Code may end attachment spree

THE National Credit Act came into force in 2007, supposedly "to promote and advance the social and economic welfare of South Africans and promote a fair ... and accessible credit market and industry".

THE National Credit Act came into force in 2007, supposedly "to promote and advance the social and economic welfare of South Africans and promote a fair ... and accessible credit market and industry".

So where are we now, seven years later? As Clark Gardner of Summit Financial Partners pointed out, 10million credit active consumers are in some degree of financial stress, and the leading unsecured market lender, African Bank, is in curatorship.

"The National Credit Act has failed. In fact, it could be shown that financial inclusion has eliminated consumer welfare," said Gardner.

A major contributor to this has been the abuse of emoluments attachment orders under the act. As one employer said: "The easy access to [the attachment orders] has meant 'unsecured lending' is actually the most secure form of lending there is - it is secured against my property."

This might be about to change. There is a pending "code of conduct", drawn up by the National Credit Regulator and Treasury, which could slow (or end) the use of attachment orders by unsecured lenders . It is expected to circumscribe their use tightly .

The Treasury's Ingrid Goodspeed said the proposed code would ensure the orders were the last resort for the recovery of a debt, and were not served before a six-month waiting period from date of default.

Legal action by Stellenbosch University's Legal Aid Centre could result in crucial changes to the Magistrates' Courts Act to prevent the clerk of the court (as opposed to a magistrate) authorising the attachment orders.