Critiques alone won't undo debt relief bill, says Patel

A report on the potential negative impacts of the National Credit Amendment Act alone will not prompt President Cyril Ramaphosa to reconsider it, Trade and Industry Minister Ebrahim Patel told Members of Parliament earlier in the month.

The Act – commonly known as the 'debt relief bill' – is intended to assist over-indebted consumers. It allows for low-income workers to extract themselves from debt via debt restructuring, if they earn up to R7 500 gross income, with up to R50 000 in unsecured debt or if they are critically indebted.

It was signed into law in August.

While the ruling party had argued it was a means of protecting poor South Africans from unmanageable debt, the opposition Democratic Alliance had said it could drive already vulnerable citizens to approach loan sharks for credit.

Patel told MPs early in December that the bill had several positive qualities that could protect consumers from reckless and predatory lenders.

Democratic Alliance MP Mathew Cuthbert had asked Patel how the Act had been used since it was signed into law to include persons who were previously financially excluded from access to credit.

"It introduces a range of interventions to deal with over-indebtedness of consumers. It identifies what is meant by over-indebtedness and allows for debt rearrangement plans, adjustments to payment times and debt removal," said Patel.

Patel said his department met with the credit sector and regulators in September to discuss how the law should be implemented.

'Your own studies said it would be negative'

DA MP Dean Macpherson challenged Patel to review the Act, arguing it would be disastrous for the poor.

"The debt relief bill was a pre-election party trick [and] has come back to haunt you.

"It will be one of the biggest hurdles for financial inclusion for those in the lowest income brackets. Your own studies said it would be negative for credit inclusion and drive up costs of debt," said Macpherson.

Patel said Ramaphosa must consider the Constitution before signing a bill or returning it to Parliament.

"That report raised a number of concerns within the provisions of the law, but it also raised the potential positive outcomes of the Act.

"The president of the republic is required to behave in a Constitutional manner. If he declined it or sent it back on the basis of a report, it would be inconsistent with the Constitution," Patel said.

Economic Freedom Fighters MP Yoliswa Yako asked Patel: "Millions of South African cannot participate in the economy in a number of ways because they are heavily indebted. What would you propose to address this?"

Patel agreed that there existed a basis for legislative reform and that the National Credit Amendment Act set out mediation and debt counselling and postponement of payment.

If all else failed, there was a provision for the removal of debt, Patel said.

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