Presentation to the Select Committee on Trade and International Relations 14 August 2012

1. Presentation to the Select Committee on Trade and International Relations14 August 2012 Diane Terblanche Chairperson

2. NCT - Establishment and Jurisdiction The National Consumer NCT was established in terms of s26 of the National Credit Act (NCA), Act 34 of 2005. “Tribunal” in the Consumer Protection Act (CPA) refers to the National Consumer NCT established by the NCA. In terms of its’ establishment, the NCT: • Has jurisdiction throughout South Africa; • Is a juristic person; • Is a Tribunal of record; and • Must exercise its functions in accordance with the NCA or other applicable legislation (refer section 142 of NCA)

3. Purpose of NCA Sect 3 “… to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers, by – (a) Promoting the development of a credit market that is accessible to all South Africans, and in particular to those who have historically been unable to access credit under sustainable market conditions … (c) Promoting responsibility in the credit market by – (i) encouraging responsible borrowing, avoidance of over- indebtedness and fulfillment of financial obligations by consumer; and (ii) discouraging reckless credit granting by credit providers and contractual default by consumers: … (f) Improving consumer credit information … …”

4. NCT - Functions • Adjudicates on disputes between parties. In this regard note that – • NCT is NOT ADR agent / facilliatator • NCT only adjudicates once parties have excercised all other avenues and have ben unable to resolve their dispute • There are limited provisions for parties to appraoch the NCT directly those instances are mainly provided for in the NCA (statements of acounts, sale of goods,disputed entries, limitation of information requests, pawnbrokers’ issues) • Confirm settlement agreements entered into between parties • Grant interim relief (urgent) applications where appropriate • Consider applications for the review of the regulators’ decisions

5. Matters NCT adjudicates (decides) on • NCT was created by the NCA and may only adjudicate (make decisions) on the matters specifically provided for in the NCA (i.e. credit and consumer protection matters) • What those are is driven by – • Prohibited practices and applications provided for under NCA/CPA; • Matters specifically excluded for the civil and criminal courts • Decisions by Regulators to refer matters to Provincial Courts, Civil Courts and others

6. Matters NCT adjudicates (decides) on (cont.) • Courts NOT NCT may decide on - • Contractual disputes • Damages / awards of damages • Criminal matters • Enforcement of NCT orders take place through the criminal courts • NCT makes determination that prohibited conduct took place and with its certification parties can claim civil damages through the civil courts

7. Role and Function Follows on regulatory actions of Regulators / Challenges by regulated persons / entities • Enforcement action against registrants (NCA only) • Compliance notices • Non referrals • Referrals • Settlements / consent orders Each with specific consequence to regulatory objective

8. Approach to Mandate • Never rubberstamps – adjudicates to ensure that the order given by the Tribunal is lawful and complies with the requirements of the NCA and the CPA

9. Approach to Mandate (Cont.) Section 142(1) - hearings • in public, • in an inquisitorial manner, • as expeditiously as possible, • as informally as possible; and • in accordance with the principles of natural justice. Links back to SA Constitution and PAJA

10. Tribunal cases • Consent order & Non-consent order (compliance notices and de-registration of credit providers) applications filed per financial year

11. Tribunal Cases

12. Tribunal Cases • Majority of the cases in credit space are applications to confirm debt re-arrangement agreements as consent orders. • Debt re-arrangements as Consent order applications by DCs iro • more than 7 000 consumer credit agreements; • with a combined value of more than R200 million, were dealt with by the Tribunal during the last financial year. • The consent orders granted in these applications resulted in consumers being in a position to retain both immovable and movable property whilst servicing their credit agreements in a responsible manner.

13. NCT cases From NCR – • Application to deregister a registrant ito S57(1) for repeated contravention of the NCA or conditions of registration e.g. - • Section 80 – Reckless credit; • Section 90 – Unlawful provisions of credit agreement; • Section 100 – Prohibited Charges; • Section 101 – Cost of Credit; • Section 102 – Fees or Charges; • Section 103 – Interest.

14. Debt re-arrangement and Consent orders Adjudication process Tribunal’s authority to confirm a debt re-arrangement from – • Section 86(7)(b) Debt counselor recommend to consumer and credit providers to voluntary consider and agree on a plan of debt re-arrangement IF consumer is not over-indebted but experiencing difficulty in meeting his obligations. • Section 86(8)(a) “… may file a consent order in terms of section 138(1)…”

15. NCA and Amnesty for debt stressed consumers Debt re-arrangement and Consent orders Tribunal assess the following prior to granting an order: • Identification of consumer; • Confirmation by all parties – consumer and credit providers; • Financial consideration including affordability, over-indebtedness, applicable interest rates, practicalities and legality

16. NCT cases Observations and outcomes - • Consent orders refused due to – • overcharging of interest (judgments on website & Saflii) • Unaffordability • Initial rates reduced when entering into debt re- arrangement • Long re-payment period (implication for cost of credit) • Economic impact and considerations

17. NCA and Proposed Credit Information Amnesty Conclusions vis-a-vis amnesty – • Paying amounts not due • Paying debts that should have been settled but for overcharges • Entitlement to compensation / re-payment of amounts over-charged

18. NCA and Proposed Credit Information Amnesty • Conclusions vis-a-vis amnesty – • Certain consumers who should fall within the targeted group, may not be regarded as part of the targeted group as a result of their debt being depicted inaccurately as higher than what it should be;

19. NCA and Proposed Credit Information Amnesty • Conclusions vis-a-vis amnesty – • Even if the listing is removed, certain consumers who should benefit from this amnesty proposal will in any event not have access to credit due to being under debt review. • A sample of the consent order applications received by the NCT indicates that a consumer on average have 6 to 7 credit agreements and will be under debt review for approximately 71 months.

20. NCA and Proposed Credit Information Amnesty • Conclusions vis-a-vis amnesty – • Credit Providers are required to do a proper credit assessment prior to extending credit. If the debt is not written off and the record thereof expunged, this may result in consumers accessing credit beyond their means – Implications for the consumer and for the credit provider.

21. Contact Details Office Hours: Monday to Friday, excluding public holidays, from 09:00 to 16:00. Postal Address: Private Bag X 110 CENTURION 0046 Physical Address: The National Consumer Tribunal Ground Floor, Building B, 272 West Avenue Lakefield Office Park Centurion, Pretoria Telephone: (012) 663 5615. Facsimile: (012) 663 5693. E-mail:Registry@thenct.org.za