Accredited NCR Debt Counselling Services

Debt counsellors want guide on lending

By on Feb 7, 2014 in Blog |

The debt-counselling industry on Thursday opposed self-regulation by banks when assessing the affordability of applicants for credit approval.

Instead they want the minister of trade and industry to publish regulations on guidelines as proposed in the National Credit Amendment Bill, in consultation with the industry.

They said current requirements that credit providers must comply with when conducting affordability assessments were “wholly inadequate to prevent an increase in the granting of reckless credit”.

The Department of Trade and Industry wants to regulate the affordability assessments to reduce reckless lending and overindebtedness. This is just one of the elements of the amendment bill, which also deals with the removal of some adverse credit information from bureaus and strengthens debt counselling and review.

The Banking Association of South Africa has argued against regulated affordability assessments as they would not provide for nuances in lending practices by banks.

It wants the industry to regulate itself by a voluntary code of conduct which would incorporate affordability assessment guidelines.

Appearing before Parliament’s portfolio committee on trade and industry yesterday on behalf of the debt-counselling industry, attorney Kenneth Bredenkamp submitted that the trade and industry minister should prescribe what was required from affordability assessments.

They should have detailed information on financial circumstances of a client that could be verified from third-party sources such as bank and municipal accounts, and personal information of consumers.

He said that regulation with proper enforcement “will ensure the industry players are aware of the boundaries and rules applicable to them, and will assist in limiting the scope for disputes. Our client does not support the idea of self-regulation and believes that the enforcement of the proposed codes is the most important function of the National Credit Regulator.”

Debt counsellors wanted the minister to be empowered to draft the codes of conduct and make them part of the regulations of the act.

They wanted compliance with the codes to be linked to the registration of industry players.

Mr Bredenkamp proposed that the codes of conduct provide for negotiations on debt-restructuring agreements, and concessions that credit providers were prepared to make for each type of agreement.

The debt-counselling industry, he said, believed that “the establishment of proper codes of conduct could lead to an effective and harmonised solution to the current crisis, the prevailing uncertainty in the process and limit the number of matters referred to the courts.”

MicroFinance SA CEO Hennie Ferreira called for the introduction of rates and fees for the microfinance industry that reflected the actual cost of providing credit.

He expressed concern about some unsecured products that were “forced” onto consumers “simply because of the financial benefit to the credit provider.”

Courtesy Business Day Live