Reckless lending to consumers curbed

2014-02-28 08:56

Members of Parliament have given the green light to a bill that will see tougher new measures govern credit providers.

The national credit amendment bill will provide a uniform risk assessment process for credit providers to curb reckless lending practices.

“We have over the years seen the increase in the accessibility of the credit market, but we have equally seen the increase in unsecured loans that are expensive to the poor, reckless credit caused by failure to conduct proper affordability tests, as well as levels of over-indebtedness and impaired consumer records,” Trade and Industry Minister Rob Davies told MPs yesterday.

While the existing credit act was lauded for largely cushioning South Africans from the fallout of the global recession, Davies said gaps still existed.

“For instance, gaps in the implementation of debt counselling and debt review processes have led to credit providers using parallel legal processes such as repossessions of homes in total disregard of the mechanisms in place to assist consumers to meet their obligations.”

The bill creates a uniform affordability test for prospective lenders.

“Credit providers are allowed in terms of the act to develop their own affordability assessment models, but research revealed serious discrepancies in how the credit providers do this, and in most cases it appears that such assessments are not done at all,” Davies said.

“The affordability assessment regulations will include elements relating to discretionary income, as well as determine the buffer in respect of income that should not be taken into account when conducting affordability assessments.”

The bill’s passage through the National Assembly came a day after Davies published regulations, which would ensure the removal of adverse consumer credit information and information relating to paid-up judgments from credit bureaux.

“The notice comes into force on the first of April, meaning that information cannot be used and this information can’t be used from that date, and then the credit bureaux have got two months thereafter to clear up their systems,” said Davies.

The regulations did not mean people who did not pay their debts would be automatically cleared.

“It says that a paid-up judgment ... it’s out, it’s off. You don’t have to go to court. You don’t have to do all those other things you did before,” Davies said.

“If they’ve got terminology applying to you saying you’re a slower payer or irregular payer or something like that, that must also be removed.”

But, the credit profiles of South Africans would still show on the system.

The profiles included information on how many credit agreements people had and how they were making payments against those loans or accounts.

“It’s a once-off exercise, so if thereafter you incur a judgment, it doesn’t mean you’re off forever, you go back on the system,” Davies explained.

Credit providers would still be able to assess risk by looking at one’s profile.

Half of the of the 21 million credit-active South Africans had credit impairments.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News

Book flights

Compare, Book, Fly

Traffic Alerts
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.