Dear Sirs

In addition to the submission in regard to the above by MortgageSA.com (Pty) Ltd, we have been requested by the National Association of Mortgage Originators to make a similar submission to the Portfolio Committee on its behalf.

1. Background to NAMO

1. The National Association of Mortgage Originators (NAMO) is an association representing and regulating originators within South Africa. Its members currently exceed 150 originators who between them originate in excess of 65% of all new residential mortgage bond registered each year.
2. The Main Object of NAMO is to:

1. To promote, advance and protect the interests of the mortgage consumer and the mortgage lending financial institutions; and
2. To promote and regulate mortgage originators and the business of mortgage origination by transparent processes which enhance professionalism and service excellence and eliminate improper and/or unlawful and/or unethical practices which cause actual or potential prejudice to the interests of the mortgage consumer and/or the mortgage lending financial institutions and/or bring mortgage origination into disrepute; and
3. To provide for the resolution of disputes and conflict between members and to provide a credible forum to deal with complaints against members by the mortgage consumer or the mortgage lending financial institutions; and
4. Generally to represent the best interests of member mortgage originators in all areas relevant to mortgage origination.

 

2. Originators as "credit agents" under the National Credit Bill

1. For the purposes of the Bill:

1. the banks for which originators originate home loans, secured by way of mortgage, are "credit providers";
2. the originators are persons appointed to represent the credit provider, i.e. "credit agents".

2. In terms of section 163(1) of the Bill, a credit provider –

1. These requirements can be satisfied and regulated contractually between the banks and each originator in terms of the origination agreements between them. Further, one anticipates that the credit provider’s register would record each origination company as its agent, and that it would not be necessary for the banks to keep a register of all the origination company’s employees (see further paragraph 3 below).
2. However, section 163(2), potentially, has considerable impact on the manner in which originators offer their consumer services.
3. Section 163(2) provides that a credit provider must –

1. Practically, does the legislation intend:

1. One identification card for each corporate credit agent, alternatively, a number of corporate identification cards, with each employee of the credit agent being issued with one? or
2. That each employee of an origination company has an individual identification card depicting their likeness and recording their employment by the originator. If so, each originator (and not the bank) should be responsible for issuing these identification cards, although reference could be made to the identification card issued by the bank to originator.

2. Further, the strict wording of section 163(2) obliges the originator to show an identification card to any person with whom it interacts. Practically, this will not be possible where the interaction is by way of call centre or on-line. The Bill needs to make provision for the ever increasing number of instances where the agent is promoting, soliciting or concluding a credit agreement telephonically or on-line.

1. Competition Issues

1. Banks and mortgage originator compete directly for the origination of consumer home loans. That competition has led to increased competition between the banks to the benefit of the consumer.
2. It is submitted that the Bill needs to be alive to these competition issues, and to recognise the credit agent as more than just an extension of the credit provider’s business.
3. Accordingly, the provisions of sections 163(1)(b) & (c) in regard to training and registers should be amplified to make it clear that:

1. The bank’s register need only record the corporate credit agent and not its employees;
2. Training should be the responsibility of the corporate credit agents and not the banks. In the absence of allowing in-house training to be the accepted standard, corporate credit agents may be restricted in their ability to staff their business. This would be so as they would be dependent on their staff having completed a competitor’s training course, or, as in the case of originator originating for a number of credit providers, a multiplicity of training courses.

4. In the absence of further detail, credit providers may argue (as it may be in their interests) that the provisions of section 163(1)(b) & (c) require the credit provider to have access to information (which may be confidential) relating to the credit agent’s business, including details of training programmes, names of staff members, new staff appointments and the like.

2. Summary

1. For the reasons set out above, it is submitted that the Bill does not provide adequately and/or in a workable manner for credit agents (originators) that are corporate entities and/or that are significant employers and/or that conduct their business by way of call centres and/or on-line.
2. It is submitted that section 163(2) requires amendment to deal with:

1. Corporate credit agents being issued with an identification card by the credit provider;
2. The corporate credit agents then issuing (as opposed to the credit provider issuing) the employees of the corporate credit agent with identification cards. The latter identification cards would reference the identification card issued by the credit provider to the corporate credit agent;
3. The showing of identification cards being dispensed with, other than on request, where consumer services are offered other than by way of personal interaction, e.g. by way call centre and/or on-line by way of websites.

3. In addition, it is also submitted that section 163(1) requires amendment in order to be more sensitive to the competition issues that arise. Credit agents, certainly in the case of mortgage originators, are competitors of the credit providers, and importantly not simply extensions of their businesses.

Yours faithfully