National Credit Act: Amnesty to qualifying blacklisted customers: Public hearings
The Department of Trade and Industry (dti), National Credit Regulator (NCR), National Credit Tribunal (NCT), Credit Bureau Association (CBA) and Credit Providers Association (CPA) made presentations to the Select Committee on the progress made since the promulgation of the National Credit Act (NCA or the Act) in relation to the amnesty granted to all qualifying blacklisted consumers.
The dti and NCR stated that the impact of the first credit amnesty was very small, although its scope was quite wide. There was a need to revisit the aims and purposes, as set out in section 3 of the NCA, and to ask how the playing field could be levelled. One of the ways of doing this would be through the proposed credit information amnesty. The purpose of the proposed credit information amnesty would be to increase access to credit and to help consumers to pay less for their credit. However, it would be difficult to achieve a balance because credit information helped credit providers to price the credit, so this would had to be done in a carefully measured way. The aim was also to reduce the cost of credit repair as it was quite expensive for consumers to sort out their credit records.
The NCT stated that it had seen more than 7 000 consumer credit agreements with a combined value of over R200 million during the last financial year. The consent orders that had been granted by the NCT resulted in consumers being able to retain both immovable and movable property whilst servicing their credit agreements in a responsible manner. The number of debt rearrangement applications received was not significant compared to the number of debt and credit agreements in the industry, but a pattern was emerging that would require investigation. Even if the listing was removed, certain consumers who should benefit from the amnesty proposal would not have access to credit, because they were under debt review. Credit providers therefore must be required to do proper credit assessments before extending credit. In cases where a debt had not been written off but the record was removed, consumers might access credit beyond their means, with adverse implications for the consumer and the credit provider.
The CBA stated that consumer defaults were habitual. Consumer education was needed to change the behaviour of consumers in order to achieve lasting results. If adverse credit information was to be removed from credit records it would affect lenders’ ability to price the risk, leading to one price for all credits, instead of risk based prices. The CBA spent some time in detailing the type of data that it held, and its importance to the whole credit industry, and reminded Members that a credit information amnesty only removed records relating to a debt, but did not remove the debt itself, and that if further credit was then extended, based on incorrect data, this would have negative effects on the consumer and credit providers.
The CPA was of the view that both positive and negative data was used by credit providers to identify and evaluate prospective clients. Negative data did not necessarily exclude a consumer from obtaining credit, but only indicated that the consumer was a higher risk and should have access to a different credit product. Statistics on the credit standings of consumers from March 2009 to December 2011 showed that the percentage of adverse listings had reduced from 15.6% in June 2010 to 12.9% in December 2011. Historically, lower income consumers were deemed to be a higher risk. However, the inclusion of payment behaviour information and the indicators submitted to credit bureaus had allowed for more advanced analysis. This had led to the refinement of consumer lending decisions. Credit providers could now determine good from bad consumers, based on consumers’ individual behaviour, rather than applying risk indicators to generalisations. If credit data did not give a true reflection of actual performance it would lead to an irresponsible credit environment, reduced consumer protection with a higher level of reckless lending.
Consumer Fair gave a brief submission in which many of the previous points were reiterated, and also commented further on concerns that Members had raised in relation to the previous presentations. It urged full consultation on the amnesty proposals, noted improper practices by some credit bureaus, and the fact that the whole system rewarded those who had finances or could offer surety, and penalised those who did not, thus widening the gap between rich and poor. Whilst amnesty would solve some of the problems, many of the problems were related directly to the high interest rates, which exacerbated the debt crises. It was noted that there was yet another industry around defaults including debt collectors, debt counsellors, and banks who levied additional charges. More government support was needed for consumer education. The growth of the informal debt sector was indicative of the failures on the part of the regulators and credit providers. Access to justice for consumers was vital.
Members stressed that both lenders and borrowers had showed a degree of irresponsible behaviour, but that many debtors were poorly educated on the issues, and were very vulnerable. They were generally in agreement that another process should ideally be found in place of rescission of judgments, and this would involve amendments to the Magistrate’s Court Act and Rules of Court, as well as the National Credit Act. It was suggested that it would be useful for the National Consumer Tribunal to perhaps draw a “checklist” of likely expenses for a household, and what credit would be affordable. Concerns were expressed that credit history and blacklisting was often taken into account in potential employment checks, although everyone agreed that this might, at most, be permissible if the potential employee was to take up a position of trust or be involved in financial management. The importance of consumer education programmes was stressed. Some Members indicated that they would lean in favour of a blanket amnesty whilst others suggested that an amnesty might not cure everything, that creative thinking was needed, along with full consultation (with a number of other named institutions as well), and that the effect of an amnesty on business, employment and foreign direct investment must be carefully considered. At a later stage, the presenter from Consumer Fair also suggested that the lessons learnt from previous amnesty arrangements must be carefully examined. Many Members felt that micro-lending should be promoted, and expressed their concerns that in the absence of enough alternatives, many consumers were being driven into the hands of loan sharks. Departments needed to take more responsibility to ensure, for instance, that beneficiaries of social grants were not targeted by loan sharks at pay points on the pay dates. The right balance was needed. They asked for comment on service delivery disputes in municipalities, the failure to pay suppliers within 30 days, which affected their credit ratings, and instances where people had either been wrongly blacklisted, or had paid the amounts, yet whose names were still listed. A full explanation was requested, and given, on the in duplum principle. Members criticised the tendency for debt counsellors to persuade debtors into debt rearrangements that placed them in a worse position, clarified the difference between the five year credit listing and the thirty year prescriptive period, and noted that the Committee wanted a report-back from the dti by the end of February 2013.
National Credit Act: Amnesty to qualifying blacklisted customers: Public hearings
Department of Trade and Industry (dti) and National Credit Regulator (NCR) presentation
Mr Macdonald Netshitenzhe, Chief Director, dti, noted that when the dti was approached to give its views on credit amnesties, it had asked the NCR to do some research. After his introductory remarks on the subject, NCR would thus detail the technical aspects.
The research results had been presented to the NCR’s Board, which then directed the management of NCR to deliberate the findings with dti. Dti principally supported the views expressed by the NCR in its report. The research showed that the 2006 amnesty, even though it was wide in scope, did not really have as much impact as the dti would have liked. Because of the global recession in 2008, the period of the amnesty should move back, instead of running from 2007 or 2008 to 2012. Mr Netshitenzhe stated that prescription, generally, should terminate the debt, but at the moment a prescribed debt could be resuscitated as a debtor could be pressurised to start paying the debt by instalments. This pressurising of debtors was not sanctioned, and dti believed that it should be criminalised. It would need to liaise with the Department of Justice and Constitutional Development (DOJ) on the issue. There had been arguments on whether or not the ‘Affordability Guidelines’ were binding or not, but the dti wished them to be given the force of law, to put an end to the debate.
Mr Netshizenzhe asked that the Committee mandate the dti to consult with the industry and the public on the issue of amnesty and then present a final document to the Committee for its adoption and report to the relevant Ministry.
Ms Nomsa Motshegare, Chief Executive Officer, NCR, stated that NCR’s initial reaction to the proposed strategic information amnesty was that extreme caution was needed, but it had agreed, after debate, to reconsider the matter. As stated earlier, the first credit information amnesty of 2006 had very little impact. The National Credit Act (NCA) became effective five years ago, and made provision for affordability assessments and responsible credit practice. However, a huge number of consumers were still impaired. About 46% per cent of the 90 million active consumers in South Africa were classified as ‘impaired’. This was partly because of the global financial crisis, followed by recession and the slow economic recovery. There had been job losses, which had led to the increase in the number of consumers with ‘impaired’ records, whilst consumers continued also to lose their jobs. Some consumers who were not able to enter the job market because of negative listings. This was complicated by the way that unsecured credits had been extended. There were certainly some irresponsible consumers, but there were also irresponsible credit providers who did not look at affordability assessments when they granted credit. In summary, the credit health of consumers continued to deteriorate, as shown by NCR’s statistics. For this reason, dti, NCR, CBA, CPC, other stakeholders and the public had to find a sustainable and lasting solution to address the effect of the first amnesty. Firstly, she recommended that credit should be borrowed and extended responsibly. Secondly, consumers should be allowed to enter the job market. Increased access to affordable credit must be facilitated, thereby contributing to the positive growth of the South African economy. NCR would support an amnesty, with certain conditions.
Mr Stephen Logan, Consumer advocate and Consultant to NCR, stated that the need for the proposed credit amnesty was quite clear, and emphasised again that 46% of active consumers were credit impaired. That pointed to a massive failing on the part of both consumers and lenders of credit, and showed that the correct affordability testing was not carried out. The NCA stated that every application for credit had to result in affordability testing, yet it was not picking up the risk of default that should make it difficult for credit to be granted to those unable to pay for it. There was a need for the Affordability Guidelines to take into consideration matters such as instalments in credit agreements, from the credit record, and to state what should be shown in bank statements. If the Affordability Guidelines were properly used, as well as the other steps suggested, then dti and NCR believed that the proposed amnesty could be very beneficial to South Africans. However, he emphasised the need to temper the proposed amnesty with other safeguards to ensure that reckless spending was not bolstered in South Africa.
The rationale for the proposed credit information amnesty was principally to remedy the defects of the first credit information amnesty. The first information amnesty, according to Experian Credit Bureau, only had the potential to increase credit application acceptances by 3.2% on average. The credit bureaus, having looked at the scope of the first credit information amnesty, believed that its impact would be minimal.
The Credit Ombudsman had conducted massive public advertising on the first amnesty, and received about 12 000 calls a day at the credit bureaus. However, most of the 12 000 callers were being told that they did not qualify for credit, so the impact of that was small.
The purpose of the proposed credit information amnesty would be to increase access to credit and to help consumers to pay less for the credit that they get. However, he emphasised again the need to achieve a balance, as credit information helped credit providers price their credit offering properly. At the moment, it was also expensive for defaulting consumers to sort out their credit records, as not only did they have to pay off the debt, but also get the judgment rescinded, by applying to the court, which was an expensive process. The aim of the proposed credit information amnesty should also be to reduce this cost of credit repair and not merely to help consumers clear their records on a once-off basis, but to make ongoing improvements to their credit health.
Although the NCA provided that the credit records of a consumer who applied for a job could not be used as a reference check, except where the position applied for required trust or financial responsibility, Mr Logan noted that in reality the credit records of applicants for jobs were being checked regularly, and they therefore ran the risk of being denied the jobs if they were credit impaired. This was a real problem that affected many, and he reiterated that in most cases these checks were inappropriate. NCR was investigating this, was trying to ensure that this would not happen in future, and noted that part of the exercise was to clean up the credit record.
Mr Logan emphasised that the Act’s purpose was to protect the interest of consumers and to enable them access to cheap credit. NCR wished to make a proposal that would have wide scope, and a huge impact, but which was not a blanket amnesty. It also had an alternative proposal that was narrower in scope, but would have less impact. There was a need to carry out a detailed impact assessment study, using predictive scoring technology, to indicate the impacts of each proposal to the Committee and the NCR.
The first, wider proposal, was based largely on the principles contained within the first credit information amnesty. Whilst that first credit information amnesty was flawed, it had dealt with the key pieces of information in a credit record. Four types of negative information were contained in a record; namely the payment profile information, adverse information, judgment information and notice information. The payment profile information showed how a borrower had paid an account in any one month, and showed up to 36 months of credit history for every credit line. The NCR did not propose that the credit profile information be removed but did believe that the dormant account information should be removed, since it had been covered by the first credit information amnesty, and that would affect payment profile information. However, where the account was active, the NCR was of the view that the payment profile information needed to be retained, to enable credit providers to price properly, and to differentiate between consumers of credit. It was crucial that people who had been paying their credit perfectly should not be affected by the credit information amnesty, and the suggestion was that they be rewarded by slightly lower rates of interest for their perfect payment history. There were a significant number of people who had adverse information, and that had a negative effect on their access to credit. NCR proposed that once they settled, that adverse information should be removed from their credit record. At the moment, this was not done unless the debt retention period had elapsed.
Mr Logan then explained that NCR had not proposed that this information should be removed whether or not the debtor had paid was that NCR was also proposing that the period of amnesty should start from 5 January 2006, but would only be effective in 2013. Debts were only retained on the records for five years, so adverse information should be removed at the end of 2011, with a two-year gap between 2011, the date on which the first amnesty would cease, and 2013, when the proposed new amnesty would become effective. All adverse information would be removed within the confines of the proposed amnesty, and there was no need to legislate further for it.
NCR further proposed that any judgment granted between 2006 and 2011, which was equal to or below R10 000, should be removed from the credit record, irrespective of whether or not it had been paid. This did not mean that the judgment would be written off, merely that it would no longer reflect on the credit record. NCR also proposed that judgments above R10 000 granted during between 2006 and 2011 should be removed from all credit records, once evidence was given that they had been settled. A consumer also should not have to apply to court to have the judgment rescinded before it was to be removed from the credit record.
Mr Logan explained that these proposals would not affect conditions in the first amnesty. That amnesty provided that consumers with more than one judgment against them would not qualify for such an amnesty.
The alternative proposal was similar to the proposal just outlined, but reduced the amounts. Mr Logan stated that countervailing measures were needed to offset the risks that an amnesty could bring to the credit industry. It was possible that a credit amnesty, unless handled very carefully, could cause substantial harm. Countervailing measure would include Affordability Guidelines, and he too stressed that these should be binding and incorporated in specific legislation, so that they could not be ignored. There was a need to work with all stakeholders to ensure that their concerns about credit amnesty were properly addressed, and to find consensus on the way in which such an amnesty could work properly in South Africa.
Mr Logan stated that credit on life insurance was very expensive, and here the premium did not reduce as the balance reduced, nor was it disclosed in the total cost of credit, so that it could add significantly to the cost of credit. The marginal rate of unsecured personal loans in South Africa was 31%, but this did not include the cost of credit life insurance. Consumers were over-indebted because they had taken unsecured credit that they could not afford, and the rate was far too high. There was a need to disclose the cost of credit life insurance, and to make consumers understand the actual ratio of what they were going to pay. Consumers must be informed and educated on the total cost of credit that they were requesting. Rules were needed in relation to debts that were sold. At the moment, when a judgment debt was settled, creditors were not abandoning judgments, which meant that consumers had to take the time and expense to get the judgments rescinded. Creditors should be required to abandon judgments, following a settlement, to issue a notice of abandonment, and file it in court, whereupon the judgment would be removed from the credit record. This would cost little to the creditors. The Credit Bureau would be able to verify the issues, by making enquiries to the credit provider, as it did already to verify judgment rescissions, in an attempt to prevent fraud. It would be appropriate to amend the regulations to provide for the abandonment of high court judgments. Subscribers to credit bureaus whether service providers or credit providers, should inform the credit bureau to remove adverse information listing once the related account was settled.
It should also be made a criminal offence to attempt to collect a debt that was deemed to have prescribed, in terms of the Prescription Act. Any possible collusive price fixing should be referred to the Competition Commission.
Mr Logan reiterated the need for consensus amongst all stakeholders and government as to the scope and means of giving effect to the proposed credit information amnesty . Provided that countervailing measures were implemented, he repeated that the proposed amnesty could have a positive impact on the South African economy and benefit millions of credit-impaired consumers.
National Consumer Tribunal (NCT) presentation
Ms Diane Terblanche, Chairperson, National Consumer Tribunal, explained that the role of the NCT was slightly different from the NCR and dti. She wanted to put her presentation into context. The issue was about consumers and their access to credit. She would describe what NCT, from its experience, had isolated as the main factors impeding consumers’ access to credit in South Africa. NCR was the regulator for the industry, and NCT did not have the same depth of experience on credit matters. Ms Terblanche explained that the NCT was established by section 26 of the NCA ,and came into operation in 2006. The NCT adjudicated on matters under the NCA and the Consumer Protection Act (CPA), so it had a dual function in relation to consumer issues. The NCT had jurisdiction throughout South Africa and was a tribunal of record. It must exercise its functions in terms of the NCA and any other applicable legislation such as the CPA and the Constitution.
Section 3 of the NCA spoke to advancing the socio-economic wealth of South Africans and sought to promote a fair, responsible, transparent, sustainable, efficient and accessible market and industry. Important details related to the promotion of access to credit by South Africans, specifically those who, historically, were unable to access credit. The Act also emphasised promotion of responsibility in the credit market, by encouraging responsible borrowing, discouraging reckless granting of credit by credit providers, avoidance of over-indebtedness and fulfilment of financial obligations by consumers, and improving consumer credit information. These very important principles had to underpin any discussion on the issue of credit information amnesty.
Credit, credit provisions and collection of credit obligations under credit agreements were all very contentious issues. NCT had to adjudicate on disputes between parties, mainly credit providers and credit receivers. The NCT was not an alternate dispute resolution agency, and was also not a facilitator. Parties to disputes should avail themselves of all other possible avenues to resolve the dispute, before approaching the NCT. In some limited instances, however, parties could approach the NCT directly. The bulk of NCT’s cases arose from debt counsellors approaching the NCT to have debt re-arrangement agreements made into orders of the NCT.
The NCT also considered applications for interim relief, and for the review of regulators’ decisions. The NCT only adjudicated on matters provided for in the NCA, and could not adjudicate on any matters within the jurisdiction of the criminal or civil court. Specifically, the NCT did not look at issues of over-indebtedness, so that a debt counsellor finding that a consumer was over-indebted, and wanting a debt re-arrangement, had to approach the civil courts, not the NCT. NCT’s orders were enforced through the criminal courts, but once the NCT had made a determination and certification, parties could (with assistance from the NCR and National Consumer Commission (NCC)) also claim damages in the civil courts. The role of the NCT followed on the actions taken by regulators. Within the context of the NCA, the NCT would get direct referrals from debt counsellors, credit bureaus and credit providers, mostly linked to excessive requests for information by consumers. The NCT would never merely “rubber-stamp” any party’s referrals or recommendations, but would adjudicate on every matter to ensure that it gave lawful orders that complied with the NCA and Consumer Protection Act.
NCT held its hearings in public, and followed an inquisitorial approach, so that a consumer approaching the NCT did not have to be an expert, nor know the particular provision of the NCA or Consumer Protection Act that had been contravened. NCT, after hearing the facts, would determine which provisions had been contravened. Hearings were conducted as informally as possible, with no technical points being upheld, and the hearings followed the principles of natural justice.
NCT had been receiving more and more cases over the years There were over 2 000 applications for consent judgments in 2012, most of which were debt re-arrangement agreements between consumers and creditors. Debt counsellors asked for these agreements to be made an order of the NCT, so that if the debtors failed to comply, criminal liability would attach. NCT had seen more than 7 000 consumer credit agreements, with a combined value of over R200 million, in the last financial year. The consent orders granted by the NCT resulted in consumers being able to keep both their immovable and movable property, whilst servicing their credit agreements in a responsible manner.
Ms Terblanche noted that the number of debt re-arrangement applications that were referred to the NCT was not significant in comparison to the total number of debt and credit agreements in the industry. However, a pattern was becoming apparent, which would require investigation. When application was made for consent orders for debt re-arrangement agreements, the NCT would give consideration as to whether the consumer named in that agreement was the person receiving the credit, whether the parties agreed on the re-arrangement, and financial considerations. NCT refused to give a consent orders in some cases, which were listed on its website. Reasons for refusing consent included the fact that the consumer could not afford to service the debt, based on his income and the fact that the interest rates charged in the re-arrangement agreement very high, even illegal. High interest rates had caused many consumers to be in debt in the first place. One point that must be considered in an amnesty was whether many consumers ended up being listed in credit records for debts that in fact they were not legally obliged to pay, because they were over-charged. Many people had been overcharged for several years, and should in fact have finished paying off before they went into a debt re-arrangement. NCT itself had neither the mandate nor the means to carry out investigations into this point, but believed it must be investigated. Some people who should be targeted by the amnesty may in fact not be included if their debts were reflected inaccurately as in a higher range. Even if the listing was removed, some consumers who should benefit from the amnesty proposal would also still not get access to credit if they were under debt review. She urged that credit providers must be required to do proper credit assessments before extending credit. If the debts were not written off and the record removed, this might result in consumers accessing credit beyond their means, which would have adverse implications for the consumer and the credit provider.
Credit Bureau Association (CBA) presentation
Mr Frank Lenisa, Director, COMPUSCAN, and representative of the CBA stated that the majority of consumers had handled their credits badly after the 2006 amnesty. He believed that consumer default was habitual, and consumer education was vital to change the behaviour of consumers and achieve lasting results. He cautioned that if adverse credit information was simply to be removed from credit records, this would affect the lender’s ability to price the risk, resulting in one price for all credits, instead of risk based prices.
Mr Lenisa offered brief definitions of adverse listing, amnesty, retention periods and payment profiles. He noted that credit bureaus hosted information on how consumers managed their accounts and credit obligations, and passed this on to credit providers. Credit Bureaus themselves did not make decisions on whether credit should be granted, but merely provided the credit history that would then enable credit providers to do affordability assessments. These assessments were done to assist credit providers in risk management, in increasing or decreasing the amount of lending, reducing default rates and enabling borrowers to develop credit profiles. Sources of information to credit bureaus included companies that offered credit, such as banks, insurance companies and retailers, in relation to account information, courts that provided civil judgments, sequestrations and administrative orders, and debt counsellors. In essence, the data did not “belong” to the credit bureaus. They hosted both positive and negative data, with about 85% of all data being positive. The credit bureaus had responsibilities, in terms of the NCA, to host accurate, up to date and relevant information, to provide consumers with credit reports, and to assist consumers, free of charge, to investigate and lodge disputes around inaccurate information on credit reports.
Credit bureaus had call centres, which consumers could phone in order to have their credit reports explained to them. All official languages were spoken at the call centres.
Mr Lenisa reminded Members that the first credit information amnesty came into effect on 30 November 2006, and the bureaus were required to expunge information by 1 June 2007. On 31 August 2007, the bureaus had to submit a report to the NCR confirming that the information had been removed. On 28 February 2008 an independent audit report had to be submitted by the bureaus confirming the removal of the information. All registered bureaus complied with these requirements at that time. They did not keep the Identification numbers of consumers that benefitted through that amnesty. However, the bureaus did identify about 600 000 consumers as a statistical sample on the amnesty, and these statistics showed that 64% of the consumers who benefited from that amnesty had taken up further credits. Of that number, 74% ended up having bad accounts – defined as accounts three or more months in arrears – whilst 44% had judgments and adverse records, with 19% having judgments taken against them in the last five years. The default figure for the credit that they entered into amounted to R33 billion, and R14 billion of judgments were entered. Information that the bureaus received from a bank showed that, after that amnesty, consumers were two or more times more likely to end up with a bad credit profile than before the amnesty.
64% per cent of individuals that took up credit after the amnesty also showed delinquent performance.
Mr Lenisa explained that in terms of the NCA, the bureaus had a duty to remove information under certain circumstances. These included cases when clearance certificates were given, or judgments rescinded by the court, during the period for which the information was normally retained. He explained that different periods of retention applied in different circumstances. Details and results of disputes lodged by consumers were removed after 18 months. Enquiries were removed after two years. The payment profile of consumers was removed after five years. Adverse classification of consumer behaviour was removed after one year, and adverse classification of enforcement actions was removed after two years. Debt restructuring information was only removed when a clearance certificate was issued.
Bureaus would, on an annual basis, delete about 4 million enquiries, about 7.7 million adverse classifications of consumer behaviour, 1.7 million adverse classifications of enforcement actions and 500 000 judgments. He did not present other data, because of time constraints. It was projected that by 2013, given the increase in credit active consumers, about 7 million enquiries, 14 million adverse classification behaviour details, 3 million adverse classifications of enforcement action and 235 000 judgments were likely to be removed.
Section 71 of the NCA provided for removal of information regarding debt re-arrangements of a consumer’s credit agreements or judgments granted against a consumer. The bureaus must expunge all information on defaults that preceded the debt re-arrangement, including the payment profiles. Bureaus must also expunge all information relating to rescinded judgments.
Mr Lenisa said that credit reporting systems were integral to well-functioning credit markets. Credit should be built into modern economic infrastructures, and there should be access to responsible credit, dependent on sound risk and affordability assessment tools. At the screening stage, lenders need information to enable them to assess the risk attached to each consumer. High risk borrowers would be inclined to disguise their level of risk, whilst low risk borrowers would be inclined to highlight their low level of risk, and asymmetric information between borrowers and lenders could lead to adverse selection and moral hazard. Credit bureaus operated to try to prevent this, and to ensure that credit decisions were based on the best possible information that would help lenders identify good borrowers.
South Africa was currently ranked fourth in the world in getting easy access to credit, based on the strength of legal rights and the depth of credit information. He cautioned that if data was unnecessarily removed through a poorly planned process, there would not be compliance with the NCA, and that would result in lenders not being able to do their affordability assessments properly. Less data meant more risk, with an increase in adverse selection and moral hazard. He urged the need for completeness of data, and said that more than half of South Africa’s population were not represented on the bureaus. One solution would be for the bureaus to require access to more complete data, including municipal payment records, UIF data and data from other government departments. The benefits would include expansion of access to credit to the population, the ability then for small businesses to develop, an increase in the number of taxpayers and a greater contribution to the Gross Domestic Product (GDP).
Mr Lenisa concluded that a credit information amnesty only wiped out the record relating to a debt, but did not wipe out the debt itself. This meant that a consumer who could not in fact afford credit would be granted credit on the basis of inaccurate data, which would lead to over indebtedness and an increase in defaults.
Credit Providers Association presentation
Mr Mark Seymour, Chairperson, Credit Providers Association, noted that the CPA was a voluntary association of payment data providers, whose members included credit providers, insurance companies, and telecommunication providers. The CPA created a self-regulatory framework for credit data to be submitted and shared among members, and managed the quality of information shared. It was governed through an elected Management Committee.
Mr Seymour stated that figures from Statistics SA showed that unemployment rates had reduced to 24.9% per cent in the second quarter of 2012, from 25.5% in the first quarter of 2012. There were 13.6 million formally and informally-employed people in South Africa, with about 2 million being employed in the broader public sector. The NCR’s Credit Bureau Monitor, published in December 2011, stated that there were 19.34 million active credit-consumers in South Africa, and 67.53 million credit accounts, which meant an average of 3.5 accounts per active credit-consumer.
The NCA defined different products, such as mortgages, credit facilities, unsecured credit transactions, developmental credit, short term credit, incidental credit and other credit. Each of these credit products had different capped rates. Credit products also showed different loan performances, and different credit providers focused on different credit products. The permitted rate determined credit providers’ ability to absorb poor-performing debt. Members of the CPA shared both negative and positive data with each other, on a monthly basis. Clients of credit bureaus, such as credit providers, submitted their credit data to the bureaus. Information on all credit active consumers was shared. The majority of data related to positive credit behaviour, but negative data related to defaults. Credit providers performed two types of analysis before taking a credit decision; namely, an affordability assessment (to determine the consumer’s ability to service the debt applied for) and a credit bureau check (to determine a consumer’s propensity to pay the debt).
Different credit providers focused on different consumer groups, and therefore had exposure to a variety of credit risk profiles. Both positive and negative data would be used by credit providers to identify and evaluate prospective clients. Negative data did not necessarily exclude a consumer from obtaining credit, but would indicate that this consumer was a higher risk, and may only qualify him for a certain credit product. Statistics on the credit standings of consumers from March 2009 to December 2011 showed that the percentage of adverse listings had reduced from 15.6% in June 2010 to 12.9% in December 2011. Historically, lower income consumers were deemed to be a higher risk. However, a more detailed analysis resulting from more information had now led to consumer lending decisions being revised, since credit providers were now able to determine good from bad consumers, based on consumers’ individual behaviour, rather than applying risk indicators to generalisations. If the credit data did not give a true reflection of actual performance, it would lead to an irresponsible credit environment, and reduced consumer protection, with a higher level of reckless lending.
Mr Seymour noted that the provisions in the NCA around reckless lending were probably more to do with consumers being restricted from accessing credit rather than the negative listings. A total amnesty would no longer allow credit providers to distinguish between performing and non-performing credit behaviour. This, he suggested, would lead to credit providers following a more conservative approach, and result in less access to credit. It would also lead to less credit being extended to the lower income consumers, less access to formal credit by consumers, and would push them into borrowing from the informal sector. Well-performing consumers would also be prejudiced, since it would be impossible to distinguish them.
Mr Seymour emphasised the important of having a well functioning and profitable credit industry. There was a growing trend of people borrowing from the informal sector. It should be recognised that credit played a crucial role in the effective functioning of the economy. Profitable credit providers would attract investments, and the more investment attracted, the wider range of consumers could be served by different forms of credit providers.
The Chairperson noted that often consumers were in a disadvantaged position, but it must be recognised that there were two sides to the issues. He wanted to hear more about the position of the service providers.
The Chairperson noted that the process for rescission of judgments was long and expensive and it was necessary to consider whether this was necessary. He thought the National Credit Regulator (NCR) would play a key role in this question.
The Chairperson noted the increase of cases between 2009 and 2012, as listed on page 11 of the Tribunal’s presentation, which did not augur well for the future, as it indicated that more people were falling into debt. However, it must be remembered that the service providers were involved in this trend also.
The Chairperson asked the National Consumer Tribunal to state what steps were being taken in relation to household expenses, and suggested that perhaps a checklist of likely figures, for a family, say, of four people, could not be drawn.
The question was why consumers borrowed; often they did not realise that the loans, so far from freeing them of financial problems, would add to their own unsustainable position. The attitudes were compounded by poverty, unemployment, lack of access to finance, and people had to be assisted to get out of debt. He noted that some people ended up not being able to be employed because of their previous credit blacklisting.
The Chairperson noted the CPA’s comment that the good aspects outweighed the blacklisting, but said some credit providers were using the blacklisting process as a threat, even when they had not in fact purchased anything. He gave an example of his friend’s situation but said that, unlike his friend, many poor people could not afford to attend court to defend the claims.
Some consumers did not have money to pay their debts, so they were not always acting in bad faith, and many tended to simply submit to demands. Whilst the term “amnesty” did not mean that everyone would qualify, it was a start. The Committee believed that credit listing was contributing to the problem, and it must be addressed, along with other interventions, to change the lives of people. He highlighted that consumer education campaigns were also vital, and real outcomes should be seen from the amnesty. It would not be an easy process.
Ms E van Lingen (DA, Eastern Cape) expressed concern at the suggestion that an amnesty would be a cure for all, and urged that more creative thinking was needed to ensure that it would work. The National Credit Bureau was working well and was highly rated internationally and she would be loath to interfere with a process that was successful. She commented that not sufficient figures were presented. She also said that care must be taken to ensure that any amendments to the National Credit Act (the Act) did not result in jobs being lost and in negative impacts on foreign direct investment.
Ms van Lingen said that other mechanisms of funding in Africa – such as microfunding –were not applied in South Africa, in quite the same context. Informal lenders must be controlled, and the responsible departments had to take responsibility. For instance, on South Africa Social Services Agency (SASSA) pay-day, there should be departmental staff available to ensure that loan-sharks were not fleecing the beneficiaries. It was necessary to find the right balance so that all parties could benefit.
Ms van Lingen was worried how long the impact assessment would take, who would take responsibility to drive the issue and how the change would be effected. She urged that all contributions today be taken into account.
Ms van Lingen cited problems in her constituency and others around service delivery disputes with municipalities, including cases where a person might buy R100 pre-paid electricity, yet only actually receive R60. She was also worried about government failing to pay accounts within 30 days, especially to small businesses, who suffered cash flow problems as a consequence. She also thought that the cost to business of the changes had to be properly assessed.
Mr M Maine (ANC, North West) noted that South Africa’s fourth-in-the world rating, quoted earlier, and said he would be in favour of a blanket amnesty. Citing the large companies and municipalities, he wondered what long-term harm would really be caused if they were simply to write off debt, to enable a fresh start. He noted that those most affected by the continuing cycle of debt were the previously disadvantaged South Africans.
Mr B Mnguni (ANC, Free State) commented that the ease with which people could access credit was mentioned, but the majority were unable to access major loans, and the amnesty was needed to bring those on the periphery into the mainstream of the economy. He agreed that often people were unable to get jobs because of their poor past ratings. Whilst he recognised the concerns of the Credit Bureau Association, it was also necessary to view the whole indebtedness of society holistically and to try to minimise household debt in the country.
Mr Mnguni said that nothing was mentioned about the interest on amounts under R10 00, which represented most of the debt in the country, and asked for further detail on the in duplum principles for these amounts.
Mr Seymour, CPA, commented that the Credit Providers Association believed that education of consumers was a positive target. He pointed out that it was not valid to blacklist consumers against whom incorrect claims were levied, or whose bad credit record resulted from illegal actions. CPA believed that there was a need for further engagement and analysis, and suggested that the Banking Association, The Clothing and Furniture Retailers Association and Micro Finance Association could all offer valuable comment. CPA could point out the risk in the various categories, but these associations could indicate their members’ appetite for the risks.
Mr Seymour, commenting on Mr Maine’s suggestion to write off amounts, said that if a major chain store were to write off a large amount, in practice they would try to find another way to recoup that loss, and would no doubt “load” other credit products, by a small amount per customer, so that paying consumers would end up subsidising the non-paying consumers. Municipalities had written off money, but eventually taxpayers would be called upon to make up the income lost, and investors would be affected.
The Chairperson agreed, noting that in the past, small “administration” fees might have been added to each of one million customers’ accounts.
Mr Seymour said that the in duplum principle was adhered to in the credit industry, and the court decisions were being implemented as the Act had envisaged.
Mr Lenisa, CBA, said that even if there were to be an amnesty, many borrowers who performed badly in the past were likely to do so again. He agreed with the comment that perhaps rescissions would be more appropriately dealt with through the NCR. He said that one problem was that not enough people were aware of the dispute processes. He noted that no judgments from more than five years previously should be listed. When a judgment was rescinded, the Credit Bureau was given 20 days to remove the listing, failing which the Ombud would make a final decision. Information was being taken off the credit lists all the time. Legitimate complaints could be resolved, and disputes could be registered. Mr Lenisa agreed that it would be useful to publish rules for blacklisting. He also agreed that education was very important.
Mr Lenisa also confirmed, in regard to the comments on micro-financing sector, that Uganda and other countries had a vibrant sector that allowed people to build their business, and the growth of the micro-finance sector should be addressed in South Africa. Informal lenders had to be addressed as well. He agreed with Ms van Lingen that it would be undesirable to try to effect too many changes in the finance sector if it was working.
Ms Terblanche, NCT, was concerned about the comment that a person’s credit information was being taken into account when assessing their suitability for employment, and did not think that this information was being used properly. It might be appropriate to consider the credit record in cases where the prospective employee was being interviewed for a position that required him or her to take judgments around financial management, but it should certainly not form part of the general background check.
Ms Terblanche agreed that there had to be proper investigations into whether a person was indeed indebted, and said that the prescription regulations must be followed. Although she did not claim to be an IT expert, she would have thought that it was quite easy to programme systems so that certain listings and debts were removed automatically on the due date. She also pointed out that section 72(1)(c) of the Act dealt with the possibility of investigations to ensure that information held was accurate and credible.
In relation to the in duplum rule mentioned by Mr Mnguni, she noted that whenever the NCT dealt with debt arrangement agreements, it checked that the consumer would not have to pay interest amounts that exceeded the capital and charges.
Ms Terblanche confirmed that assessment and affordability issues were an issue for the NCT. It would help if concrete guidelines as to household debt could be drawn, would help in making sound decisions and avoid people being drawn deeper into debt that they could not repay.
Ms Terblanche agreed that an overnight solution was unlikely, but fully endorsed the suggestion that at least some basis be laid. Everyone would have to work to finding the best solution. People were faced with challenging circumstances and some were far more vulnerable to abuse and exploitation than others. She thought that the decision on who was to drive the process could be taken further when concrete proposals were developed.
Ms Terblanche agreed with Ms van Lingen that it was necessary to find a good balance between rights and obligations of all stakeholders.
Ms Terblanche said that the NCT had first-hand experience of municipal debt and said that if a person did not repay a debt, it could become incidental credit, through a credit agreement. She agreed that the question that government often failed to pay suppliers within 30 days was very serious. NCT itself ensured that it paid its own suppliers within 17 days.
Ms Marelize Bosch, NCT, added that the cost to business of the amnesty would have to be answered by other presenters, as the NCT would not be able to make a contribution to that debate.
Ms Terblanche suggested that section 69 of the National Credit Act spoke to the establishment of a national credit bureau type structure to track debt, although that would have serious cost implications to the NCR.
Ms Motshegare, NCR, also addressed the issue of credit histories being used for employment purposes. She said that the Act was clear as to where information on credit could be sourced, and for what it could be used. She agreed that if a person was being interviewed for a position of trust or was to handle finances, this information would clearly be relevant. However, she did not think that this was necessarily the case for other positions. NCR had, despite this, seen instances in which this information was released wrongfully and was investigating them.
Ms Motshegare referred to the suggestion that some guidelines on likely expenses be drawn and said that the NCR had, at one stage, started to draft some principle-based guidelines, but did not want to be seen as removing the decision from the credit providers. NCR had also made a start on the register, and it would be consulting with the industry. The Act stated the content of the information that could be held. That would be incorporated also in the new IT development that she had outlined earlier.
Mr Stephen Logan, Consultant to NCR, amplified on the questions around the in duplum rule by saying that it was changed dramatically when codified in section 103 of the Act. Previously, this rule stated that if a person defaulted on a debt, interest would be added only until it reached the same amount as the principle debt. However, as the debt was paid off, further interest would be added. The Act had changed this, providing an absolute limit of 100% on interest and all collection charges, and so it was a far better remedy. The Supreme Court of Appeal had confirmed that this was the intention of the legislature. All parties must ensure that the rule, as reflected in section 103, was given effect to in all instances.
Mr Logan noted that the NCR was tasked with ensuring that caps on interest were properly enforced, would be taking steps to investigate overcharging, and would ensure that nobody guilty of this would escape prosecution.
Mr Logan noted comments earlier around reckless lending and said that the Act provided that this could only be brought to the court for an appropriation sanction when raised by a debt counsellor. There might be a different way to provide for this, and provide for a separate sanction, such as forfeiture. At the moment, the remedy was for practical purposes difficult to obtain. The fact that there were 46% of impaired consumers indicated that there was reckless lending and borrowing, but regrettably there were very few instances in which this was brought before the courts. This problem was unlikely to be addressed by the proposed credit information amnesty.
Mr Logan agreed fully on the need to engage with other associations and said that the NCR intended to consult in detail with them on the proposed amnesty. He suggested that the terms of reference of the impact assessment would need to be set out in some detail, once endorsed by the Select Committee, and wide and appropriate consultation would be held.
Mr Logan addressed the questions asked around the cost to business of the proposed amnesty. The intention of the NCR and dti was to minimise the cost and adverse effects to business. However, the credit industry had to understand that it too bore a responsibility for the currently poor state in which consumers were at the moment, so some cost would accrue to all parties, and the credit industry as a whole would have to work out a fair way to ensure that whatever credit information was retained was retained for the benefit of consumers, and that consumers with good credit histories were not adversely affected. The dti had given some thought to whether “amnesty” would include a blanket amnesty. He suggested that the granting of a blanket amnesty was likely to undermine the economy and industry as a whole, since it could potentially result in a write-off of billions of rands of debt. Whilst the concerns were very real, and it was true that many consumers had not obtained financial freedom, concerted efforts were needed by the NCR, Government and others to ameliorate the effects of poor decision-making by both credit providers and borrowers, and try to give relief wherever possible.
The Chairperson noted that the Furniture Sector had been invited to this meeting, and there would still be engagement with them, as also other associations mentioned.
Mr Netshitenzhe, dti, noted that dti would need to propose legislative amendments, following on the findings made by this Committee.
Mr Netshitenzhe agreed that the informal lending sector needed to be improved. He noted that one of the contentions was that where an industry was not well-run or well-priced (such as suppliers of sporting goods) then consumers felt that they had little choice other than to go to the informal sector and to purchase pirated or counterfeit goods. One solution to piracy was for the relevant industry to reduce its prices, and clean up its own sector.
Mr Netshitenzhe agreed that there should be a legislative review and that all those lending and borrowing recklessly should be addressed. There was already an offence of reckless trading in the Act that could be applied.
Mr Netshitenzhe said that he had no mandate to comment on the suggestion of standards to regulate credit providers, but personally noted that self-regulation or Charters were not always working successfully, and that regulations and legislative enforcement tended to be more effective.
Mr Netshitenzhe noted the question of whether the amnesty would result in job creation. When the Act was first introduced there were fears that it would scare investors away, but it was later established that the regulation and the protection that it offered were welcomed. The amnesty could alleviate the plight of distressed debtors, but there was a need for wide consultation.
Mr Netshitenzhe finally confirmed, in relation to payments to suppliers, that the dti paid its suppliers within 30 days, although he could not answer for the rest of government.
National Consumer Forum (NCF)/ Consumer Fair submission
Mr A Mukadam, Western Cape Convenor, Consumer Fair, said that his organisation was originally styled “the National Consumer Forum” but had now adopted the name “Consumer Fair”. This association was dedicated to ensuring consumer fairness and worked to assert the guidelines and Consumer Protection Act. It aimed to educate consumers, lobby on issues, and speak out on behalf of consumers. It was affiliated to consumer organizations in other countries
Mr Mukadam noted that the public hearing was organised at very short notice, and he did not have any slides. There had not been quite enough opportunity to consult with all stakeholders and he asked that the opportunity for further input also be given.
The Chairperson apologised for the short notice and agreed that more input would be welcomed.
Mr Mukadam said that consumers faced numerous problems but it was believed that the amnesty proposals should not be rushed and wide consultation was necessary. Consumers must be able to exercise their right to responsible and affordable credit. Government and credit institutions should share the lessons learned during the 2007 amnesty, and the proposals must be accompanied by a full impact assessment to ensure that all issues were addressed. The previous amnesty programmes were beset by problems and there were many complaints about debt review processes since most consumers had no financial or legal knowledge and could not afford to hire lawyers. He agreed that late payments to small and medium businesses were a major issue since the lack of cash flow often resulted in them being blacklisted. Without resolution of this problem, thousands would continue to be blacklisted and lose their jobs.
Mr Mukadam also wanted to address some of the issues raised in discussions earlier. There had been complaints made to the Cape Town offices that credit bureaus would phone debtors in business hours, and, when told that it was not convenient to speak with the debtors would immediately note this as a negative point. Credit suppliers were often using their ability to blacklist as a punitive measure. The cost of debt was already high, but the weaker an individual’s credit rating, the higher the interest he would be charged, which penalised those who were already most vulnerable and put them further into debt. The whole system rewarded those who had finances or could offer surety, and penalised those who did not. This widened the gap between rich and poor. Whilst amnesty would solve some of the problems, many of the problems were related directly to the high interest rates, which exacerbated the debt crises.
Mr Mukadam also noted that there was a whole industry around default payments, including debt collectors, debt counsellors, banks who levied extra charges and all of these aggravated the crisis. It was necessary to give consideration as to how to alleviate penalties imposed on debtors. Consumers became victims when they were facing hard times, and the rest of the industry would prey on them.
Mr Mukadam agreed that another important point was the role of consumer interest groups in consumer education, and how much effort was being made by all stakeholders to empower consumers. Despite the fact that the Consumer Protection Act made provision for this, there was no real government support of consumer interest groups.
The growth of the informal debt sector was indicative of the credit system failing, and the failures on the part of the regulators and credit providers meant that five million South Africans were being forced into the clutches of loan sharks, where they would be further victimised.
Access to justice for consumers who were not financially and legally literate was important. Currently, consumers could not access proper legal representation, and there was not enough emphasis on mechanisms for them to defend themselves.
Ms B Abrahams (DA, Gauteng) asked what was suggested by way of an amnesty. She commented that many people had higher educational qualifications, yet could not find a job as their poor credit history immediately disqualified them.
Ms Abrahams said that many people had judgments noted against them, with medical bills being prominent in the listing, and cited her own instance in which she was threatened with blacklisting because she did not pay for dental treatment that was wrongly ascribed to her. Many people were being bullied into signing forms confirming their indebtedness. She agreed that consumer education was vital, including clear education on the amount of time for which matters remained on the system. One person in her constituency had been named on the system for ten years; and she questioned that surely that person’s name should have been removed.
Ms Abrahams noted that people would also visit one bank after another, trying to qualify for loans, without realising that the information they submitted in support of one application would automatically be tracked.
Ms van Lingen commented that consultations should also be done with the insurance industry, because of the prevalence of sales of life insurance, funeral policies, the failure of companies selling funeral insurance to re-insure instead of immediately using the cash they received to purchase something else, and the general failure to supervise this industry. She had received many complaints from her constituents about this industry. She also wondered if there should not be a limit on the number of policies that a person should be able to purchase; often people ended up taking home very little for food and household expenses, because so many deductions were made at source.
Ms van Lingen cited an example of one of her constituents, who had complained that she was blacklisted despite having paid all debts, and then paying R4000 to a firm to attend to the removal of the blacklisting.
Mr F Adams (ANC, Western Cape) said that it was fundamental to get the judicial system to buy-in to any amnesty, because magistrates delivered the judgments and authorised the section 65 proceedings. He thought that the Law Society should be involved in discussions, especially around the fact that judgment could be requested after issuing only one notice, and in the absence of the debtor. Often, debtors asking to speak to he magistrate were incorrectly informed that they could not do this, but merely had to sign forms.
Mr Adams noted, with displeasure, a recent instance in which a bank had agreed to a sale in execution of a house for R1 000, although that house was worth R200 000, leaving the former owner to pay the full balance of the debt plus interest, and to find alternative accommodation, trapping the former owner in a downward spiral.
Mr Adams commented that many debt counsellors were devious, and would suggest an administration order that would take a lifetime to pay off, once again placing the debtor in a worse position. He suggested that a review of the National Credit Act was needed, to close all the loopholes, and asked the dti also to identify sections of that Act that those who did not support an amnesty might raise to defeat the purpose of an amnesty or deny reasonable amnesty. He thought that amendments were also needed to section 65 of the Magistrate’s Court Act, and said that this need not necessarily be done via the Portfolio Committee, but a Bill could be initiated by the NCOP, or as a Private Member’s Bill.
Mr Logan said that certain people may not qualify for the amnesty, if they owed a significant amount The intention was that as many of the judgments may be caught as possible and that, once the judgment debt was settled, to remove the listing from the system automatically, without a debtor having to apply formally for rescission. Statistics South Africa had noted that the average figure for judgments was around R10 000, which was the reason for fixing that figure for the proposal, and about 90% of judgments fell within those bounds.
Mr Seymour responded to the comment made by Ms Abrahams by saying that if a consumer had been listed for more than ten years, this was most likely to be under an administration order, which did last for ten years. The consumer should contact the Credit Bureau to go through the process to get his or her name removed. Similarly, in the instance cited by Ms van Lingen, a person who had paid a debt should contact the Credit Bureau and lodge a dispute.
Mr Seymour noted the questions around insurance and said that insurance payments and premiums were already costed into the affordability assessments.
Mr Seymour agreed that consumers should be educated before they went into a debt counselling process, and they should not go into this unless it was the absolutely last resort.
Mr Adams pointed out that, in practice, a person contacting one credit bureau was often referred from one to another, and so he asked if there was one central contact point.
Mr Seymour said that the judgment would remain on the Credit Bureau’s listing for five years and after that the consumer should not have any record against his name. Once a clearance certificate was issued, confirming payment of the debt, the Credit Bureau was obliged to investigate the matter, within 20 days, and would, on receipt of such a request, circulate it to the other credit bureaus also. He reiterated that a consumer could also approach the Credit Ombud if no assistance was given within 20 days, and he suggested that a consumer should strongly assert his or her rights.
Mr Adams said that although he was aware that listings should be removed after five years, many of the banks were insisting that would have to make applications to courts to get judgments rescinded formally, as bank debts were listed for thirty years. He asked for clarification on this.
Mr Logan said that the Prescription Act said that a judgment debt remained able to be collected or enforced for thirty years, but this was something completely different from the five year period for data retention. Even if the bank was still able to collect on the judgment debt for thirty years, the credit bureau would only be able to display that debt for five years. He thought that no banks should be able to withhold consent to rescission of judgments. At the moment, the rescission was a long process, and that was why NCR suggested that judgments be removed automatically after the relevant period from the Credit Bureau records.
Mr Netshitenzhe agreed with all the comments on awareness campaigns, and also agreed with the proposals to review the National Credit Act. It may be possible to do some consequential amendments to the Magistrate’s Court Act, and dti would take this up with the Department of Justice. Some amendment may also be needed to the High Court Rules on abandonment and rescission of judgments.
Mr Lenisa said that there was nothing in the National Credit Act to limit the number of insurance policies to which a person could subscribe, but that this may be dealt with in the Financial Advisory and Intermediary Services Act.
The Chairperson referred back to the comment that a credit rating might be appropriate for those people hired in “a position of trust” and said that this might be a dangerous precedent if the exact meaning and concept was not decided upon.
The Chairperson summarised the issues that this Committee would take forward, after these hearings, as including assurances to businesses, automatic rescission of judgment as opposed to approaching a court, whether credit history should be kept, or wiped out altogether, the question of formal and informal lenders, how each should be addressed, and how formal lenders were doing their job. The Committee also needed to consider whether a blanket or targeted amnesty was needed.
Mr Seymour added that the issue of consumer education was also important.
The Chairperson said that a timeframe of six months had been suggested to take the process further, although there was no need for any delays in implementing consumer education, which should receive immediate attention.
Ms van Lingen wondered what role Legal Aid South Africa would play.
Mr Logan thought that Legal Aid did not need to be consulted, as it operated according to a means test and this body tended to concentrate on criminal matters.
Ms Terblanche said that the Tribunal had discovered that many people were paying debts that they did not owe, yet for which they were blacklisted and that was an important consideration around amnesty. She also commented that people were being persuaded to get into debt re-arrangements, tying them and restricting their access to further credit, when voluntary arrangements would have served them better. She said that in the economically depressed area of Vereeniging, three credit providers existed in one street, and the majority of people were being persuaded to enter debt rearrangements, to their huge detriment, which was patently unfair. It was up to the regulators to resolve the issues responsibly, not in a paternalistic way, but by trying to ensure that the purpose of the legislation was realised – namely to ensure economic growth for all.
Mr Netshitenzhe emphasised that the dti would return with consolidated reports, and the Chairperson asked that this be done by end February 2013. .
The meeting was adjourned.