Annual Review Sub-Committee – CIF
Justin van der Linde will be representing the National Clothing Retail Federation (NCRF) in an annual review sub-committee, which aims to provide procedural and legal solutions for the annual review of debt arrangements and court orders by the debt counsellor. We believe that the annual review process would assist with achieving the purpose of the National Credit Act, more specifically the speedy rehabilitation of the consumer to ensure future access to the credit market.
We will aim to ensure that the annual review achieves the following purposes:
- Mitigate the discrepancy in outstanding balances of credit agreements between the credit provider and debt counsellor / payment distribution agent (hereinafter referred to as “PDA”).
- Ensure that the consumer’s budget (living expenses) remain realistic.
- Ensure that increases or decreases in income are catered for.
- Ensure that the increase or decrease in insurance premiums is catered for.
- Ensure that additional sources of income (bonus or SARS refund) are taken into consideration and distributed accordingly.
- Assist with early rehabilitation and the issue of clearance certificates.
- Ensure that the consumer has not applied for additional credit or has made use of his / her credit facilities.
- Assist with continual lifestyle changes for the consumer (for example the sale of luxury items).
- We will provide an update on this post the meeting date set down for mid-March 2019.
The Department of Trade & Industry (DTI) is currently holding public hearings in order to ascertain if the Bill is in line with the Constitution – this in an effort to ascertain the possible impact.
Genesis Analytics has been tasked to independently assess the socio-economic impact that the Bill may have. Seeing as debt intervention is aimed at low affordability consumers and may impact debt review, debt counsellors have been urged to participate in a survey.
Parliament has confirmed that the National Credit Amendment Bill has been passed by the National Council of Provinces plenary.
Judge President Practice Directive Issued
A Directive was issued in February 2019 to make provision for a full court to sit to hear and determine two (2) debt review court applications to be declared not over-indebted and to clarify the position and practices pertaining to similar applications. A further purpose of the Directive is, amongst others, to set timelines for the filing and service of further processes regarding conduct of the applications.
A number of legal issues will be raised in order to obtain clarity, especially due to the conflicting judgments that have been handed down in various Divisions – This relating to whether a High Court is able to make an Order confirming that an applicant is no longer over-indebted, where no valid declaration of over-indebtedness is before the court.
We will provide an update once the judgments have been made.
Consumer Friend noticed that a number of debt counsellors exclude certain credit agreements from the debt review process. After extensive investigations we approached the transgressing debt counsellors to ascertain their reasoning behind this.
A number of reasons were given, the most common being:
- The consumer wished to exclude the account;
- The credit provider wished to exclude the account;
- The consumer is a low affordability candidate and as such the assets are excluded as it is in the best interest of the consumer.
We believe that the Act does not cater for accounts to be excluded (legal accounts the exception) and have kicked back on this – much to the disagreement of the debt counsellor. We feel it is against the scope and purpose of the Act; in that it has the effect of preferring one creditor over another and does not allow for consistent treatment for credit providers.
This was supported by the National Consumer Tribunal (NCT) in September 2018 (Andre Pienaar & Antoinette Pienaar v Ian Wason & Others) where all 3 presiding members concurred that it was clear from the wording of the Act that a debt counsellor must make a repayment proposal to all the consumer’s creditors. The judgment went on further to confirm that credit providers must consent to the debt counsellor’s proposal in order for the debt counsellor to approach the NCT for an Order.
It must be noted here that a decision made by the NCT has the same status as one made by the High Court of South Africa.
We have reported this to the NCR and after further discussions with them we await their comments on issuing an industry guideline.
On a similar aspect, the NCT has also ruled on joint bonds stating that excluding one of the account holders from a debt review process amounts to a unilateral change to the contract, and that parties that are not included in the debt review application must consent to the account being subject to a debt review Order.
The Industry has struggled with the number of court Orders that are granted but do not include the necessary information in order to effectively restructure a consumer’s account.
As a result CIF convened in order to agree on a standardised version of a debt review court Order, taking into account the Magistrates Court Act, as well as what the industry will need.
Noteworthy items are:
- Proposed structure to be part of the court Order.
- Terminated accounts can no longer be re-instated by simply including this in the Order.
After numerous discussions, a final template was agreed upon. The industry awaits CIF’s final recommendations.
Reckless Lending Procedure – CIF
The Act states that a debt counsellor must conduct a reckless credit investigation should the consumer wish to pursue reckless credit against a credit provider. Seeing as this is most likely “recommended” by the debt counsellor when a consumer approaches them, it was prudent that a process be agreed on to handle reckless lending investigations.
The Credit Industry Forum (CIF) convened and a process was agreed on which set out the time frames and requirements when reckless credit investigations are conducted.
A noteworthy requirement proposed is that the debt counsellor must supply a basis on why they view an agreement to be potentially reckless, and that only certain documents are supplied by credit providers at first.
The industry awaits CIF’s final recommendations.
In September 2018, The National Credit Regulator (NCR) issued a notice of their intention to withdraw the reckless lending fee of R1,500.00. This on the back of conducting an investigation on how any investigations were actually done whilst debt counsellors charged the fee. Needless to say the investigation showed that most debt counsellors charged a fee of R1,500.00 and merely requested for the affordability information as a matter of procedure. It seemed that no investigation was actually done.
In October 2018, the NCR issued a further notice to request for written comments of their intention to withdraw the reckless credit fee of R1,500.00. The submission date was extended but no final notice has been issued in this regard.
The NCR engaged with Consumer Friend to determine if the notice the NCR issued affected the number of requests. Whilst we did see a marginal decrease, this was most likely attributed to the approaching year end, and not as a result of the notice issued by the NCR. The reckless credit slide in this report pack is evidence to this.
Debt counsellors are clearly against the removal of the fee, as they already feel that the current fee they may charge the consumer for applying for debt review is too low for them to make a living. By removing the reckless credit investigation fee, it is going to increase financial pressure on them whilst they still have to conduct the investigation. We however, from past statistics on the number of investigations conducted, feel that it will curb he number of investigations as debt counsellors will likely apply their mind and be more prudent on which matters they wish to investigate.
The Debt Counselling Association of South Africa (DCASA) are in discussions to make a compromise by smoothing the fee over the debt review process.