National Credit Amendment Bill, 2013 - Department of … Credit Amendment Bill, 2013 Portfolio Committee on Trade and Industry, 12 February 2014 Purpose The purpose of the presentation

National Credit Amendment Bill, 2013

Portfolio Committee on Trade and Industry, 12 February 2014

Purpose

The purpose of the presentation is to provide the PortfolioCommittee on Trade and Industry with detailedresponses to submissions made by Advocate CharmaineVan Der Merwe on 11 February 2014 on the NationalCredit Amendment Bill, 2013

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Delegation

Z Ntuli: DDGM Netshitenzhe: Chief Director - Policy and LegislationM Nonyana-Mokabane: Chief Director - Legislative DraftingA Potwana: Director – Consumer Law and PolicyS Kumkani: Director - Credit PolicyT Mavhuthugu: Director - Legislative DraftingN Motshegare: CEO – NCRL Mashapa: Company Secretary – NCRD Terblanche: Chairperson – NCTJ Ferreira: Acting Executive Strategic Support - NCT

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Introduction The National Credit Act (NCA) 34 of 2005 aims to promote and advance the social

and economic welfare of South Africans. The NCA has made progress in promoting its key policy aims: “A fair, transparent,

competitive, sustainable, responsible, efficient, effective and accessible credit marketand industry.”

Credit touches the lives of many millions of South Africans, with about 19.69 million(September 2012). It not only has the potential to create opportunities for individualsto access goods and services, start businesses, obtain education or improve livingstandards, but also serves as a shock-absorber during periods of financial hardship.

However, while credit can have positive implications for the person accessing it, it canalso destroy a person’s financial security.

The NCA further introduced initiatives to prevent reckless credit and a new debt-counselling industry to provide for debt restructuring for over-indebted consumers.

These new initiatives changed the dynamics between the stakeholders, includingcredit providers, potential new clients, over-indebted consumers, debt counsellorsand the payment distribution agencies.

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Introduction - Continued

Some of the practical outcomes of the NCA suggest that the time has come to re-assess the original policies underlying the NCA.

In this regard, the initial reviews and subsequent policy framework, legislativedrafting of the NCA, its interpretation and implementation were considered with theprospect of improving on what has transpired.

The 2012 policy review of the framework, upon which the NCA is founded, hasconcluded that while the framework is sound and relevant, its intended outcomeshave not always materialised as anticipated.

Since the scope and purpose of policy are outcome-based, the evaluation ofoutcomes indicates that there is a need for the enhancement of certain policiesunderlying the NCA, which may involve the further development of some of theprovisions of the NCA.

NCA ‘cushioned’ SA from the global financial crisis. Innovative measuresintroduced (e.g. credit assessment, reckless lending rules, pre-agreementdisclosure, regulation of agents etc.)

It is against this background that the dti approaches this Parliament forenhancement of some of the provisions of the NCA as per the policy review.

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Preamble

• Reference to “National Credit Tribunal” is incorrect

• Should read “National Consumer Tribunal”

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Definitions

“Lease”

• Submitted that the removal of (d) will result in the removal of differentiation between rental and lease

• Amendment will not be effected

“Mortgage”

• Agree with BASA definition

• Amend accordingly

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Definitions - Continued

“Payment Distribution Agent”

means a person who on behalf of a consumer[,] that has applied for debt review interms of section 86(1), distributes payments to credit providers in terms of the debt re-arrangement court or Tribunal order or agreement; and

• Delete comma

• Insert “or Tribunal”

“Regulated Financial Institutions”

• Not agreed to amend

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Clause 2

Relations with Regulatory Authorities

• No need for dispute resolution mechanism

• Co-operation and Consultation is already provided for in the Act and is a Constitutional requirement

• Notification is the only issue not addressed: Section 57 however identifies the critical areas for consultation – S54(2); S57(4)

• Check other sections where reference is made to a regulated financial institution –may require amendment

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Clause 3

Appointment of inspectors and investigators

• No issue

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New Amendment – Section 40

New Amendment – Section 40

• New provision not part of the proposed amendments

• Provision was made in the policy to review

• Not all policy issues found its way into the Bill

Options:

Permission to be sought from NA to include amendments as set out in next slide, or

Provision to lower the threshold in terms of Section 40(1)(b) through the Regulations

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New Amendment: Section 40 - Continued

• Decision:

Requires an amendment of Section 40(1)(a) to delete the reference to “at least 100 credit agreements” and include the words “number of credit agreements as prescribed by the Minister from time to time by Regulation”

Requires an amendment of Section 42(1) by deletion of the words “not less than R500 000”

• No need for public consultation as this was canvassed during the public hearings

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Clause 5

• Payment Distribution Agents

PROPOSED SECTION 44A CONTAINS:

• Requirements for registration should be in the Bill - legal certainty• (3) In addition to the requirements of section 46 read with changes to the context

(drafting conventions to be considered) an applicant for registration as a payment distribution agent must satisfy any prescribed education, experience or competency requirements

• Act currently provides general conditions set for Credit Providers (S40), Credit Bureaus (S43) and Debt Counsellors (S44).

Provisions should be consistent with those for other registrants

• Registration in terms of National Payments Systems Act and management by the Payment Association of SA not agreed – might consider inclusion in conditions of registration

• 12 Month transitional period – agreed• A juristic person and a debt counsellor may apply to the NCR to act as a PDA

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PDA - General

Payment Distribution Agents (General)

WHEN?

• Upon debt arrangement ordered by Tribunal or Court in terms if a debt restructuring agreement

HOW?

• Consumer to approach PDA through referral by a Debt Counsellor• Referral does not oblige Consumer to use PDA – will remain the consumer’s option

to use a PDA/Switch/None• Deal with possible misuse i.e. incentives for Debt Counsellors to be referring to a

specific PDA

WHY?

• Safeguard to consumers• Ability to track and reconcile payments obo Consumers ito Payment Plan

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Clause 6

Applications for Registration

Fit and Proper Test• Agreed to apply this test consistently• All Registrants will be subjected to fit and proper test• Minister to prescribe what this test will entail

Subsection (b) “Upon investigations”

• This investigation is not a formal investigation• Entire subsection (b) to be deleted

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Clause 7

Disqualification of Natural Persons • Relevant disqualifications set out in Section 46 (Natural Persons) and Section 47

(Juristic Persons) should apply iro PDA who is a registered Debt Counsellor• Drafting will have to be aligned to principle. Proposed “a juristic person and debt

counsellors may apply to the NCR to be registered as a Payment Distribution Agent”

Current position:

• Debt Counsellor can distribute monies on behalf of a consumer if it meets the prescribed requirements of the Act and the Regulations - Refer to existing Regulation 11 of 11 May 2006

• Section 47(1): A juristic person/association of persons cannot be a Debt Counsellor

Considerations:

• With regard to corporates being Debt Counsellors - Enforcement ability against natural persons is far greater than in the event of corporates who can raise defences i.e. corporate veil and vicarious liability

• Credit Provider can never be a Debt Counsellor or PDA – conflict of interest due to nature of role envisaged for Debt Counsellors

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Clause 8

Conditions of Registration

• Affordability assessment regulations – to be complied with by Credit Providers• Condition for Registration – compliance with Affordability Assessment Regulations

and Codes• Follow existing enforcement processes as provided for in Act

Clear distinction between:

1. Affordability Assessment Regulations prescribed, issued and published by the Minister after regular due process – See S171

1. Code of Conduct – must adopt the language used in the Section 82 CPA, can be proposed by the industry via the NCR or by the Minister

Both to be published by the Minister after consultation (not in consultation)

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Clause 11

Voluntary Cancellation (Debt Counsellors)

• There is existing provisions in Section 58

• Need a procedure for proper handover

• Minister is allowed to prescribe the process

• Intention was that procedures of voluntary cancellations should be articulate

• Asking Parliament to note that the Regulations by the Minister will have to occur in compliance with this Section

• Done in terms of Section 171(1)(d)

• Agree with “seize” to be changed to “ceased”

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Clause 12Removal of Credit Records

• The amendment is proposed so that a certificate can be issued where all the other debts have been satisfied and only long term debt is outstanding

• Agree to give the right to issue clearance certificate

• Obligation on PDA and Credit Providers to provide information is thereWe must enhance this and say exactly who will be obliged to furnishThis can part of Special Conditions of Registration

• Test that Debt Counsellors must be applied must be clarified

• NCR to monitor that DC’s are following this strictly

• Numbering is incorrect

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Clause 12 - Continued

Removal of Credit Records (continued)

“Current obligation”

• In section 12(a)(b) (sic): this subsection must be reworded as it is very broad and may lead to litigation

• Referring to the debt that the person has under the debt re-arrangement order• May include agreements that may have been excluded from debt re-structuring ito

Section 129• Certificate must be issued to all credit bureaus• Categorisation or a visual depiction of a payment profile as “adverse” and/or

typification in payment profiles as adverse should be removed • Information on payments still to be reflected in order to conduct risk assessments• Suggested that Section 71A(1)(c) must be amended to read as follows: “An

adverse listing recorded or depicted in the consumer credit payment profile”

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Clause 13

Automatic Removal of Credit Records

• Transitional Provisions are not required

• This will be dealt with in a notice to be issued by the dti on the Removal of Adverse Credit Information Project

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Clause 15

Assessment Mechanisms and Procedures

• Dealt with above in respect of Clause 12

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Clause 16

Reckless Agreements

• Agreed

• The Act already provides for Appeal and Review of Tribunal Orders

• See Section 148 and Regulation 26 of 28 August 2007 as amended

• Matters pending in different forum to be finalised there

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Clause 17

Application for Debt Review

• Clause 17(a) is a credit agreement, not debt re-arrangement• Clause 17(b) is a credit agreement, not debt re-arrangement• Clarification required• The empowering provision already exists in Section 101(f) and (g) – this can be

applied to cap collection cost through Regulation prescribed, issued and published through a due process

• The cost of credit insurance is currently not capped• Credit Insurance is included in the itemised list for cost of credit and could be

subjected to the limits promulgated under the regulations prescribed by the Minister following due process in order to reduce the cost of credit to consumers

• It is for that reason that the NCR published “Credit Providers Code for Combatting Over-Indebtedness”

• Credit Insurance issue also articulated in Section 106

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Clause 20

Procedures before Debt Enforcement

• No issue

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Clause 25

Outcome of Complaint

• Already provided for in Section 140(1)(a)

• Notice of Non-Referral is an outcome of an investigation and not an enforcement action

• Agreed – abandon the amendment. This was intended to deal with additional powers for the NCR in terms of the Amendment Bill which was not proceeded with.

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Clause 26

Agents

• Word incorrectly referenced to Clause 26 instead of Clause 20

• Discretionary: Minister may prescribe training

• Agreed

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New Clause

New Clause

Collecting/Selling and Activating prescribed debts

• The issue is whether we want to make the selling of prescribed debts an offence? Currently it is a defence that can be raised by a defendant, not an offence

• We are aware that this is a defence but consumers may not know it and may also not be subject to an equal exercise of power

• Consider including this in the Registration Conditions for Credit Providers or Code of Conduct

Prescribed fees for Debt Counsellors, PDA’s and ADR’s

• To be dealt with consistently in terms of the NCA

Rationalising Agencies

• Proposal for the rationalisation of the Governance Structure of NCR. No implications on any other agency or person

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General Discussions

General Discussions

• Section 52(4)(b) already provides for automatic lapsing of registration

• There should be provision made for a grace period within which a registrant can still exercise the option to pay any outstanding fees and have its registration remain in place, subject to the payment of a penalty for late payment of the annual renewal fee

• The provision to introduce the grace period is included in the Bill. The penalty to be prescribed by Regulations

• It must be clear that registration lapses after the grace period in order to avoid conflict with Section 52(4)(b)

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General Discussions - Continued

General Discussions (continued)

• Regulations: Section 171 will be finalised once all of the empowering sections have been finalised

• General interest caps constituting an offence: It is already dealt with as a form of prohibited conduct and is therefore adequately provided for and remedies are available

• Emoluments attachment orders: this could be dealt with in the Code of Conduct. Not part and parcel of the amendments except in so far as they relate to adverse classifications or depictions – refer to NCR Project

• Credit Ombud: it is desirable that all credit matters be regulated by the NCR to avoid regulatory splintering, including regulation of ombuds with jurisdiction. We do not need an amendment

• Administrative penalties payable to fiscus: raised during the public hearings, not part of consultation. No amendment required.

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Consequential Amendments

Consequential Amendments

• Corrections to be effected on the proposed amendment to Section 71 of the Consumer Protection Act 68 of 2008

• Proposed amendment to read “(1) Any person may file a complaint concerning a matter contemplated in Section 69(c)(iv) with the Commission in the prescribed manner and form, alleging that a person has acted in a manner inconsistent with this Act

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