New measures in the offing to curb reckless lending

Legislative measures are in the offing to curb reckless lending which continues unabated‚ Department of Trade and Industry officials said in Parliament on Tuesday.

The measures include extending the powers of the National Credit Regulator (NCR) to conduct proactive investigations and impose administrative fines on perpetrators as well as empowering Trade and Industry Minister Rob Davies to provide debt relief mechanisms through regulations.

Parliament’s trade and industry committee has approved the proposal to enhance the powers of the NCR.

Democratic Alliance spokesman on trade and industry Geordin Hill Lewis said the party fully supported the proposals which arose out of a court case involving Capitec in which the court ruled that the NCR needed a reasonable suspicion of wrongdoing to investigate a matter.

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However‚ the law did not give the NCR the power to conduct proactive investigations and there was no clarity as to what constituted reasonable suspicion.

The committee has given approval to the department to approach cabinet for the go ahead to introduce the proposed National Credit Amendment Bill which would contain these measures.

This is according to Department of Trade and Industry acting deputy director general MacDonald Netshitenzhe in his briefing to the committee on the department’s review of national credit policy.

He said one of the weaknesses of the 2014 amendments to the act was that the NCR did not have the power to enforce the act. The department should have the power to effect the speedy and cost effective resolution of disputes‚ Netshitenzhe said.

"The NCR should be given the power to order regulated entities to pay administrative fines and give redress to consumers. The National Consumer Tribunal should serve as an appeal and review body for the decisions of the NCR."

The work of the tribunal had been clogged up and it became inefficient as consumers resorted to it for the resolution of their complaints.

Netshitenzhe said it was only the NCR that could detect prohibited conduct such as the collection of prescribed debt and the non-application of the affordability assessment regulations.

The NCR should be given a specific mandate to negotiate settlements of consumer disputes with regulated entities within a defined set of criteria. "Settlements substantially minimise the time periods of resolving disputes and costs for both the regulator and the regulated entities‚" he added.

The department also believed that the act should make provision for the introduction of debt relief or debt forgiveness measures to alleviate overindebtedness in specific economic circumstances. The minister should have the power to prescribe the debt relief measures through regulation.

Also‚ Netshitenzhe said the NCR should be empowered to issue guidelines to industry to provide best practices on the sale of repossessed goods‚ motor vehicles and properties by banks and other credit providers.

This would address the problem of properties being sold at a fraction of their market value through sales in execution.

Furthermore‚ the department is proposing that the NCR be given the power to declare credit agreements reckless and unlawful‚ with such lending being criminalised and directors held personally accountable for these practices.

NCR CEO Nomsa Motshegare briefed the committee on the various debt forgiveness programmes that the NCR was pursuing. These included debt forgiveness for retrenched workers and students.

She said at end June total outstanding consumer credit balances stood at R1.66 trillion‚ a 2.3% increase year on year.

Impaired accounts had increased from 19.9-million to 20.2-million representing 24% of all accounts.

- TMG Digital/BusinessLive