President Cyril Ramaphosa has signed into law the controversial National Credit Amendment Bill which is geared to provide relief to over-indebted consumers.
The legislation, also known as the “Debt Intervention Bill”, will enable low-income workers to extract themselves from debt through a process of debt restructuring if they earn a gross income of R7 500 or less per month, have unsecured debt of R50 000, or have been found to be critically indebted, but fears have been raised that it could in fact drive up the cost of loans and limit access to credit.
One of the clauses on the bill require debt counsellors to report suspected reckless lending, in an attempt to discourage registered financial service providers from engaging in reckless extension of credit.
The controversial bill also allow intervention for over-indebted consumers earning R7 500 per month or less. The first step in the intervention process involves debt restructuring, giving consumers five years to pay their debt, as well as the extinguishing of debt.
In September, the chairperson of Parliament’s trade and industry committee Joanmariae Fubbs, explained that debt will only be extinguished for those seeking relief after all other measures have been exhausted.
South African consumers are currently battling the effects of the tough economic climate and rising unemployment, which has hit savings.