National Credit amendment Bill

1. National Credit amendment Bill 2014.02.11

2. PROPOSED AMENDMENTS

3. Definitions ‘Lease’: Revisit the deletion of paragraph (d) due to impact on rental agreements / financial leases: Department to confirm proposal; Consequential amendment: add “and” after paragraph (b)(ii) and delete “and” after paragraph (c); ‘Mortgage’: Use the definition proposed by BASA: "‘mortgage’ means a mortgage bond registered by the registrar of deeds over immovable property that serves as continuing covering security for a mortgage agreement."

4. Definitions ‘Secured Loan’:Retain the word ‘movable’ in paragraph (b): ‘‘(b) retains, or receives a pledge [or cession of the title] to any[movable] property or other thing of value as security for all amounts due under that agreement.’’ New amendments: “Payment Distribution Agent” “means a person who on behalf of a consumer, that has applied for debt review in terms of section 86(1), distributes payments to credit providers in terms of the debt re-arrangement court order or agreement;”; and “Regulated Financial Institution”:include non-deposit taking financial institutions; Department to respond

5. Clause 2: Relations with Regulatory Authorities Provide for a mechanism to resolve disputes between the NCR and other regulators: dti proposed this be agreed upon in the agreement between them; Question whether such a dispute mechanism is necessary. The agreements will be on aligning processes and working together, and not a matter of intruding mandates, thus there is not much scope for disagreement. Co-operative governance is a constitutional prescribed obligation.

6. Clause 3 – Appointment of inspectors and investigators Replace the word “official” with “employee” “25. (1) The Chief Executive Officer or any official duly authorised by the Chief Executive Officer—” The Act refers to “employees” of the NCR and not to “officials” of the NCR Amendment proposed to ensure consistency in the Act.

7. New Amendment: Section 40 The Department proposed that all Credit Providers must be registered. The Act provides: 40. (1) A person must apply to be registered as a credit provider if- (a) that person, alone or in conjunction with any associated person, is the credit provider under at least 100 credit agreements, other than incidental credit agreements; or (b) the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds the threshold prescribed in terms of section 42( 1). Concern: This amendment falls outside the current scope of Bill and introduces an amendment to a different provision of the Act requiring NA permission and facilitation of public involvement.

8. Clause 5 - PDAs Experience, capacity and capability of PDAs could be prescribed by regulation, or included in the Bill; Department to respond on where this should be contained. Registration requirements for PDAs: Must maintain fidelity insurance and trust accounts; Must be subject to audits by National Credit Regulator (‘NCR’); Must abide by the code of conduct prescribed by the Minister; Must be registered under the National Payment System Act and managed by the Payment Association of SA; Department to confirm this proposal. Must have a number of years’ experience (3 – 5) in the payment industry; A transitional provision for registration of PDAs must be included (12 months’ grace is proposed);

9. PDAs - General When / why would a consumer approach a PDA Department to respond

10. Clause 6 – Applications for registration Change “probity” test to “fit and proper” test; Amend “upon investigations” to align it with the fit and proper test and to distinguish it from the section 139 formal investigations; ‘‘(3) If an application complies with the provisions of this Act and the applicant meets the criteria set out in this Act for registration, the National Credit Regulator, after considering the application, must register the applicant [,] subject to section 48 unless the National Credit Regulator— (a) after subjecting the applicant to a probity test or any other prescribed test; or (b) upon investigations, is of the view that there are other compelling grounds that disqualify the applicant and which render such an applicant not to be a fit and proper person to be registered in terms of this Act.’’.

11. Clause 6 – Applications for registration Include an appeal to the National Consumer Tribunal against decision of NCR regarding fitness of a person to be registered; Section 59 already provides for a review of the decision: 59. (1) A person affected by a decision of the National Credit Regulator under this Chapter may apply to the Tribunal to review that decision, and the Tribunal may make an order confirming or setting aside the decision in whole or in part. ... (3) A decision by the Tribunal in terms of this section is subject to appeal to, or review by, the High Court to the extent permitted by section 148. .

12. Clause 7 – Disqualification of natural persons Disqualifications contained in section 46 also to be applicable to PDAs Natural persons only if not unrehabilitated insolvent, must be over 18, not convicted in past 10 years etc. May not be a debt counsellor; Department to confirm this proposal. Provide for deregistration if become disqualified after registration This proposal is already provided for in section 46(5): (5) The National Credit Regulator must deregister a natural person if the registrant becomes disqualified in terms of this section at any time after being registered.

13. Clause 8 – Conditions of registration The Minister must make codes and affordability assessment regulations, after public consultation and on recommendation of NCR (Align clauses 8 and 15 iro in / after consultation); Department proposed section 82 of the Consumer Protection Act related to Codes of Conduct, with a due process for the Minister to follow as example for this Bill; Public consultation provided for in section 171(1)9a) read with 171(2)(a). 171. (1) The Minister- (a) may make any regulations expressly authorised or contemplated elsewhere in this Act, in accordance with subsection (2); (2) Before making any regulations in terms of subsection (1)(a), the Minister- (a) must publish the proposed regulations for public comment;”

14. Clause 8 – Conditions of registration Compliance with affordability assessment regulations and codes must be a prerequisite for registration; Affordability assessment guidelines to exclude SASSA grants; Propose that this be included in the regulations

15. Clause 11 – Voluntary cancellations (Debt Counsellors) Prescribe (regulations) process for voluntary cancellation of registration by a debt counsellor, as well as other de-registration and transfer of a business (including notification to credit bureaux’s); Propose that a new clause be inserted as section 57A, with wording similar to the new clause 58A (Voluntary cancellations), but related to de-registration and transfer, as section 57 deals with cancellation of registration. “Seize” to be changed to “ceased”;

16. Clause 12 – Removal of credit records Insert an obligation that debt counsellors must regularly assess the financial position of consumers; Concern: This amendment falls outside the scope of the Bill. Although the amendment can be housed in a provision that is currently amended (thus avoiding NA permission being needed), facilitation of public involvement is still required. The test to be done by the debt counsellor to determine if the consumer has sufficient financial ability to satisfy every credit agreement to be indicated in the Bill; Amend the clause to clearly indicate what is required before a clearance certificate is issued; “Current obligations” to be made clear so that it is not interpreted as obligations under the re-arranged agreement; Amend the section so that the certificate be made available to all credit bureaus;

17. Clause 13 – Automatic removal of credit records Amend the clause so that only negative profile information is removed (payment profiles to be retained); Amend so that all credit bureaus are notified; Align section 71A with regulation 17; Department to confirm this proposal; Transitional provisions must be created to assist bureaus; Department to confirm the transitional provisions.

18. Clause 15 – Assessment mechanisms and procedures Consequential amendments to subsections 82(1), (2), (3) and (4) related to “guidelines” becoming regulations;

19. Clause 16 – Reckless agreements Ensure that the National Consumer Tribunal decisions are subject to review and appeal; Only referrals from the NCR and specific instances are subject to appeal. It is thus necessary to specifically provide for an appeal in respect of this new mandate; Transitional provisions to be drafted; The Department to provide details of the transitional provisions required.

20. Clause 17 – Application for debt review The clause to provide for all types of credit applications S83 – Reckless Agreements; S85 – Over indebtedness; S87 – Re arrangement of debt The Department to confirm these are all the agreements Ensure that cost of credit is limited to the balance of the unpaid debt: S103(5) (Ultra Duplum Rule) already caps all possible costs.

21. Clause 17 – Application for debt review The cost of credit insurance to be regulated / capped; The value of credit insurance is capped (section 106); Concern: This amendment falls outside the current scope of Bill and introduces an amendment to a different provision of the Act requiring NA permission and facilitation of public involvement (Finance, insurance industry). Collection costs under other laws to be capped in consultation with the Minister of Justice and Constitutional Development; Concern: This amendment falls outside the current scope of Bill and requires a new amendment in the Schedule requiring NA permission and will require consultation with the Minister of Justice and Constitutional Development, as well as the Law Society.

22. Clause 20 – Procedures before debt enforcement “Revive” to be amended to “reinstate”; Amend the clause so that consumers could lodge a complaint; Clause 20(a) already provide this; ‘‘(a) may draw the default to the notice of the consumer in writing and propose that the consumer refer the credit agreement to—” (debt counsellor, alternative dispute resolution agent, consumer court, Ombud or NCR) Clarify “dispute” so that in par (i) it relates to claimed amounts and in par (ii) to other terms of the agreement;

23. Clause 20 – Procedures before debt enforcement The clause must be aligned with the judgement in Sebola and Another v Standard Bank of South Africa Ltd and Another (CCT 98/11) [2012] ZACC 11; 2012 (5) SA 142 (CC); 2012 (8) BCLR 785 (CC) (7 June 2012): - S129(1)(a) is a prerequisite for litigation, thus the "may" is a "must"; - S130 requires the Credit Provider to prove that the notice was delivered; - Accepting that it will increase cost of credit, the court required (if it is send by post) registered mail with track and trace (i.e. must be able to determine the letter reached the relevant post office chosen by the consumer).

24. Clause 25 – Outcome of complaint Amend the clause to clarify that a notice on non-referral is an outcome of an investigation into a complaint; Concern: This amendment falls outside the scope of the Bill. The amendment can be housed in a provision that is currently amended , but as the specific provision is not being amended, NA permission is required as well as facilitation of public involvement.

25. Clause 26 - Agents Amend the clause so that word “reinstate” is retained (not clear what dti is referring to here); Department to clarify; Amend the clause to provide the Minister the discretion to prescribe training; There is no obligation placed on the Minister to prescribe training; The proposed clause can be worded in such a way as to make it clear that it is discretionary.

26. New Clause Collecting / selling / activating debts that have prescribed to be null and void and to be made an offence; The Department to confirm where in the Act this should be placed. (perhaps S133 “Prohibited collection and enforcement practices”. Concern: This amendment falls outside the current scope of Bill and introduces an amendment to a different provision of the Act requiring NA permission and facilitation of public involvement. The agreements will not be enforceable as a person cannot sell more rights than they have. This aspect could be addressed through creating awareness.

27. New Clause: Regulations Regulations (Section 171 or in each applicable section): Provide considerations for ‘fit and proper’ test; Provide for process to deregister a PDA; Provide for the duties, obligations and fees of Payment Distribution Agents and ADR Agents; Provide for assessment criteria to determine if an applicant’s commitments to prescribed guidelines are sufficient; Clause 10: Prescribe formula for penalty for late renewal of registration; Prescribe termination of / withdrawal from debt review process.

28. General Discussions Providing that exceeding the interest capped constitutes an offence; Propose that an offence is added under section 100 that deals with prohibited charges. Concern: This amendment falls outside the current scope of Bill and introduces an amendment to a different provision of the Act requiring NA permission and facilitation of public involvement. Provision for emolument attachment orders (maximum percentage; final date of payment; monthly statements); Concern: This amendment falls outside the current scope of Bill and requires a new amendment in the Schedule requiring NA permission and will require consultation with the Minister of Justice and Constitutional Development, as well as the Law Society.

29. General Discussions Credit Ombud to register with the NCR; Currently recognised by Financial Services Ombud Scheme Council and regulated under the Financial Services Ombud Scheme Act, 2004 (Act no 37 of 2004). Concern: This is a duplicate registration and could cause the Ombud to be subject to two different sets of rules. If the Regulatory authorities have agreements with each other, double registration is not necessary. This amendment further falls outside the current scope of Bill and introduces an amendment to a different provision of the Act / schedule to the Act requiring NA permission and facilitation of public involvement.

30. General Discussions Fines to be utilised towards the consumer and not be paid into fiscus. Concern: This amendment further falls outside the current scope of Bill and introduces an amendment to a different provision of the Act requiring NA permission and facilitation of public involvement. Further: PFMA section 13 provides: (3) Draft legislation that excludes money from payment into the National Revenue Fund may be introduced in Parliament only after the Minister has been consulted on the reasonableness of the exclusion and has consented to the exclusion.

31. Thank you