DA to petition Minister Patel to invoke ‘public interest' credit agreements to assist cash-strapped South Africans
9 April 2020
The Democratic Alliance has written to Trade, Industry and Competition Minister, Ebrahim Patel with a detailed proposal, requesting him to invoke Section 11 of the National Credit Act to allow for ‘public interest’ credit agreements.
Should the minister agree, this would be the first such time that this section of the legislation will be used to assist financially hard-hit consumers who may not be able to access traditional relief measures from their banks or government.
The DA believes this could be the very lifeline that many people urgently need and would also open up a line of credit with registered credit providers and deter people from using loan sharks which are often abusive and charge higher than prescribed interest rates.
To this end, the DA has proposed that:
1. The Minister activates Section 11(3) of the NCA in order to simultaneously:
a) Ensure expediency and the need to move with speed given the public interest imperative to bring relief to affected consumers in a time sensitive manner, while maintaining sound regulatory principles as well as consumer protection considerations;
b) these regulations including the Minister’s intent to activate Section 11 of the NCA must be published in the Government Gazette with comment due within 72 hours of date of publication thereof. The timeframe for implementation must come into force within 7 calendar days of the publication of the Notice
2. Consumers may only access a public interest credit agreement from credit providers with whom they have an existing account or relationship.
3. The maximum permissible debt is R4 500 per existing short-term loan.
4. The credit agreements may be revolving so that consumers may access and enter into a new public interest credit agreement, during the National State of Disaster, provided that they have repaid and settled previous agreements.
5. The credit agreements are subject to a 12-month repayment term.
6. The Minister provide instructions as to the interest and fees payable on these agreements in accordance with the prevailing limitations of fees and interest rates, published in 2015 with the additional concession of a reduction of 1% applicable to all fees and rates.
7. The implementation of affordability assessments with the basic minimum criteria in order to prevent abuse of the system by credit providers and consumers. These minimum requirements imposed on credit providers to take practical steps to ensure consumer affordability and eligibility, which include:
Proof of Financial Distress;
Income and extent of interruption thereto (i.e. not paid full salary etc.) for individuals as well as SMMEs;
Existing financial obligations;
Dependents (i.e. family and or employees);
Debt repayment history per Credit Bureau records
In a time such as this and with South Africans feeling the brunt of the ‘perfect storm’ of a recession, economic downgrade and Covid-19 lockdown, it is critical we come up with urgent financial solutions to assist people. The DA believes that this is one of them and will be a much needed lifeline to allow people to get through each month, should they choose to utilise this.
The DA looks forward to engaging with the Minister and other interested parties on this matter of urgent importance in order that we act with speed to enact this critical section in the National Credit Act.
Issued by Dean Macpherson, DA Shadow Minister of Trade and Industry, 9 April 2020
