New legislation restructuring the country’s legal framework dealing with lending, in the form of the Consumer Credit Bill, is expected to be published within the next few weeks and should not encounter many impediments in Parliament, according to Bob Tucker, CEO of the Banking Council of South Africa.
Speaking at Friday’s Euromoney conference entitled “South Africa Ten Years On-Empowerment, Finance, Trade and Investment”, Tucker said that the new legislation would change the entire lending sector, particularly that of microlending, by improving consumer protection, improving access to finance for previously disadvantaged people and integrating the current divided system into one comprehensive approach to lending.
Current legislation governing consumer lending in South Africa comprises largely the Usury Act of 1968 and the Credit Agreements Act of 1980. The system is split into two, as loans with a value of less than R10 000 are categorised as “microlending” and largely focused on poor, black communities and those of over R10000 are part of the mainstream banking sector and mostly focused on the white population.
The antiquated legislation has led to a lending market characterised by poor consumer protection, reckless lending leading to over indebtedness among the poor, and high costs, amongst other abuses.
“The new Consumer Credit bill will break down the binary system and integrate the two into one,” Tucker explained. “It will address the needs of low income people and eliminate the abuses of microlending. I believe it will go through Parliament quickly.” – I-Net Bridge