• Objective
• The FTA landscape
• The PTA's position towards the National Credit Bill

• Building a more responsible credit market
• Developments during the preparation phase for the National Credit Bill
• Positive drivers that contributed to the current healthy state of the consumer credit market
• Future protection of the consumer and credit industry – a national imperative

• Broad Perspectives
• Specific concerns
• Considerations for further engagement
• Conclusion

Share the views of the FTA on the proposed National Credit Bill to secure shared meaning and common understanding of:

• Transformation elements contained in the bill that the FTA underwrites
• Concerns and their implications facing the industry

The FTA landscape

• FTA represents 3000 furniture and appliance stores throughout the country

• 50 000 employees
• 10 million credit account holders

• The combined furniture industry is a significant player in providing credit to the mass furniture and appliances consumer market

• The FTA and its members fully endorse the objective of the National Credit Bill

"To promote a fair and non-discriminatory market place for access to consumer credit"

• Registration and regulation of credit grantors
• Extending and expanding responsible credit (neutralise reckless lending)
• Improved Consumer credit education
• Consumer protection
• Regulatory framework of Credit Bureaux

The national Credit Bill has to take the interests of all role players into account to secure a sustainable future.

General Comments - developments during the preparation phase for the National Credit Bill

• FTA participated and contributed to assist in shaping a framework for debate in the development of the new credit bill
• The failure of Saambou and Unifer as well as the need to rescue Profurn from failure confirmed the urgent need for transformation
• These failures were mainly due to over-extension of credit and reckless lending

Business failures are not in national or industry interest.

• Improved Credit Standards:

• Standards in the consumer credit market improved dramatically for the 17.5 million credit receivers compared to three years ago by:
• widespread introduction of electronic credit scoring which de-personalised credit assessment processes
• Improvement of positive credit record from 82.5% to 87%
• Payment failure reduced by 20% during the above period

• Professional risk assessment
• Lower interest rates
• Lower personal tax.
• Vibrant economy
• Interventions of the MFRC

The current business environment was preceded by a very difficult one. The National Credit Bill must cater for both buoyant and depressed economic conditions.

Future protection of the consumer and credit industry - a national imperative

• Risk and return dictates where money is invested
• Furniture retail credit extension is considered "high risk" by investors
• A return that relates to the level of risk is expected

Concerns

• Limiting credit risk assessment mechanisms
• Sources of revenue

• Capping of income levels

• Compliance and penalties
• Restrictions on credit marketing
• Effects and cost of new statutory entities :

• Tribunal
• Debt Councilors
• National Register of Credit Agreements

Cost of credit versus the potential inability to price for risk may result in a contraction in credit extension.

Specific Concerns

Specific FTA concerns and its implications

• Insurance
• Debt recovery
• Implementation and Administration of the new legislation
• Impact of the not yet published regulations.

• Financial
• Technology
• Timeframes

• Insurance provides security and peace of mind for the credit receiver:

• • Safeguarding of ownership of goods purchased in the instance of retrenchment
• • Replacement of goods purchased in the instance of theft or destruction
• • Settlement of the outstanding debt in the instance of death or disability

• The above adds significantly to risk mitigation in credit extension for the credit provider.

Insurance (Continued) -Furniture and appliance credit insurance in perspective

• No medical examination required for life and disability cover
• No preconditions regarding security etc. for all risks cover
• No excesses applied
• Goods covered at full replacement cost
• Retrenchment cover provided
• All insurance administration is performed by the credit provider

• Collection of premiums
• Early settlements rebates
• Claims administration and settlement

• Complexity of now legislation for the furniture and appliance Industry:

• Onerous administration processes resulting in increased cost
• Impractical/impossible to implement top up premiums based on shortfall between value of goods and outstanding balance of account.

Debt recovery

• FTA supports the concept of debt counseling and mediation
• Potential for abuse
• Negative impact on the quality of debtors
• Negative investor perceptions
• Prevention for earning interest during period of debt counseling will impact on credit providers
• Negative impact on cash flow and company balance sheet.

• The scale and complexity of the new legislation will have a major impact on the capacity of the industry
  to cope with it from a cost, process, technology and timeline perspective

• Additional compliance required from business will necessitate extensive training.

• Administrative burden of managing such a complex retail environment will significantly impact on the industry's viability and attractiveness for employees, customer, investors and communities.

• Further consultation on the specific identified areas of concern to secure collective levels of understanding and finding solutions is imperative for the successful implementation of the National Credit Bill
• Regulations must be published and subjected to the same collective consultation as the National Credit Bill
• Phased-in implementation of the Bill and the collective scheduling of implementation timelines will be imperative for the success thereof

The FTA is totally committed to partner the Department of Trade and Industry to ensure a better regulated, enlarged and responsible credit environment to the benefit alt stakeholders and secure a sustainable consumer credit environment.