Nicolette Dirk, finance writer, Justmoney.co.za
Standard Bank Group reported today that bad debts have been higher in the first four months of this year due to South African consumers being under pressure from the weak economy. But the newly signed National Credit Amendment Act could help South Africa’s indebted population.
According to Debtsafe debt councillor, Wikus Olivier, the new amendments have put the consumer at a very favourable position to address their debt problems.
Here are the important changes within the act pertaining to debt:
• When a consumer is under debt review, the credit providers cannot terminate that debt review if a court date has been obtained. According to Olivier, credit providers could find technical ways to terminate the debt review in the past, even if it was on a court roll.
• Affordability assessments done by credit providers when a consumer applies for credit will be regulated. Olivier said the assessments will be a lot stricter than what we are used to, and will result in fewer people being able to get credit. This will also lead the way in identifying reckless credit granting more easily.
• When a consumer is under debt review and all the smaller unsecured debt has been repaid, a clearance certificate can be issued if the larger debts such as a home loan are up to date. In the past, a clearance certificate could only be issued when all debt was paid in full. This caused several issues due to larger debts, like home loans, not being paid and therefore causing some technical challenges when trying to rehabilitate consumers into the credit market.
• Prescribed debt cannot be collected or sold to any third party. Section 26B now clearly states that no person may sell a debt that has been extinguished by prescription under the Prescription Act, 1969 (Act No. 68 of 1969). Prior to this collectors used to use a loophole in the Prescription Act to obtain money from lenders. Read more about that here.
• The continued removal of negative and adverse consumer credit information will hold great benefit for consumers. If a debt has been repaid, all negative information on that debt has to be removed.
“This information will be specific negative listings like judgements, slow payer, absconded, default listings, etc. Listings of debt with outstanding balances will remain on the credit profile.
The payment history will remain untouched, even if the debt has been settled and negative information removed,” said Olivier.
The payment history will remain untouched, even if the debt has been settled and negative information removed,” said Olivier.
How are consumers further protected?
Olivier said these amendments will allow for Alternative Dispute Resolution Agents (ADR) to be registered. ADRs handle disputes between consumers and credit providers on a voluntary basis.
“We foresee that most debt counsellors will register as ADRs in order to have a broader service offering. An ADR, that is not a registered debt counsellor, is prohibited from doing debt review activities,” said Olivier.
Payment Distribution Agencies (PDAs) will also be able to register in terms of the Act. In the past only three PDAs were accredited by the National Credit Regulator (NCR) and were the only ones to offer the Payment and Distribution services up to date.
“Consumers need to make sure that the PDA they are using through their debt counsellor is in fact registered with the NCR,” he said.
“Consumers need to make sure that the PDA they are using through their debt counsellor is in fact registered with the NCR,” he said.
All credit providers will now also have to be registered with the NCR. In the past there were certain thresholds that a credit provider had to exceed in order to register.
“Now, every person or company that gives out loans or credit has to be registered with the NCR. This will help the NCR in combatting reckless and unscrupulous lenders, which will in turn help protect the consumer,” said Olivier.
To apply for debt counselling, click here.