved on 04 September 2013. The Portfolio Committee on Trade and Industry in the National Assembly adopted the Bill and the Bill was referred to the Select Committee on Trade and International Relations in the National Council of Provinces on 27 February 2014

9. Policy Framework : Key Policy and Legislative Challenges Draft policy framework highlighted the following key policy issues: Strengthening the powers of the National Credit Regulator to ensure more efficient regulation. Enhanced ways of dealing with reckless lending accompanied by effective penalties. Finding a way of dealing with Alternative Dispute Resolution structures or agents in the debt resolution process by registering and accrediting them as well as defining the scope of their operation, within the Act. Addressing the implementation challenges and gaps in the current legislation to improve efficiency on matters such as complaints handling and determination of a fit and proper person Key Policy Issues

10. … Key Policy Issues Identified Rectification of ambigous drafting, incorrect referencing and unintended consequences. e.g. Section 130 (1) (a) which erroneously refers to a notice in terms of section 86 (9) instead of (10), Section 129 which refers a consumer to a debt counselor when section 86 (2) prevents. Interpretation difficulties such as can be found in section 129 regarding notifying the consumer of the default. Judgments such as the recent one declaring section 89 (5) (c) to be unconstitutional. The mandate and practical functioning of the NCT should be enhanced, recourse to the NCT should be effective and efficient & the NCT can be re-positioned as an appeals/reviews body. Policy Issues

11. … Key Legislative Issues Identified Tightening requirements for people who may practice as debt counsellors PDA’s or as credit providers (e.g requirement of fit and proper person). Setting norms and standards when it comes to affordability assessment criteria, by empowering the Minister to issue affordability assessment regulations. Empowering the National Consumer Tribunal to be able to adjudicate and make rulings on applications for the suspension of reckless credit agreements, thus creating a cost effective relief for consumers. Legislative Issues

12. …Key Legislative Issues Identified Defining the role of Alternative Dispute Resolution structures or agents as well as the manner in which they are registered or accredited. Ensuring that debt counsellors employ trained staff in their practices but at the same time not allowing staff who are not registered as debt counsellors to perform functions of debt counsellors. Ensuring that applicants are fit and proper persons to be debt counselors or PDAs. Providing a procedure for cancellation of registration of debt counselors or PDA’s. To amend the provisions relating to debt review (sections 86, 129 and 130). Legislative Issues

13. … Other issues Identified Clearance/ Rehabilitation Certificates where a consumer has settled all other debts under debt re-arrangement except long term debts such as the Mortgage Bonds. Governance structure of the regulator. Automatic Removal of Adverse Consumer Credit Information – the Bill amends section dealing with removal of adverse consumer credit information to allow for immediate removal after payment on an on going basis. This means that the consumer with judgment listed at the credit bureau need not approach the court anymore to rescind a judgment. The Minister has issued a Notice in Government Gazette No 37386 dated 26 February 2014 on the removal of adverse consumer information after consultation with Cabinet and Parliament. Prescription of debt – The Bill prohibits the sale or collection of expired debt Credit Insurance – Capping of Credit Insurance to deal with the abuse of Credit Life Insurance. Other Issues

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