Government of South Africa Moves to Protect Consumers and Assist Over-Indebted Households
of South Africa Moves to Protect Consumers and Assist Over-Indebted
The Cabinet of the Government of
South Africa authorized the Ministers of Finance, and Trade and Industry to
take measures to assist over-indebted households and prevent them from
becoming over-indebted in future.
The level of household
indebtedness in South Africa has risen to 76 per cent of disposable income in
June 2013 compared to 50 per cent in 2003. The number of customers in arrears
for more than three months or more is 4.2 million out of 20 million credit-active
Government is putting in place an
immediate set of comprehensive steps necessary to deal with the problem of
present and future household over-indebtedness as follows:
Government is considering
assisting households that are already in the debt trap by:
- Setting clear affordability
criteria that all retail lenders have to adhere to and clearly defining
a “reckless” loan, thus enhancing reckless lending controls under the
National Credit Act.
- Ensuring the provision of
credit is not only affordable but suitable. For example it is clearly
inappropriate to promote a short-term (30 day) loan as being suitable
for supporting borrowing over longer periods.
- Reviewing the pricing caps
under the National Credit Act to ensure that current levels of caps are
appropriate, especially for pay-day loans where rates are excessive.
- Strengthening regulatory
monitoring, supervision and enforcement to ensure the shutting down of
unregistered credit providers and full compliance of registered credit
- Reviewing the regulatory
framework for credit insurance policies that are sold with, or linked
- Setting norms and standards
for access to the payment system, including for debit orders. Persistent
reckless lenders should be denied access to the payments system.
- Setting norms and standards
for emolument attachment and garnishee orders issued for credit.
- Extending and strengthening
the debt collection law to apply to legal firms. Regulating credit-linked deductions allowed on employer payroll systems.
- Investigating simpler and
lower-cost insolvency arrangements for lower- and middle-income
For full news release, see here.
- Engaging with lenders and
their industry associations to provide appropriate relief to qualifying
distressed borrowers by reducing their installment burden, without
additional cost to the borrower.
- Enabling major lenders to
provide voluntary debt relief measures to distressed borrowers without
charge, in addition to the current debt counseling process, subject to
compliance with the National Credit Act and Financial Advisory and
Intermediary Services Act.
- Engaging with current lenders
to take steps to withdraw certain categories of existing emolument
attachment orders for credit, and to use such orders for future credit
only as a last resort and according to a robust code of conduct.
- Regulating debt-collection
firms, including legal firms, to ensure they do not indulge in
unscrupulous debt-collection practices.
- Encouraging employers to
investigate the legitimacy of all emolument attachment or garnishee
orders they may be enforcing against their employees (for purposes of
credit not maintenance) and to write to credit providers to reduce or
even remove all onerous orders. Public sector employers will be expected
to lead by example and implement the above proposals early next year, as
soon as guidelines for the public sector are published.
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