There is a debt culture in South Africa, as many families are forced to take on debt to provide the basics for their family, such as putting food on the table. While there are steps and procedures in place to help people who become over-indebted, the National Credit Regulator (NCR) is calling for debt relief laws to be introduced.
The difference between debt relief and debt forgiveness
Debt forgiveness is the writing off of a person’s outstanding debt. In other words, you will no longer need to pay the money owed on the debt that is ‘forgiven’. By contrast, debt relief looks at putting in place structures and procedures to help people who are over-indebted better manage their debt repayments. This can include reducing interest rates or extending payment terms.
The response to calls for stricter laws
Hannalie Crous, head of credit for FNB Retail, told Justmoney: “FNB can confirm that the bank was part of initial discussions held in Parliament by the Trade and Industry Portfolio Committee. FNB has a number of initiatives in place to assist customers that find themselves in financial difficulty; however debt counselling remains the key element of customer support for consumers that may become over indebted. As a credit provider, we are committed to ensuring that customers are not over indebted when credit is granted. The bank will remain an active participant in this type of discussion, as is the case for many other industry discussions and initiatives.”
Nedbank responded: “Nedbank is actively participating in these discussions with the regulators. Our overall collections philosophy is geared towards rehabilitating consumers whose accounts are in arrears, wherever possible. Nedbank clients who find themselves in financial difficulty should proactively contact our call centre and discuss potential solutions.”
Justmoney contacted Absa and Standard Bank, as well as the NCR, who had not responded to requests for comment at the time of publication.
However, in an article published on Business Live, the NCR noted that while there is evidence that the banks are willing to assist over-indebted clients who may be struggling, it is necessary to have laws in place to force the banks to do what has been agreed if they fail to do so.
However, the banks appear to be reluctant to have laws pertaining to debt relief implemented, stating that they all have procedures in place already to help customers that may require assistance. Furthermore, there is concern that by over-regulating the industry, customers may be attracted to the unregulated credit market.
