2.2 Financial Sector and Growth & Development Summit Agreements

3 Comments on National Credit Bill 2005

3.1 Endorsement of comment and proposals by FSCC member organisations

3.2 Additional comments

3.2.1 Credit information

3.2.2 Credit black listing amnesty

3.2.3 Reckless lending exemptions

3.2.4 Savings and credit co-operatives

3.2.5 Matters prescribed in regulations

1.INTRODUCTION

The Financial Sector Campaign Coalition (FSCC) appreciates the opportunity to make this submission on the National Credit Bill 2005 to the parliamentary Portfolio Committee on Trade and Industry. We welcome the introduction of the Bill as the first attempt by government to draft comprehensive legislation to regulate the credit industry in a fair and just manner. This holistic approach to credit policy and law reform, which seeks to promote and protect the rights of consumers of credit, marks a decisive break with the past, where piecemeal and inappropriate amendments to credit legislation, coupled with a failure to implement effectively the consumer protection provisions of existing credit laws, especially the Usury Act, have resulted in massive exploitation of the majority of our people.

In the past, and certainly in the first decade of democracy, the DTI has failed to protect or promote the rights of consumers of credit. The Department's attempts to regulate microlenders in terms of the 1998 Usury Act Exemption Notice, have resulted in millions of our people, many the poorest of the poor, being trapped into ever-spiraling debt from which they cannot escape. The department's administration of the Usury and Credit Agreements Acts has encouraged and legitimised a highly profitable credit industry, especially in the microlending sector, which thrives by mercilessly exploiting the workers and the poor of our country

Against this background, the passing of the National Credit Bill can achieve, for the first time in our history, a balancing of the profit-making interests of credit granters against those of consumers of credit. We find much of merit in the proposed Bill and find that in many instances, the Bill takes cognisance of the demands on credit agreed by the social partners at the Financial Sector Summit in 2002.

We are in agreement with the Bill's attempts to ensure access to affordable, appropriate credit and to address the reckless lending practices that have characterised credit access for the majority of South Africans in the past. The Bill's provisions on limits to total costs of credit and interest rates, access to credit information, contracts in simple language with full disclosure of charges, terms and conditions, effective regulation of credit information and credit bureaus, are welcomed. These were all among the demands of civil society organisations at the Financial Sector Summit three years ago and it is gratifying to see them finally included in the National Credit Bill.

But we also wish to raise a number of concerns. This submission will propose amendments to the Bill; it will recommend additions to the Bill and it will propose that all matters prescribed in terms of regulations should be tabled in parliament.

2.BACKGROUND

2.1 FSCC Profile

The Financial Sector Campaign Coalition was launched in 2001 to campaign for transformation of the financial sector so that it would serve the needs of all South Africans. Having grown from its roots in the South African Communist Party's Red October Campaign in 2000 to "Make The Banks Serve The People", the FSCC is now a network of 50 member organisations representing civil society through labour, political, legal, human rights, health, youth, faith, consumer, community, women's and co-operative organisations.

The FSCC is a non-profit organisation, registered as a member of the Community Constituency at the National Economic Development and Labour Chamber (Nedlac), the social dialogue forum which brings together government, organised business, labour and community groups in an effort to reach consensus on issues of social and economic policy.

As a member of the Nedlac Community Constituency, the FSCC spearheaded initiatives that resulted in the Financial Sector Summit in August 2002. The Summit declaration outlined thirteen agreements that committed business, government, labour and community constituencies to work together for transformation of the financial sector. The agreements recorded, inter alia, the Summit's commitment to reforming access to credit and the regulation of credit bureaus in our country.

One of the outcomes of the Summit was the Financial Sector Charter which was signed in 2003. The FSCC is part of the Community Constituency representation on the Charter's governing body, the Financial Sector Charter Council.

The Coalition is governed by a Steering Committee composed of the SA Youth Council; the Savings and Credit Co-operatives League; the SA Council of Churches and other faith communities; Streetnet International; the Aids Consortium; the Black Sash and FSC coalitions in the nine provinces. The chairperson is Dr Blade Nzimande, representing the SA Communist Party.

2.2 Financial Sector and Growth and Development Summit Agreements

The Nedlac Financial Sector Summit reached agreements on far reaching transformational goals for the financial sector. These were summarised in a Declaration signed in August 2002, three years ago this week. These agreements were incorporated in toto into the Presidential Growth and Development Summit Agreements in 2003 and form the blueprint for financial sector transformation in our country, driving both private sector change and public policy and legislation.

The Summit Declaration committed the Nedlac social partners to the following (the agreements which impact on the National credit Bill 2005 are highlighted):

Declaration of the Financial Sector Summit

1. The Government, Business, community and Labour constituencies at NEDLAC began meeting at the beginning of 2002 in order to agree on strategies to ensure the financial sector is more efficient in the delivery of financial services, which will enhance national savings and direct them to developmental purposes. The proposed strategies should assist the financial sector:

a. To provide sustainable and affordable banking services, contractual savings schemes and credit for small and micro enterprise and poor households,

b. To support higher levels of savings and investment overall,

c. To expand developmental investments that create jobs, raise living standards and strengthen the economy, and

d. To encourage broader and more representative ownership, control and employment within the financial sector itself and in the economy as a whole.

2. To achieve these aims requires a financial sector which is more diverse in terms of the nature, size and ownership of institutions. All its different components must assume a strong developmental role.

3. Today, on the anniversary of the launching of the United Democratic Front, the parties agree on the following proposals. These agreements must be seen as a package.

3.1. Ensuring access to basic financial services: To engage effectively in the economy, encourage savings and improve the quality of life, every South African resident should have access to affordable and convenient payments and savings facilities. Both the public and private sector financial institutions must play a role in achieving these aims.

3.2. The parties will jointly research the economics of basic financial services and on that basis establish mechanisms and timeframes for achieving universal access.

3.3. Development of sustainable institutions to serve poor communities. While the large formal financial institutions have an important role to play in providing services for the poor. They must interact with and support smaller institutions, especially co-operative banks and NGOs that can provide micro-credit to the poorest households. We need to harness the energies of the existing institutions in our communities, such as stokvels and burial societies, in order to mobilise our people's savings. The smaller financial institutions serve to increase the diversity of the sector and broaden ownership.

3.4. The parties agree on the need for new enabling legislation for so-called second and third tier deposit-taking financial institutions. As a start, they have agreed key principles for legislation for financial co-operatives. the legislation should ensure that these institutions operate according to co-operative principles and enjoy adequate prudential oversight

3.5. Following the Summit, the pa flies will also make proposals on ways to enhance the developmental impact of the regulatory framework.

3.7. In the absence of realistic alternatives, many wage-earners have had to resort to micro-lenders when they need credit In too many instances, the result has been an accumulation of excessive debt at a high price. Following the Summit, the parties will propose appropriate regulation for micro-lenders to minimise the negative effects of usurious practices.

3.9. Discrimination. The parties have agreed that, within the context of the Equality Act of 2000, every subsector within the financial sector should establish or strengthen a code to end unfair discrimination. Government should legislate uniform norms on disclosure of financial services by race, gender, location and categories of amount. People who face unfair discrimination should have an effective route for adjudication.

3.10. HIV/AIDS. The parties are particularly concerned about the need to end unfair discrimination against people with HIV and develop appropriate services for them. Following the Summit, they will work together to achieve this end, and especially to ensure that people with HIV have improved access to housing finance and other services.

3.11.Capital markets and investment. The parties agree on the need to increase overall investment and in particular projects that strengthen infrastructure, create jobs, meet basic needs, stimulate economic activity in the poorest regions and communities of South Africa and/or support development throughout southern Africa. They agree on the need to establish a system to identify these projects. On that basis, they will engage around the establishment of realistic targets and monitoring mechanisms. In addition, they will develop training for fund managers and retirement-fund trustees to enable them to adopt more informed and appropriate investment strategies.

3.12. Development finance institutions (DFIS) and other state-owned financial institutions. Following the Summit, the parties will mak3 proposals around the developmental impact of these institutions and, if necessary, recommend improvements. A particular concern is to ensure that the PostBank should maintain and expand its services to poor communities.

3.13. Savings initiatives. The parties have agreed on activities to promote a savings culture, mobilise our people around the need to increase savings and improve the savings facilities available to all our people.

4. The parties recognise that the proposed measures require a great deal of work following the Summit. We have agreed to meet at least once a month to review progress and strengthen our proposals. To ensure our success in this process, the NEDLAC constituencies commit to providing the necessary capacity, time, energy and enthusiasm.

Signed this 20th of August, 2002, in Pretoria.

3 Comments on provisions of the National Credit Bill 2005

It is against the background of five years of mobilising, organising and negotiating transformation of the financial sector with various stakeholders that we submit our comments on the National Credit Bill 2005.

3.1 Policy and legislation drafting processes

We wish to express disappointment at the policy and legislative processes followed by the DTI in the hope that these observations will result in better planning and consultation by the Department in future. At the same time DTI officials were negotiating the new credit policy in Nedlac, as required in terms of the Nedlac Act, they were negotiating the already drafted Consumer Credit Bill outside of Nedlac in bilateral forums between government and business groups. It is not surprising therefore that some of the consumer protection measures in the policy and first draft bill had been removed by the second draft, the National Credit Bill, which is now being consdered by the portfolio committee.

Despite requests for the final draft of the Bill to be formally tabled in Nedlac, this was not done as DII is of the view that policy only, and not legislation, should be tabled in Nedlac. Following the Financial Sector Summit agreements outlined above, three years have passed without DTJ implementing the interim arrangements regulating credit bureaus as had been agreed.

3.2 Endorsement of submissions

The FSCC wishes to endorse the submissions made by its member organisations, the Congress of South African Trade Unions (COSAIU), the Savings and Credit Co-operatives League (SACCOL) and the Black Sash. We agree with the recommendations made in those submissions and add our voice to their proposals. We will not repeat these recommendations in this submission, save where it is necessary to do so in order to expand on a proposal.

The following comments deal with credit information, credit bureau regulation, credit blacklisting amnesty, reckless lending exemptions, recognition of savings and credit co-operatives and matters prescribed in terms of regulations.

3.3.1.Credit information

The FSCC welcomes the regulation of Credit Bureaus contained in the Bill. It is unfortunate that it has taken three full years for the commitments of the Financial Sector Summit to translate into draft legislation.

S68-70

With reference to s68-70, which deal with the receiving, compiling and reporting of consumer credit information, we refer to the agreement of the Financial Sector Summit described above, namely: The Bill should include the commitment made by government at the Financial Sector and Presidential Growth and Development Summits to regulating credit bureaus so that they could supply "only in formation relevant to a person's creditworthiness"

This agreement was reached after lengthy deliberations on the purposes for which credit information should be sold or supplied. The parties heard evidence from constituencies of credit bureaus supplying adverse credit information to employers or prospective employers and causing workers to lose, or be refused, jobs.

The partners agreed the practice of credit bureaus selling information to agencies to screen potential employees was unacceptable and unconstitutional. Effectively this practice condemns jobseekers to further economic hardship and increases unemployment. Instances have been reported where financial institutions require credit clearance on employment, even though it might not be an inherent requirement of the job.

In terms of these provisions of the Bill, credit information could be traded for purposes other than for assessing creditworthiness. This provision could encourage the prejudice that anyone who is blacklisted by a credit bureau is automatically unfit not only to borrow on credit even if their circumstances have changed, but is also unfit to earn a living.

Credit information industry interests have apparently prevailed in arguing that their profits would be harmed if they are forced to sell information only to those who would use it for bona fide creditworthiness assessments. Recent public statements by Departmental officials state that these provisions could be contained in regulations.

We propose that the Bill should provide for credit information to be sold only for the purposes of assessing creditworthiness and that sale or use of credit information for other purposes should be an offence.

Alternatively, any regulations drafted to prescribe the purposes for which credit information may be sold or supplied, or prescribing who may access credit records, should be submitted to parliament for public comment and consideration.

3.3.2 CREDIT BLACKLISTING AMNESTY

We also regret that the Bill does not contain an amnesty for those blacklisted by credit bureaus. We call on the committee to amend the Bill to include an amnesty to all South Africans who are blacklisted by credit bureaus.

The new credit law is a step in the right direction - the direction of stopping exploitation of the workers and the poor. The poor are the ones who pay the highest price for credit in our county and who are the victims of a credit system that has been grossly unfair and neglected by our lawmakers and regulators for far too long. We fully support government's commitment to enacting new laws that will remedy these shortcomings.

But the new law does not go far enough. A once-off amnesty must be granted to all those on credit bureau blacklists at the same time. The new law must start from a clean slate - the rich have had plenty of amnesties - tax amnesty, foreign assets amnesty - amounting to billions of rands being written off. In May 2005, the National Treasury estimated the value of foreign assets disclosed under the latest amnesty to be worth R50.7 billion, with 8 000 of the 43 000 applications still to be finalised.

In the name of reconciliation and democracy, we have even given amnesty to murderers and assassins. Why can't we have an amnesty for the poor? They must also get a second chance to start afresh.

Critics ask: Why should people get amnesty now, when apartheid ended 10 years ago and blacklistings last only 3 to 5 years? They ask: what will happen to the stability of the financial sector if the poor get a credit blacklisting amnesty? These criticisms miss the point entirely and can only be made by critics who are out of touch with the grinding poverty experienced by the masses of our people.

Apartheid credit practices and massive exploitation of the poor did not end with the fall of the apartheid regime - they flourished after 1994 and so did credit blacklistings. And what could be more destabilising to the financial sector than to have millions of citizens excluded from access to credit, many for trivial amounts and because of exploitative interest rates, lack of affordable credit, discrimination or joblessness?

Post-apartheid amendments to the Usury Act added to the millions of South Africans blacklisted by microlenders and banks. The creation of the massive and unscrupulous microlending industry in the 1990s, with microlenders charging exorbitant interest, left millions of poor borrowers caught in debt, blacklisted by credit bureaus. Few poor people can escape the spiral of debt when they get trapped. They often get into the debt tmp by borrowing for essentials like school fees or funerals. Micro lenders, to say nothing of ebomashonisa, charge poor people 500% and more in interest per year. An estimated 18 million of the poorest South Africans pay more than 360% a year in interest on unregistered microloans.

Our country is deeply divided between rich and poor. Shamefully, we have the third biggest income gap in the world. Government's own research shows that the way credit has been regulated up to now has failed the poor majority - the poorest of the poor pay seven times more for credit than the rich. In a system where over R360 billion is provided in credit every year, the poor pay on average 175% in interest a year for credit while the highest paid earners pay on average only 26%.

This state of affairs is outrageous when we are struggling to deal with the legacy of apartheid, 40% unemployment and the HIVIAIDS pandemic. The credit bureau industry seems to think it is not a problem to have over 2 million people blacklisted or to sell credit information to whomever is willing to pay for it, repatriating these to parent corporations in Britain and America. Their rules are made by middle class managers, or shareholders in New York and London, with no experience of the reality of working class lives and poverty in South Africa.

In our view, credit blacklisting is a national crisis - two million blacklisted adults affects up to 10 million people, a quarter of our population - denying families access to housing loans, denying workers jobs.

Poor communities cannot benefit from government's plans for stimulating the informal economy, or from low-income housing, SME and other financing proposals of the Financial Sector Charter, because of blacklisting. As the Minister of Housing stated recently, access to the R42 billion in housing finance to be made available in terms of the Financial Sector Charter will be undermined by credit blacklisting.

We note recent claims by credit bureaus and their industry association that they are merely the messengers in blacklisting, not the decision-makers. We dismiss this attempt to dissemble and obfuscate. The industry is hiding behind semantics to disguise the central role it plays in selling credit information for profit. The industry is fully aware that the relationship it has with its clients is one in which those clients act on the information supplied by the bureau in considering credit applications. Why else would they buy its information? Surely, not even the credit bureaus can expect us to believe they sell information for it to be ignored?

Any blacklisted borrower in South Africa will testify that credit granters without exception refuse credit to those on blacklists, no matter whether the debt has been paid or the circumstances of the borrower have changed. We urge the committee to legislate the manner in which bureaus receive, compile, store, market release and sell their information.

In our view, this committee has an important role to play in deciding the way forward. In deciding whether a once-off amnesty is justified, honourable members can ask some simple questions:

• Would the two million people who are currently on credit bureau blacklists be there if the proposed new law had been in place at the time they were granted credit, or when they defaulted?

• Will one of the objectives of the Bill, to make affordable credit accessible to the millions of South Africans denied this basic right in the past, be achieved if the blacklists remain in place?

If the answer to these basic questions is no, then how can we justify continuing to punish people because of the unjust dispensation that allowed them to be blacklisted in the first place? If we believe the provisions of the new Bill are correct - that reckless lending must be stopped, that recording and supplying of credit information must be better regulated - then there can be no excuse for claiming punishments in terms of the previous, unjust dispensation should continue.

The crisis of indebtedness of poor households is a ticking time bomb, an unsustainable reality that must be addressed with a sense of urgency. It is time to close this chapter of massive exploitation of the poor. A once-off amnesty is the only solution. We must leave the baggage of the past behind and go forward with the new law. We call on the committee to intervene on the side of the poor.

3.3.3 Over-indebtedness and reckless credit

The Section 78(2) reckless credit provision exemptions allow lenders to grant loans for "unanticipated life events" to already highly indebted borrowers without facing penalties for reckless lending. The FSCC proposes that the Bill's provisions for exclusion of emergency, educational loans and public interest loans should be removed.

s78(2) states: s78(2) Sections 81 to 84, and any other provisions of this Part to the extent that they relate to reckless credit, do not apply to

(a) a school loan or a student loan;

(b) an emergency loan;

(c) a public interest credit agreement;

For ease of reference, the definition of "educational loan" means-

(a) a student loan;

(b) a school loan; or

(c) another credit agreement entered into by a consumer for purposes related to the consumer's adult education, training or skill's development; and "emergency loan" means a credit agreement entered into by a consumer to finance costs arising from or associated with-

(a) a death, illness or medical condition;

(b) unexpected loss or interruption of income;

(c) catastrophic loss of or damage to home or property due to fire, theft, or natural disaster or

(d) any other similar unanticipated life event affecting the consumer, a person who is dependent upon the consumer or a person for whom the consumer is financially responsible; and "public interest credit agreement" applies in –

circumstances of natural disaster or similar emergent and grave public interest;

This exemption provision is misguided and provides a loophole through which unscrupulous lenders could continue to lend to poor people already trapped in debt. It gives lenders permission to prey on poor people when they are at their most vulnerable and desperate.

The provision reflects experience from a social milieu far removed from the reality of life for most people in South Africa. It might be "unanticipated" that a house would burn down in minutes in a middle class suburb, or a planned, serviced residential development on another continent, but for the estimated 6 million South Africans living in informal settlements, the reality of homes being razed by fires that sweep through entire communities in minutes is hardly unanticipated - it is a daily fear and expectation.

Equally, it might be "unanticipated" in the affluent sector of our society, or a foreign country where access to treatment for HIVIAIDS is free or affordable, that several members of one family or community might die. But in South Africa, with an HIVIAIDS infection rate of over 5 million out of a population of 43 million, this is a highly likely event.

For all the predictability of death from AIDS, many people do not have access to savings for funerals. Loan sharks, so-called regulated microlenders, banks as well as abomashonisa will be eager to take advantage of the destitute who suffer death, illness or medical condition; unexpected loss or interruption of income; catastrophic loss of or damage to home or property due to fire, theft, or natural disaster; or any other similar unanticipated life event".

The stark reality of life in South Africa for poor people, the majority of South Africans, is that life crises are entirely predictable. Almost half of all African people in South Africa live in the former homeland regions, where 55% are unemployed, only one in seven has a formal job, and 70% earn under R1 000 a month against the national average of one in four workers earning under P1000 a month.

In this context, the life crises described in the Bill are anticipated life events. It does not make them any more affordable or any less traumatic. Needing cash for emergencies is not for emergencies, it is the norm. In such times of dire need, predictable as they are, poor people should not be forced to borrow from lenders who will exploit them mercilessly.

The State social security system is, and should remain, obliged to provide relief for people who are faced with life crises such as death, disability, catastrophe or natural disaster. Where the provisions of the current social security system are inadequate to deal with the needs of citizens in traumatic circumstances, especially in the light of the burden of dealing with the HIVIAIDS pandemic, it should be the task of the democratic government to devise interventions to meet society's life crises and education needs.

Proposing that parliament should approve a law that foists people in crisis onto avaricious microlenders is at best dangerous in its naivet6 and at worst both cynical and heartless. The exemption provisions of the Bill will allow poor people in crisis to be exploited by lenders and will undo in a single blow any good the Bill might achieve.

The FSCC therefore proposes that all credit transactions be subject to a t'reckless credit" assessment and that Section 78(2)(a)(b) and (c) be deleted from the legislation.

3.3.4 Debt counseling and rehabilitation services

s86(3) of the Bill requires consumers to pay for a debt counseling and rehabilitation services application fees. We reiterate detailed proposals by the Black Sash and other FSCC member organisations that the Bill should state unambiguously that the services of debt counsellors will be provided free of charge service to consumers throughout the country. We support proposals that the funding of debt counsellors should be detailed in the legislation and not the regulations. Alternatively, that all proposed regulations be tabled in parliament to allow for adequate public comment.

3.3.5 CONSUMER REPRESENTATION

The consumer perspective should be heard effectively. We do not support the appointment of 'representative consumers', but of 'consume] representatives'. The crucial difference is that consumer representatives can be appointed only on the basis that they are mandated by and accountable to credible organisations. These may be labour, community, co-operative, savings or similar organisations. This is a qualitatively different appointment process to that which pertains in many advisory structures where people are appointed on the basis of perceived knowledge or experience but where they are not accountable to constituencies in

3.3.6 SAVINGS AND CREDIT CO-OPERATIVES

The Bill is silent on appropriate treatment of savings and credit co-operatives. The FSCC supports the concerns raised in the submission to the portfolio committee raised by one of its members, the Savings and Credit Cooperatives League, SACCOL.

The Credit Bill takes no account of the needs of SACCOs and, if passed in its current form, could place such a regulatory burden on the small but growing .savings and credit co-operatives movement that it would either be rendered non-compliant or collapse.

In South Africa, SACCOs play an increasingly important role in providing financial services to the millions of citizens outside the formal banking and financial services system and toward implementing mass based economic empowerment through democratically owned and controlled enterprises. This role, and support for it in all spheres of government, is reflected in two other recent pieces of legislation, namely the Co-operatives Bill and the draft Cooperative Banks Bill.

Unlike non-financial cooperatives, SACCOs mobilise members' savings in the form of withdrawable shares and/or deposits. To assure the members that these deposited funds are safe, SACCOs require a specialised system of examination and regulation that is not needed by non-financial cooperatives.

Unlike Commercial bank shares, SACCO members' shares are withdrawable at par (plus earnings, if any). Bank shares are converrible to cash only upon liquidation of the bank or by sale of the shares to third parties.

We note with concern that, notwithstanding the bill's professed commitment to "promoting black economic empowerment and ownen3hip within the consumer credit industry", nowhere does the bill propose providing support to SACCOs.

The Bill refers inappropriately to "credit unions", apparently reflecting the bias of its North American drafters, and does not mention or define these institutions as SACCOs, the name by which they are known throughout the whole of Africa, and the name by which they are recegnised by the SA Reserve Bank.

The Bill makes some special allowances for "developmental" lenders, but does not take into account the unique structure of the savings and credit cooperatives movement in South Africa. The Bill requires each individual SACCO to apply for registration as a lender as well as for "developmental lender" status.

The Bill does not recognise the co-operative tiered structure of primary co-operatives, secondary or apex co-operatives (services organisations whose membership is made up of primary co-operatives as recognised in the Co-operatives Bill 2005, recently approved by this Committee). It also does not recognise the co-operative tiered structure, or the anticipated co-operative banks provisions, that will be contained in the National Treasury's Co-operative Banks Bill, the final draft of which is due to be tabled in parliament October 2005. Documentation on this Bill is readily available from the National Treasury.

We therefore have the anomalous situation where two departments are producing legislation dealing with related financial regulation issues but who are clearly not communicating with each other. In a country characterised by high financial illiteracy, low numeracy and unequal access to education, it would be appropriate to require these two legislative processes to be harmonised. At the very least, legislation produced by the same department, namely the DTI, should be consistent.

The National Credit Bill should be amended to:

• recognise and cater for the unique structure of the Savings and Credit Co-operatives (SACCO) movement in South Africa.

• recognise and cater for the co-operative tiered structure of primary cooperatives, secondary or apex co-operatives as enshrined in other legislation.

3.3.7 IN DUPLUM RULE We welcome the intention to apply the In duplum rule and support calls for the Bill to prohibit the continued running of fees, charges and interest and to stop the running of interest when any further payment is made. If the running of interest when any further payment is made is allowed, the incentive to settle debts will be undermined.

3.3.8 MATTERS PRESCRIBED IN REGUALTIONS

We propose that all in matters which must be prescribed, draft regulations must be tabled in parliament to ensure adequate consultation.

3.3.9 COSTING

The FSCC is concerned that the funding requirements estimated by the Department are not detailed and could be inadequate. While we agree with arguments put forward by the DII that the size of the consumer credit industry in South Africa justifies expenditure on regulation of an estimated R63 million a year, we would like assurances that firstly, this level of funding will indeed be made available and is sustainable and secondly, that staff will be recruited and appropriately trained to carry out the functions described in this Bill.

DTI has in the past cited inadequate financial, human and other resources as reasons for its failure to effectively implement the Usury Act and other legislation. We are therefore concerned that provisions of this ambitious legislation might not be implemented because, laudable though they may be, they are beyond our means. There is little point in designing elaborate and costly regulatory regimes that would be suitable for Western Europe or North America unless the resources exist to implement them in a sustainable way in South Africa.

We propose that the committee should require full details of funding for all provisions of the Bill in the medium term. As consumer protection is a Schedule 4 competence in terms of the Constitution, with competence at both national and provincial levels, adequate funding should be available in both spheres of government to carry out the regulatory functions effectively.

3.3.9 HARMONISATION WITH OTHER LAWS

The FSCC supports proposals made by the Nedlac social partners during credit policy discussions with both the DTI and the Department of Justice that a comprehensive debt law review should be expedited. As stated in the Memorandum to this Bill, the partners noted that DTI's policy research concluded that many of the weaknesses in the present regime stem from factors outside the DTI's direct mandate, such as problems related to the application of debit orders by banks and problems related to the Magistrates' Courts Act, 1944 (Act No.32 of 1944), and that these also have to be addressed in order to improve access to credit.

While we understand that the policy process around privacy, debt, magistrate's courts and other laws could take considerably longer to finalise than the National Credit Bill, we wish to record that this review should be conducted with all haste. This will ensure that gains made by credit law changes are not rendered ineffective by outdated, apartheid era debt and other laws.