28July 2005

Emerald Van Zyl Consulting/Konsultante

NATIONAL CREDIT BILL


1 I thank you for the opportunity to address the Committee and make submissions on the National Credit Bill [ hereinafter the Bill] on matters of great concern for the consumers of South Africa.


2 After the Bill published as the Consumer Credit Bill in the Government Gazette No. 266678 of 17 August 2004 for public comment, I expressed my concern of repealing the Usury Act and Credit Agreements Act retroactively in my letter dated 30 October 2004. My concern was based on a ruling by the Supreme Court of Appeal of South Africa in the matter Kruger vs President Insurance Co Ltd 1994 2SA 495 (D503G] that entrenched right cannot be taken away by retroactive repealing of any legislation. I attach the aforementioned letter as annexure "A".


3 On promulgation of the proposed National Credit Bill, the Usury Act and Credit Agreements Act will be retroactively repealed as contemplated in the Bill. From the date of promulgation, consumers will be limited to claim back any overcharges form financial institutions for the next 3 years on any overpayment that occurred not more than three years ago under the directives of the Usury Act.


4 Furthermore section 166 of the Bill determines that when a course of conduct or continuing practice that caused overcharges has stopped more than three years ago, you will not be able to recover these overcharges.


5 This will be of great disadvantage for the consumer for the following reasons :-


5.1 The Bill is heavily focused on the micro finance industry, which is where most of the reckless lending and consumer abuse has been taking place. To take away the rights of consumers to claim back overcharges that occurred within 3 years prior to the promulgation of the Bill, will not only be of great disadvantage, but will take away the problem that caused the over indebtedness. The DTI and the MFRC were aware of these irregularities but failed to act and I refer the Committee to annexure *'B" & "C"


5.2 0ver the past 3 years more than 150 execution sales of Saambou Bank bondholders were stopped because of contraventions of the Usury Act. One of these contraventions was that Saambou Bank calculated interest monthly in advance with no credit for payments made during the month until September 1999. I attach as annexure "D" a letter dated 27 September 2002 from the Registrar of the Usury Act, addressed to the Receiver of Saambou Bank, Mr. Louw. In this letter the Registrar mfoimed Mr. Louw that Saambou Bank calculated interest illegally until September 1999. Up to today, Mr. Louw nor First National Bank [ who bought the mortgage book of Saambou Bank for R 1,00] has corrected these overstated mortgage bonds. With reference to section 166 of the Bill, these people whose houses was saves from being sold in execution and thousands of other homeowners will have no further defense and will be destitute.


6 I attach an article under the heading "MitcheIls Plain woman turns to court to prevent sale other home" that appeared in the Cape Times dated 25 July 2005 as annexure D. The sale in execution was cancelled in order for Ms. Pietersen to put the matter on the court roll for hearing, because consumer protection in the Department of Trade and Industry has collapsed. The overpayment on the bond of Ms Pietersen amounts to R 34 858,14 which means that she is not in arrears with her mortgage.


7 Another matter of concern is that all mortgage bonds are registered at the deeds Office and fall under the directives of section 5(1) of the Usury Act. The terms of these bonds are normally scheduled over 20 years. Costs like inception fees, yearly fees and administration fees, etc, that were prohibited under the Usury Act will now be recoverable under the proposed Bill. This is a clear disadvantage to bondholders and another reason why the Usury Act cannot be repealed.


8. It is therefore my considered opinion that there is a place for the Bill in the micro lending industry as consumers protection tinder the directives of the Usury Act were taken away with the promulgation of the Exemption Notice 713.


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Emerald van Zyl