Responses to comments on Credit Bill,2005

Responses to comments on Credit Bill, 2005

Section	Comment	Consideration	Recommendation
	Civil Court: Consistency between the text and the definition of civil court- also reference to the Constitution is inadequate.	Remove reference to Civil Court and change it to refer to all courts	Omit "civil" from definition
	Credit Union: indicates a North American bias. Bill is silent on appropriate treatment of savings and credit co-operatives. Bill should be amended to recognize and cater for the unique structure of the Savings and Credit-Co-Operatives movement in SA - operatives, secondary apex co-operatives as enshrined in other legislation.	The points made about the definition of credit are accepted. It is therefore necessary to consider changing the term credit union and reference to services provided by bank.	Change "credit union" to "credit co-operative" and change the wording in the following manner: credit co-operative whose predominant purpose is to offer financial services to its members."
	Emergency Loan: Delete this definition (Sections 81 -84); concern that provision of this type of loan within the South African context is highly inappropriate it will allow unscrupulous lenders to advance a desperate person a loan to meet the costs arising from any of the events contained in the definition. The State should remain responsible for the circumstances the "emergency loan" purports to cover. Suggest: Disallow this category of loan.	The concern that a loophole is created for potential abuse of consumers is shared. However, it is not realistic to say that if State where to provide, it would certainly take time to implement. However , there may be real emergencies in the interim. Rather than delegating this definition and the relevant section(s78) we may need to consider tightening up this area. In particular ,it should not be possible for credit providers to do emergency lender should be able to grant such credit only under exceptional circumstances. The National Credit Regulator should be able to investigate as well.	Definition to be tightened up by limiting its application only to the consumer, a dependent and a person the consumer is financially responsible for. Also, remove reference to "any other unanticipated life event"
	Incidental credit agreement:	Definition requires review to ensure that it is consistent with prepaid transaction and intention	Definition to be reviewed – to revert to committee
		in Bill
	Inspector: incorrect cross reference	Accepted	Omit" 34( 1)" and substitute with "259(1)(a)
	Whilst the definition of instalment agreement provides in paragraph (a) for all or part of the price to be deferred and to be paid by periodic instalments, it does not provide for the payment of interest, fees or charges as provided for in the definition of" lease	Accepted	Insert into the definition of 'instalment agreement', a clause like (c) in "lease".
	Juristic person:	Comments noted and specific insertion proposed	Insert "other than stokvels and co-operatives" after "unincorporated"
	Low income housing: reference should be to 13(a)	Accepted	Replace 13(1) a with 13(a)
	Mortgage: there is a loan agreement and a security agreement - 2 different transaction in law - distinguish the concepts.	Agree. Need to redefine to ensure that mortgage' refer to the security interest registered in fixed property (or something of this sort) and define the credit agreement as the agreement that is secured through mortgage.	Amend as follows: "mortgage" is a pledge of immovable property which secures obligations under a mortgage agreement"; mortgage agreement" is a credit agreement secured by a pledge of immovable property".
	Non-returnable goods: this definition needs to be expanded to make provision for goods that may not be returned for hygienic purposes (underwear or earrings)	The need for this definition must be reviewed, as section 127 deals with instalment agreements. It is not clear that any non-returnable goods would be sold under instalment agreement and this would in fact not be proper, as the good taken as security then has no intrinsic value	Delete definition and other references to "non-returnable goods"
	Prepaid transaction: is contrary to the everyday usage and understanding of the term prepaid.	Agree that there is an anomaly here and require clarification	Delete (a) in the definition of prepaid transaction; replace use of" prepaid transaction" with" incidental credit" in other sections of the Bill, where relevant
	Private dwelling: should be changed, so that where a business is conducted from the home, the premises are still considered to be that of a private dwelling.	Implication of current wording is that the prohibition of 'door-to-door' sales of credit may not apply if part of the house is used for business purposes	Add "or principally" after 'wholly' (will be consistent with Human Rights Commission Act).
	Sms: short message service not small"	Correct	Replace "small with "short";
	Define developmental credit as referred to in the definition of statutory exception	Change definition of "statutory exception"	Change reference to "developmental credit" to "a developmental credit agreement" in definition of "statutory exception" and in all other sections of the Bill where the term "developmental credit" is used
2	Provisions of these two sections are in conflict with the ECT Act. Suggest that provisions of the ECT Act should apply to transactions and agreements that are concluded electronically, and that consequential amendments are made throughout the Bill.	Does not appear that any change to 116 is required as 2(3) accommodates electronic signature in any case where this Act refers to a document being signed. Furthermore, 52(3) is seeking to accommodate both possibilities, signature in conformation of the ECT Act, as well as other cases [3(a) & 3(b)].	Section re-organised to make clear that there are two types of signatures, which are provided for in the ECT Act and which have different rules applied to them an advanced electronic signature and electronic signature
4(1)	National Treasury request to consider exempting ad hoc loans, made by foreign institutions to SA Citizens. This definition [asset value/turnover figures] could mean that smaller subsidiaries of large corporate will, be default, fall within the ambit of the Bill	Consider Suggest that we expand the definition to include the holding company of the juristic person. Note that this would have the effect that an SME where a corporate has a controlling shareholding in, is also excluded.	Delete words "or having an effect within," from section 4(1) Insert "of this consumer or any other juristic person of which it is a subsidiary" after turnover" in 4(1b)
4(6)	Concern This is one very long and complex sentence. It spans 5 lines and 70 words.	The sentence means: "If a consumer pays for goods or services with a credit card or other credit facility, the seller of the goods is not necessary assumed to be a credit provider."	Section to be rephrased as follows: "For all purposes in this Act , if a consumer pays for goods or services by way of a charge against a credit facility in terms of which a third party is the credit provider , the person who sells the goods or services is not regarded to have entered into a credit agreement with the consumer merely by virtue of that fact;"
5	Section was deemed confusing and unclear. Concern also about the extensive application of provisions to incidental credit, especially reckless credit and registration of agreements on NCR	Agree that section is confusing at present. Need to be rephrased	Section rephrased to make clear which sections of the Act apply to incidental credit. Have excluded requirement to be registered on NCR. Also provided that incidental credit agreements may only include interest and are subject to maximum
8(2)	We are of the view that the exclusion in this section relating to policies also excludes any loans granted by an insurer in terms of the policy of insurance - the LOA requests confirmation that policy loans granted by an insurer in terms of a policy of insurance are contained within the exclusion provided in section 8(2) and that long-term insurers are not required in respect of policy loans to comply with the provisions of the National Credit Bill.	Loans against insurance policies should be included. But we can exempt loans extended to maintain the premium payments	Review section 8(2)(&) as follows "a policy of insurance, and credit extended by the insurer, but only to the extent that the credit is utilised to maintain the payment of premiums on such a policy"
11(1)	Can this be retrospective and is there a need for this?	Nothing to do with retrospectively. Allows the Minister to afford special treatment to credit in times or areas of national or regional emergency.	Insert "after the effective date" after "period"
13(a)(ii)	Should not be conjunctive - could be any one of a, b, c- in so far as the Act deals with mortgages – inner city redlining	Linguistic and stylistic issues	Change "and" to "or"
15(c )	Words missing	Change where the wording is wrong.	Delete "related" in 15(c )
19	The heading contains a reference to the "governance and objectives" of the Regulator but the section only refers to the governance - Delete "objects"	Agreed	Delete reference to "and objects" in heading
19(1)(f)	Prescribe consumer representation of at least 3 of the "six other members"	This would be overly limiting, as it may be useful to have legal expertise, accounting expertise etc on the Board. Perhaps one could add that at least one representative should be a consumer representative. It is not envisaged that there will be any industry representation on the Board	Add "at least one of which must be a representative of consumer interests"
41(1)	Every credit provider should be registered with SARS - should be a precondition for every person other than a credit receiver provider and therefore subject to 46(3)?	Expand SARS requirement across all relevant institutional forms	Add section similar to 41(l)b into other registration sections, i.e. Credit Bureaux & Credit Providers (not debt counsellors) .(sections 43 and 48)
43(3)(a)	Inappropriate that Credit Bureaux should have equivalent qualification\s to debt counselors. The standards that will be prescribed for a debt counselor cannot be made applicable to the employees or contractors of the credit bureaus. Reword the section to read as follows. "(3) The National Credit Regulator must not register a person as a credit provider unless that person: maintains and imposes minimum qualification, competence, knowledge and experience requirements for its employees or contractors who will have the authority to represent it in any function under this Act a' prescribed by regulation	43(3)b already create ability to set standards for staff of credit bureaux	Delete from 43(3)(a) "at least equivalent to those prescribed for debt counselors" and replace "minimum" with "appropriate"
46(3)b	Government Servants should not be prohibited from being debt counsellors.	Agree, this would (a) prevent the state from creating such capacity; (b) would prevent provincial government from creating such capacity within provincial consumer desks, and (c) prevent debt counselors being employed within government to assist government employees. There appears to be no compelling reason why government servants may not be directors of Credit Providers either.	Delete 46(3)b
47	May a debt counsellor be the agent of credit provider? Who pays a debt counsellor? Attorneys, debt administrators and similar professions that should be disqualified from registration as debt counsellors. People that are under administration should not be debt counsellors. Also recommended that a minimum age requirement of 25 years should be imposed	Limiting registration of activities that have a conflict of interest with debt counselling. Thelast point is already provided for indirectly in that the person must satisfy prescribed experience requirements.	47. (1) A registered credit provider, or an employee or agent of a registered credit provider, a juristic person or an association of persons may not be registered as a debt counsellor. Add new 47 1l)a: Individuals that are involved in, or employed in legal entities that are involved in any of the following areas, are disqualified from registration as debt councillors:- (i) debt collection (ii) operation of a credit bureau (iii) and any other activity that may impose a potential conflict of interests, as prescribed by the Minister. Add new 47(1)b : "Individuals that are under administration, or that are subject to debt rearrangement as per sections 86 and87 of this Act. are disqualified from registration as debt counsellors
48	See section 41 above	See section 41 above	See section 41 above
51(2)	Remove reference by inserting the wording of the provision referred to: "From which persons who carry on this business in their own names carry on registered activities"	The proposed insertion does not capture fully what was intended in section 40(2)(c'	Insert "in their own names at or from more than one location or premises, as contemplated in section 40C2)(c)".
54(5)	Contravene a notice? Language - comply rather than contravene - read with 56 read with 59[sic] Not clear whether possible to continue activity under review.	It is an indication that the NCR considers the credit provider to be in contravention- this can be rephrased.	Replace section 54C5) with "Failure to comply with a notice issued in terms of section is an offence."
55			Insert new section 55(6) "Failure to comply with a compliance notice as contemplated in section 55 and without raising an objection in terms of 56, the National Credit Regulator may refer the matter to the Tribunal for an appropriate order
57	If the regulator cancels banks ability to be a credit provider they would have to close down. SARB wants consultation on these matters Consider: Implication of no provision for review or appeal in this section as for the notice of non-registration in terms of section54 or issuance of a compliance notice in terms of section 55, though this is much more drastic intervention.	SARB is a prudential regulator - the dti can impose conditions on credit conduct but cannot de-register banks	Consider following change to 57(2)a:- "(a) ~~a request may not be made to~~ the Tribunal may not to cancel the registration, except if requested to do so by the regulatory authority that licensed that regulated financial institution"
61(1)	Section 60 refers to "association of persons". Section 61 refers to "association Clarify	Accept	Add "of persons" in S 61
	Respective roles of Courts and Trobunal		Delete reference to "The Tribunal or "
61(6)(b)	Consider: Whether the National Credit Regulator should not always simply refer this type of complaint to the Equality Court instead of entertaining it. This will avoid duplication of resources by the two bodies and forum shopping by consumers	If the person lodges a complaint with the NCR, the NCR will investigate, which will be of benefit to consumer. However, the Equality Court should probably be the only forum for hearing and adjudicating such complaints	To be amended accordingly
68(1)	Section 68(2)(b) should be deleted and the following new section 68(4) inserted: "(4) Where a person discloses confidential information in contravention of subsection (1), or fails to disclose confidential information in contravention of paragraph 2(a), any aggrieved person may apply in the prescribed manner and form to the National Credit regulator to investigate a contravention of this section"	Agree. Criminal sanction is likely to be ineffective and it would be more appropriate to deal with such cases administratively, through the Tribunal	Omit subsection (2)(a) and insert a new subsection: "(3) Failure by a credit bureau to comply with a notice in terms subsections (1) and (2) above is guilty of an offence."
69	Proposed change: " (b) the name and address of the consumer, except in the case of developmental credit providers who must provide the name only" The requirement to provide current and previous loan history to the NCR will impose significant up-front costs to implement - such costs will affect the sustainability of organisations trying to reach the poor, or the costs must be passed on to those we seek to empower. It is proposed that non- collateralised loans and those not repaid via direct debit or other EFT process be excluded from the NCR reporting process. Should this relief not be available we would request that the provision of address information for certain classes of clients of developmental credit providers & non- collaterised loans, be excluded from reporting requirements. Concern that NCR is treated differently from Credit Bureaux	This section does not currently provide for current and historic information. Suggest that this be expanded, in respect of credit with duration of longer than 3 years as a transitional measure. Recommended special accommodation for developmental credit agreements.	Add 69(2)e:- "Minister may prescribe alternative requirements that would apply to developmental credit providers" Regarding the issue with 69(3), provide in the transitional arrangement such as the following:- "In respect of pre-existing credit agreements with a duration exceeding 3 years, the Minister may prescribe information, not exceeding the information specified under 69(2), to be submitted by the credit provider to the register, within a prescribed period." (Still to be inserted) Delete section that restricts liability of National Credit Regulator and Register
70(2)	"Issue a report to any person who requires it for a prescribed purpose or a purpose contemplated in the Act upon payment of the credit bureau's fee except where the Act explicitly provides that no fee be charged" (f)	Reasonable, request	Modify 70(2)g:- "Issue a report to any person who requires it for a prescribed purpose or a purpose contemplated in the Act upon payment of the credit bureau's fee except where the Act explicitly provides that no fee be charged"
70(2)(f)	Suggest: Propose the removal of a judgment on confirmation by an attorney that the judgment has been rescinded and following receipt of an original court order, should be made mandatory in line with the requirements set out in section 71(5)	Accepted	Add 71 (7):- Upon confirmation received in the prescribed form, that judgment has been rescinded and following receipt of an original court order for the recission, the credit bureau must expunge from its records the original judgement"
70(6)	Concern: Provisions for criminal sanction are not appropriate. The authors in the fall submission give complete reasons. Suggest: enforcement should be de-criminalised - the following paragraph to replace section 70(6) " Any person may apply in the prescribed manner and form to the National Credit Regulator to investigate any contravention of this section by a credit bureau " or Delete section 70(6)	Agree at least that the administrative penalties - and the fine in particular, is the most effective disincentive. Criminal action in court does not appear to be the appropriate remedy, and is likely to be costly, time consuming and ineffective.	Rephrase subsection (6) as follows" : Failure to comply with a notice issued in terms of this section is an offence."
72(1)(b)(i)	Concern : Would be overwhelmed withrequests for free credit reports in the first effective year of the Act. Suggest that free credit reports be rolled out to consumers by date of birth, re-word the section to read as follows: "The Minister may prescribe the method by which free credit reports are to be requested in the first effective year of the Act. for example, on a date of birth basis" Concern regarding the access & challenge of credit records & information abuse by vexatious consumers	Reasonable request, and such a flood of requests for information would make the scheme unworkable and defeat the purpose of this section Consumer gets a free report only if CB has recorded info. Incorrectly. Need to re-phrase in the Bill. Suggested that CBA include this issue in a submission	Insert transitional measure: "The Minister may prescribe the method and a time frame according to which free credit reports are to be requested in the first effective year of the Act" Amend wording as follows - insert the following words in 72(l)(b)(i)(cc) "only if a change was necessary" after the words "After challenging any information in terms of this section"
72(1)	"be compensated by the credit provider who reported incorrect information, for the cost of correcting that information"	72(1)d already specifies that it is the person who supplied the incorrect information, from whom compensation can be sought. However, the word "report" may be misleading.	Amend 72(1)d as follows:- (d) be compensated, by ~~the~~ any person who negligently or knowingly filed reported incorrect information, for the cost of correcting that information
74	Suggest that subsection 5 be revised and suggest the following words: "sub-sections (2) and (3) do not apply in respect of developmental credit.	Agree	Replace (2) with ’this section’
75			Insert new subsection (7): " in any advertisement concerning the granting of credit, a credit provider must state or set out the interest rate and other credit costs in the prescribed manner and form."
76(1)	It is implicit in both sections that every person "soliciting for the purpose of inducing a person to apply for or obtain credit" must be doing so on behalf of a credit provider. The authors dispute that this is the case in respect of mortgage originators and salespersons of white goods etc who they contend are not agents of the credit provider. Suggested amendment to section 76 – words "by or on behalf of a credit provider" should be inserted after the word "solicitation" so as to clarify the meaning. Amendment to section 163(l)(a) - second line by the insertion of the words "or the consumer's agent" should be inserted after the words "credit provider directly'	Broad wording as currently more appropriate. Refer 163. Where no commission payable, nothing to disclose.!	Accept addition of words "by or on behalf of a credit provider" after the word solicitation"
76(2)	Concern: The provisions have considerable implications for the Mortgage Origination industry. The author outlines the current procedure in any consumer – mortgage originator- credit provider interaction in order to obtain a quote for the consumer. The requirements in the Bill with regard to written quotes after every oral solicitation and delivery of such written statements will add complexity and costs to the process and will require substantial changes to the existing processes undertaken by 'agents'. Cost of agreement being requested by the consumer and then not being accepted is likely to escalate due to the amount of work that now needs to be undertaken when soliciting for new business Recommend: Section needs urgent review Suggest: Re-word this section to state that providers must provide to those persons accepting the offer, a written statement containing all the said information prior to	76(2) may be somewhat too broad, and we could exclude a general statement as to the availability of credit, while keeping the requirements when it comes to discussing a specific credit option.	Rephrase 76(2):- Any person making an in-person oral solicitation for the purpose of inducing a person to apply for or obtain credit, must provide a written statement containing the information set out in subsection (1) when a specific credit offering is presented or discussed."
76(11)	Concern: Not possible to include in a written solicitation the credit provider's annual interest rate and other costs of credit	The current section is very blunt and this is an area with considerable complexity. Consider leaving such detail to the regulations.	Replace 76(1) with:- 76. (1) Any written solicitation for the purpose of inducing a person to apply for or obtain credit must include a statement -, ~~of the following~~ with the prescribed information for the particular type of solicitation, (delete 76 a to f).
77(3)	Should this not be in section 75?	Accepted	77(2) & 77(3) moved to become part of 75. Delete remainder of 77.
78(2)(a)(b) and (c)	Concern: Reckless credit provision exemptions will allow poor people in crisis to be exploited by lenders who will undo in a single blow any good the bill might achieve. Suggest All credit transactions be subject to a "reckless credit" assessment and that section 78(2)(a)(b)(c) be deleted from the Bill Concern: How many people will be able to repay emergency loans in the short to medium term. The State should provide assistance with 'disaster relief and social relief grants. Suggest: Delete provisions relating to emergency loans or emergency loans be subject to the same assessments as other loans Suggest; Section 78(2)(a) and (b) is deleted	A possible solution is not to exempt emergency loans from the reckless lending provisions, and to require that level of indebtedness is assessed and to allow in exceptional circumstances for the credit provider to issue the credit nevertheless in the circumstances.	Insert new sections which require that (1) documentary proof must be kept by the credit provider in each instance that a credit agreement in terms of 78(2)(a)-(c) is concluded; and (2) that the credit provider indicate the nature of the credit agreement when registering it with the National Credit Register.
80	Authors suggest that the credit provider should assess the consumers borrowing capacity at the time of any re-advance from a loan such as a mortgage bond. Propose an additional section be inserted - section 80(3)(d) to read as follows:"(d) any access facility in terms of which the consumer may draw down on a loan secured by a mortgage without reference to the credit provider is the limit of facility at that time." Suggest : Provisions on reckless credit should include unsolicited extension of credit to a consumer when the credit grantor had not concluded an affordability assessment with the consumer personally . The simple principle is that the credit should not be extended or increased , unsolicited or not, without an affordability assessment.		Insert in 80(1):- "... agreement was made or the time when the amount approved per the agreement is increased. ... " Amend section 80(3 )(a) to read "my credit facility or facility in terms of which the consumer may draw down on a loan secured by a mortgage without reference to the credit provider, is the limit of that facility at that time."
81			Omit "or the Tribunal"
83	Following changes proposed pursuant to section 83(2)(a): "(1) During the period of that the force and effect of a credit agreement is suspended in terms of the Act- (a) the consumer is not required to make any payment under the agreement and in respect of a credit agreement for the provision of services on a continuos basis shall not be entitled to access to the service. (b) no interest, fee or other charge under the agreement may be charged to the consumer; and credit provider’s rights and obligations under the agreement , or under any law in respect of that agreement , are unenforceable , despite any law to the country"	Amendment should indicate that the rights that a consumer may have in terms of a contract are also suspended	Insert " rights and " in front of "obligations"
89(2)(a)	Concern: Why is it necessary to deal with legal capacity to contract in the Bill – legal capacity is part of the general law and need not be specifically dealt with unless there are specific reasons to do so. The wording is unfortunate and does not allow for the possibility that a consumer contract can be entered into by a minor that can be ratified by himself on attaining majority by his guardian or the High Court that is the upper guardian of all minors.	If point is not heeded, would be interfering with current law and accepted practices, which allow minors to contract under supervision of guardian	Propose that unemancipated minors may conclude agreements with the consent of their guardians.
902(k)(ii)	Contains a reference to the giving of a power of attorney in advance. This reference is too wide and it should be amended so that it provides for exactly which types of power of attorney are prohibited by the Bill	Amend section to address concern	Change section to refer to power of attorney in respect of any matter related to the granting of credit in terms of this Act
90(2)(m)	Concern: Credit providers at a severe disadvantage relative to all other creditors, such as insurers, since the credit providers would be prohibited from being prioritised at employer level, where insurers would not. This uncertainty must be cleared up.	Seeks to contain the preferential and anti-competitive practices related to payroll deductions in respect of other credit providers - therefore does not outlaw preferences with respect to other deductions, only credit	Replace "any other person" with "any other credit provider".
92	Concern (1) Provisions in this section could prejudice the credit provider who could loose out on a sale because of the five- day quote period. (2) Bank rather than the motor dealer is the credit provider in many cases – where quotation given by a bank will not preclude a motor dealer from selling the vehicle to a different customer and there is potentially problematic.	Accepted	Insert new subsection: "(3) Where the credit is extended for the purchase of an item with limited availability, the credit provider may make the quotation subject to the continued availability of the item."
94(1)(b)	Concern: This section requires a credit agreement to set out the extent of a consumer's liability for purchases charged to the facility after a card has been lost or stolen. Section 94(2) states that a credit provider must not impose a liability on a consumer for use of a credit facility after it has been reported lost. Suggest: The two sections are contradictory and must be clarified or section 94(l)(b) should be deleted. There should be a responsibility placed on the credit provider to cancel the facility as soon as the card has been reported lost or stolen.	Agree	Delete 94(1)b
102(1)	Initiation fee" - at minimum suggest that section 102 should be expanded to allow the initiation fee to be a part of the "principal debt". Suggested insertion "(a) subject to section 106. the premiums of any credit insurance payable in respect of that credit agreement	Amended as per revised Insurance proposal	Suggest adding 2 further subsections to 102(1) (a) an initiation fee, as per 101(1 )b, subject to the consumer having been offered the option of settling the cost of the initiation fee upfront and the consumer not having accepted such offer; (e) subject to section 106, the premiums of any credit insurance payable in respect of that credit agreement"
103(1)	Concern: Section 103(1) prohibits the credit provider from catering for different interest rates on higher and lower risk portions of the debt. Suggest: Sub-section be amended accordingly	Accepted	Replace current section 103(1) with following: "The interest rate applicable to an amount in default or an overdue payment under a credit agreement may not exceed the highest interest rate applicable to any part of the principle debt under that agreement."
104(3)	Concern that same day notification is not realistic given volume of transaction and accounts in formal system	If the notice is too long , it becomes redundant . Maximum period should be at next statement date, which would in most cases be within 30 days( a problem for housing loans ,where statement dates are further in between)	Propose that written notification of clients should occur within30 days of the change in the rate; Section 104(3)(b) " if a rate is determined by referring to a reference rate as contemplated in section 103(4), the new reference rate."
104(4)	Concern : this section gives the consumer the right to freeze the rate of the existing debt implications for long terms ;loans are unacceptable. Suggest: delete section 104(4)	Accepted	Delete Section 104(4) and 104(5) and delete "or a credit facility" from section 104(1)(a)

106	To be revised as follows (1)A credit provider may require a consumer to maintain sufficient- (a) credit life insurance and insurance cover against any damage or loss of any property other than property referred to in subsection 1(b) , limited to the consumer's outstanding obligations to the credit provider at any time during the term of their credit agreement; and (b) in the case of immovable property that is subject to a mortgage in respect of a mortgage agreement, insurance cover up to the full asset value of the property for the term of the credit agreement. (2) In addition to insurance that may be required in terms of subsection (1), subject to the requirements of this section, a credit provider may offer a consumer optional insurance in relation to the obligations of the consumer under the credit agreement or relating to the possession, use, ownership or benefits of the goods or services supplied in terms of the credit agreement. (3) Despite subsection (1), a credit provider must not offer or demand that the consumer purchase or maintain insurance that is- (a) unreasonable; or (b) at an unreasonable cost to the consumer, having regard to the actual risk and liabilities involved in the credit agreement. (4) If the credit provider proposes to the consumer the purchase of a particular policy of credit insurance as contemplated in subsection (1) or (2)- (a) the consumer must be given, and be informed of, the right to waive that proposed policy and substitute a policy of the consumer's own choice, subject to subsection (5); (b) any policy required under subsection (1) or offered under subsection (2) by the credit provider must provide for payment of premiums by the consumer. (i) on a monthly basis in the case of small and intermediate agreements; (ii) on a monthly or annual basis in the case of large agreements; for the duration of the credit agreement. (5) With respect to any policy of insurance arranged by a credit provider as contemplated in subsection (4), the credit provider (a) must not add any surcharge, fee or additional premium above the actual cost of insurance arranged by that credit provider; and (b) must disclose to the consumer in the prescribed manner and form- (i) the cost to the credit provider of any insurance supplied, (ii) the cost to the consumer of any insurance supplied; and (iii) the amount of any fee, commission, remuneration or benefit receivable by the credit provider, in relation to that credit agreement; (c) must be a loss payee under the policy up to the settlement value at the occurrence of an insured contingency only and that any remaining proceeds of the policy must be paid to the consumer. (6) If the consumer exercises the right under subsection 4(a) to substitute an insurance policy of the consumer's own choice, the credit provider may require the consumer to provide the credit provider with the following written directions- (a) a valid direction in the prescribed manner and form requiring and permitting the credit provider to pay any premiums due under that policy during the term of the credit agreement on behalf of the consumer as they fall due, and to bill the consumer on monthly basis for (i)the amount of such premiums and[PMG Note: next line illegible]
107	See definition of prepaid above	See definition of prepaid transaction above		Substitute prepaid transaction with incidental credit agreement
111	Suggest : No compulsory delay(20 days) in the implementation of the recovery process . In instances where he credit provider has acted incorrectly the Court has always had the option to make a costs order against the credit provider. Section 111(2)(a) should be amended to provide that the credit provider must give the required written notice within 10 working days and sub section 111(2)(b) should be amended to provide that if the credit provider begins enforcement proceedings and does not comply with the provisions of subsection 111(2)(a), the court should take into account in awarding costs.	Can re-consider the 20 days before credit providers take action . Suggestion that credit provider can only begin enforcement proceedings after complying with sec 111(2)(a). However , then also consider constraints imposed on consumer		Delete constraint imposed on consumer with respect to notifying credit provider of incorrect information in section 111(1) Delete "at least 20 business days" from sec111(2)(b).
116	Suggest: Credit card clients have been accustomed to notice of changes of terms and conditions be sending a completely revised agreement - the provisions in this section would be costly and impractical. Propose that the current system continue. This section would also impose difficulties in cases where the document was not in hard copy - e.g. an electronic or voice recorded version, which is legal and binding in terms of the ECT Act This section should provide that "it does not apply to automatic increases made in terms of section 119(4)" This section should also provide for electronic signatures or initials in line with the ECT Act		Agree with proposed amendments	Add to the following to section 116:- (c) the change is recorded in writing and signed by the parties; or (d) any oral change is recorded electromagnetically and subsequently reduced to writing" This section should provide that "it does not apply to automatic increases made in terms of section 119C4).
121	Concern: Cooling-off period will give rise to numerous disputes around the value of the returned asset. Payment by the credit provider of any refund within 7 days of the goods being returned is illogical - any refund here is more likely to be from consumer to credit provider. There is a different treatment in section 74(2)(b). This will make access to credit more difficult Suggest: Problem of goods taken and then returned by consumers within 5 business days will cause problems for financiers of assets such as motor vehicles - in the circumstances they will prohibit registration or delivery of new vehicles (or similar assets that depreciate very rapidly) in terms of their agreement until the 5-day period has lapsed.	Believe that there is legitimacy in some of the points raised.		Amend section as follows: Substitute "account" with "agreement" in T21(1)(a); delete 121(b); delete "money or" and "or paying in frill for any services" from 121 (2)(b); delete "except in the case of a credit agreement entered into as contemplated in section 74(2)(b)" from sec 121(3)(b); Amend 121(1)a to read:- "(a) applies only in respect of a lease or an instalment agreement entered into at a location other that the registered business premises of the credit provider
122	See definition of non-returnable goods above	See definition of non-returnable goods above		Delete reference to non-returnable goods
1 23(2)(b)	Incorrect cross-reference	Accepted		Replace reference to section 131 with section 129
125	Suggest: Cancellation fees should be allowed in fixed rate contracts. This fee and its calculation should be disclosed upfront. The bill allows for 3 months interest to be chargeable (if no notice is given) on large transactions this would be inadequate to cover most fixed rate scenarios.[See the full version for illustrations of cost/value of breaking fixed rate contract]	The dti is concerned about the extent of the risk that is passed on to consumers. Before such a fee can be agreed to , there would have to be much more representation and engagement . Not clear that the absence of a penalty has been the major reason why fixed rate agreement are not successful in SA		Insert: (d) in the case of a large agreement at a fixed rate of interest, an early termination charge no more than a prescribed charge, or a charge calculated in accordance with 125(2)c, if no charge has been prescribed.
127	This section needs adjustment. Suggest that this section be adjusted to compel credit consumers that terminate an agreement, commit an act (such as returning returnable goods) to be registered as a reckless consumer and subsequently warn credit providers so that they can take precautionary measures before entering into further credit agreements with that consumer. Concerns: (1) Bill overlooks the fact that in many cases the credit provider in asset-based Finance is a bank as opposed to a motor dealer. FRB for instance would have to take possession of vehicles at short notice and provide storage - this is not feasible. (2) Procedure set out is slow and unwieldy and at odds with the test in section 128(2). Suggest: Amendment to section 127 (1) to provide that the consumer will be responsible for the costs relating to the surrender of the vehicle, including costs of storage and estimating the value of the vehicle (2) to expedite the procedure for the disposal of goods. There does not appear to be any reason why the consumer should be entitled to nominate in writing a person who is prepared to purchase the goods from the credit provider at the estimated value.	As phrased, the consumer can at any time after a purchase return the items purchased to the credit provider and require the credit provider to sell the goods and ask the consumer to settle the net outstanding balance. Intention is that, where a consumer finds debt burden unmanageable, that s/he should, rather than default, return the goods purchased and get these to be sold and set off against the account. Suggestion that it is unfair that the consumer should be able to nominate someone else to buy the goods.		Delete sec 127(1), sec 127(4)(b), sec 127 (5)(b),
129	Concern; (1) Check reference to 86(9) Suggest: Credit provider should be entitled to select the alternative dispute resolution process and that should be clarified in the Bill. Suggest: amend the wording of the section 50 that the words "before the credit provider has cancelled the agreement" should be inserted after the words "at any time	Most of the rights in section 129 are existing rights - it is not entirely clear why this would be unfair		Cross-reference should be to 86(10); Rephrase section 129(1)(a) as follows: "may draw the default to the notice of the consumer in writing and propose that the consumer refer the credit agreement to a debt counsellor, alternative dispute resolution agent, consumer court or ombud with jurisdiction, with the intent that the parties resolve any dispute under the agreement or develop and agree on a plan to bring the payments under the agreement up to date; and" Add section 1 29(4)(c) "the termination of a credit agreement in accordance with Section 123".
134(5)	Subsection (4)(ii)(bb) should read subsection (4)(b)(ii)(bb)	Agree		Replace reference to subsection (4)(ii)(bb) with subsection (4)(b)(ii)(bb)
136(2)	Suggest: Delete the latter part of the wording to clarify that this relates to the power of the National Credit Regulator to initiate complaints of its own accord. Wording as follows: "136(2) The National Credit Regulator may initiate a complaint against any person or entity for any contravention of the provisions of this Act"	Agree		Replace section 136(2) with new section 136(2): "The National Credit Regulator may initiate a complaint against any person or entity for any contravention of the provisions of this Act"
143(2)	Reference should be to 27(c) and not 24(c)	Agree		Change reference to 27(c)
148	Unclear why there should be a general right of review and appeal to the High Court against the decisions of the Full Tribunal but no right of appeal to the High Court against the decision of the frill Tribunal on a review or appeal of a decision by a single member of the Tribunal. This constitutes a severe curtailment of the rights of access to the courts of the parties to a credit agreement and should be reconsidered.	That is because a decision by a single member of the Tribunal can be appealed to the frill panel if we provide too many opportunities for appeal, matters will never end. Also. The issues that a single member of the Tribunal can deal with are not substantive - therefore no need for more than one appeal possibility. However, proposal that all decisions of Tribunal may be taken on review to High Court and appeals to Supreme Court of Appeal		Substitute "Supreme Court of Appeal" for "high Court" in 148(2)(b) and delete restrictions on appeals of single member hearings
150	Role of Tribunal vs courts	Clarify' orders that the Tribunal can make
151	Role of Tribunal vs courts	Section currently provides that Tribunal can only provide administrative fines where expressly provided. However, Bill does not expressly provide - interference from prohibited conduct.		Delete subsection (1)
156(1)	Firm? A juristic person?	Accepted		Replace "firm" with 'juristic person"
163	There is competition between mortgage originators and the credit provider. Training and registers as per this section should be permitted to allow the credit provider, as a competitor of the credit agent, to have access to confidential information relating to the credit agent's business. Suggest: Amendments to be more sensitive to the competition issues that arise. Concern: Identification cards -(1) in whose name will this be held? The corporate entity or the name of all the credit agent's employees? The number of ID cards per agent or per each employee (2) What about the situation where there is interaction with consumers via the internet or call center? Obligation of agent to show the ID card to the person he is interacting with. This section has considerable impact on the manner in which MSA offers its consumer services and, with respect is unworkable. The authors question the intention of the legislation Suggest: Amend Bill to recognize (1) corporate credit agents employ more than a specified number of employees and the issue of ID cards by credit providers. The corporate credit agents issuing (as opposed to the credit provider issuing) the employees of the corporate credit agent with ID cards The latter ID cards would reference the lD card issued by the credit provider to the corporate agent (2) the interaction between the credit agent and consumer may not be in person	Not sure that there is competition between mortgage originators and credit providers rather mortgage originators add more competition to the market - they are not credit providers, unless of course banks are financial intermediaries		This section requires further review; minor amendments included at present
164
Schedule 2	Time frames for transitional arrangements for the NPS Act envisage transition to be complete in 2010. [Details in full version]. Provisions of the NPS Act should prevail in the event of any uncertainty. Section 124(3) should be deleted. Consequential amendment to Insurance Acts not yet incorporated. Refer Treasury Memo dd 15 June 2005.	Discussed with the National Treasury and SARB Implement consequential amendments to insurance Acts as agreed with Treasury. in order to ensure that there is no conflict between Credit Bill and insurance laws, and reflecting agreement between DTI and Treasury that the Credit Bill should regulate insurance that relates to credit transactions.		Change to amendment to NPS Act. Insert at the beginning of new subsection 6A( 1) "On the date that this Act comes into effect, no person may conclude an agreement or engage in conduct which results in the change, manipulation, maintenance or application of a payment system..." Insert a new section (4): Any agreement existing when this Act comes into effect that is subject to conduct or agreement reflecting any of the principles contained in subsection 1-3, must be terminated by 3 1 December 2007. Consequential amendments to Insurance legislation: - Act 52 of 1998, Long-term Insurance Act: "The repeal of section 44 to the extent that the section applies to credit agreements to which this Act applies." 53 of 1998, Short-term Insurance Act: "The repeal of section 43 to the extent that the section applies to credit agreements to which this Act applies." Delete consequential amendments to Financial Services Ombud Schemes Act, 2004
Schedule 3	Section 4(2) provides that section 92 of the Bill will not apply to pre-existing credit agreements. Section 4(3) however requires the consumer to be provided with a statement that meets the requirements of section 92 this appears to be a contradiction with section 4(2). Concern: As a matter of legal principle, legislation cannot create retrospective validity. Suggest: Table in item 4(2) of Schedule 3 of the Bill is amended to the extent that it relates to section 93 as follows: Section 93 : Apply to a pre-existing credit agreement ~~from the effective date subject to subitem 3 only to~~ only to the extent that a document contemplated in terms of subsection (1) thereof has not already been provided to the consumer by the credit provider prior to the effective date. Section 8(b) seems to imply that service providers of the MFRC would become employees of the Credit Regulator. Section does not accommodate dti staff to be transferred	Point taken There is no retrospectivity here - however, the proposed amendment seems reasonable Amend section		Amend last row in table in item 4(2) to include "subject to sub item (3)" Section 4(3)(a) applies only to the extent that a document or statement contemplated in terms of sections (3)(a)(i) ~d (ii) has not already been provided to the consumer by the credit provider prior to the effective date Revise as follows: 8. As of the effective date a) the assets and liabilities of a regulatory institution designated by the Minister in terms of sec is A of the Usury Act, 1968, and any persons appointed as an inspector or in any other capacity in terms of the Usury Act, 1968, are or may be transferred to and are assets and liabilities respectively of the National Credit Regulator.".