The National Credit Bill is heading for approval missing the fine print necessary to ensure that its protection measures will be effective, says the Black Sash.
The Bill, introduced in August by Minister for Trade and Industry Mandisi Mphahlwa to enforce fair practice across the lending industry, is scheduled for its second reading in the legislature early next year, after which President Thabo Mbeki is expected to sign it into law. At present, the Bill is being debated in the National Council of Provinces.
Under the Bill’s provisions, each new loan provided by a bank or microlender must be classified and registered. In theory, this will allow a regulator to determine which lenders are adhering to new rules — for instance, by refusing to lend money to those already deep in debt. The regulator would be able to take action against lenders who conduct business without heed for the overall financial interests of their customers. The consumer credit industry is worth about R350-billion per year.
But once the Bill becomes law, its measures will be “toothless” until its regulations are set out, a critical process that is not always open to the public, according to the Black Sash.
“This Bill is good in outline, but there are holes that still need to be filled,” said Nceba Mafongosi of the Black Sash, who presented the NGO’s submission on the Bill to Parliament’s Trade and Industry portfolio committee in August.
“Our concern is that civil society be given the chance to comment on the regulations, to make sure they’re strong enough to protect the poor.”
Mafongosi points to the SA Social Security Agency Act (Sassa) as a recent example of two-step policy-making that skirted full public participation. The Sassa regulations were taken straight to Parliament — they weren’t published first as a draft for comment.
“We’re worried this might happen again. The issues are so critical that there should be public participation at every stage.”
Items in the Bill scheduled for additional detail when the regulations are published include blacklisting, the administration of so-called emergency loans, and the question of free access to debt counselling.
“The potential benefits to the poor from proper regulation of these issues are enormous,” said Mafongosi.
Meanwhile, consumers can also expect to benefit from cooling-off periods for all credit agreements, starter loans for new businesses, and stricter oversight of how credit bureaus use the information they collect.
The Black Sash offers free debt counselling in each of its seven regional advice offices. According to Mafongosi, unregulated microlenders are creating untenable debt situations for thousands.
“Some behave responsibly, but many purposely entrap people, who fall into vicious cycles of debt, and never escape. Without thorough regulation, microlenders can endanger the financial health of entire communities. That’s why it’s so important that we get a chance to see and comment on the regulations.” – I-Net Bridge