Nicolette Dirk, finance writer, Justmoney.co.za
Pay day loan provider wanna loan? has come out in support of stricter regulation that is set to come out of the National Credit Amendment Bill (NCAB).
However, the company’s CEO believes more stringent affordability assessments should be reviewed or scrapped.
Last month the NCAB was introduced to National Assembly by the Minister of Trade and Industry, Dr Rob Davies.
Prior to the amendment’s introduction, Paul Slot, president of the Debt Counsellors Association of South Africa (DCASA), said it was long overdue and contained a number of critical amendments that will improve the rights and protection of consumers.
Davies said complaints were raised about consumers being enticed and tempted to take credit, especially short term credit with high interest rates. These adverts come through emails, SMS, etc., and included offers of pre-approved loans and credit cards, which prey on vulnerable consumers.
“It is sad that most legitimate credit providers are involved in these kinds of practices. The National Credit Act (NCA) already empowers the National Credit Regulator (NCR) to deal with these practices, and we have impressed on them to closely monitor and take action against these unscrupulous companies. Naming and shaming of these entities will be explored,” said Davies.
Support for the amendment
While the NCAB faces strong opposition from many credit lenders, payday loan provider, wanna loan?, supports the stricter regulation.
According to Nathan January, CEO of wanna loan?, tighter regulation will protect South African consumers from reckless lending that leads to over-indebtedness.
“A well regulated environment will help to rid the industry of unscrupulous lenders who’ve caused the industry’s reputation to become tarnished over the years,” said January.
January said he welcomed proposals in the National Credit Amendment Bill which will give consumers more protection, as it will encourage competitiveness within the industry. But he added that there were aspects of the Bill that could adversely affect consumers.
“Should the National Credit Amendment Bill be enacted in its current form, consumers who make use of online lending will no longer enjoy the benefit of automation that this platform provides. Essentially what this means is that innovation will be taken back to an era where customers will be required to submit documentation manually,” said January.
There are close to 21 million credit active consumers in South Africa, and 85% of them access credit from banks.
“Wanna loan? markets itself to the balance of the population, mostly customers who are in full-time employment and earn above R10 000 a month,” said January.
But January warned the proposal to impose more stringent affordability assessments will negatively impact these consumers in three ways: convenience, user experience and turnaround time.
“This might in fact lead to the unintended consequence of pushing some consumers to informal borrowing, i.e. loan sharks, thereby exposing them to more risk. January suggests that this particular proposal be reviewed, or scrapped,” said January.
Who should be held responsible?
Overall, January said he welcomed the amendments and added that the responsibility also lies with the industry to educate consumers and to ensure that it is self-policing in order to protect customers and itself.
Slot said the current use of short term debt or pay day loans is alarming and many consumers who use pay day loans are caught in an uncontrollable and very expensive debt spiral from the moment they apply for them.
January said that at wanna loan? customers undergo a comprehensive application and online credit check which is followed up with personal contact via a telephone call.
He added that they are doing their best to avoid becoming complicit in a practice that keeps consumers enslaved to debt.