SUBMISSION: NATIONAL CREDIT AMENDMENT BILL PRESENTED BY KEN BREDENKAMP ATTORNEYS
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Transcript of SUBMISSION: NATIONAL CREDIT AMENDMENT BILL PRESENTED BY KEN BREDENKAMP ATTORNEYS
SUBMISSION: NATIONAL CREDIT AMENDMENT BILL
PRESENTED BY KEN BREDENKAMP ATTORNEYS
CURRENT HOUSEHOLD OVER INDEBTEDNESS
• EMPLOYED = 13.6 MILLION • UNEMPLOYMENT = 4.6 MILLION• CREDIT ACTIVE = 20.08 MILLION • CREDIT IMPAIRED = 9.53 MILLION
7.2 MILLION DEFICIT
HOW DID THIS OCCUR ?
•LACK OF ENFORCEMENT BY THE NCR•SOUTH AFRICANS ARE FINANCIALLY ILLITERATE
AMENDMENT TO THE NCA, EFFICIENT
FUNCTIONING OF THE NCR & THE TRIBUNAL
REGISTRATION & REGULATION OF
PDA’S & THE NATIONAL
PAYMENTS SYSTEM
DEBT REVIEW PROCESSADR’S, MEDIATION
CODES OF CONDUCT
ADDRESS & CORRECT INEFFECTIVE &
INEFFICIENT ASPECTS OF THE NCA
TO REGULATE & IMPROVE THE PAYMENT
DISTRIBUTION AGENCIES
TO IMPROVE THE DEBT REVIEW PROCESS FOR
ALL STAKEHOLDERS
AMENDMENTS TO THE NATIONAL CREDIT ACT
CORRECTION OF PATENT ERRORS IN THE LEGISLATION REMOVE CONTRADICTORY & NON-SENSICAL RESULTS ENSURE THAT AMENDMENTS RESULT IN INCREASED EFFICIENCYENSURE AN EFFECTIVE FUNCTIONING NCR & TRIBUNALUPHOLDING THE AIMS & OBJECTIVES OF THE NCA
THE AMENDMENT TO THE DEFINITIONS WILL ASSIST IN ENSURING THAT THE NCA IS ACCURATELY INTERPRETED
AND THAT THE AIMS AND OBJECTIVES OF THE ACT ARE MET
OBJECTIVE 1: TO ADDRESS & CORRECT THE INEFFECTIVE & INEFFICIENT ASPECTS of the NCA
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DEFINITIONS:MORTGAGE: DEFINITION OUT OF LINE WITH COMMON LAWADR’S: REMOVE OR ALLOW FOR REGISTRATIONINTEREST: DEFINE FIXED, VARIABLE AND
MAXIMUM ALLOWABLE INTEREST RATESIN DUPLUM: DEFINE FIXED, VARIABLE AND
MAXIMUM ALLOWABLE INTEREST RATES
SURETYSHIP: DEFINED AS A CREDIT AGREEMENTDEVELOPMENTAL CREDIT: REGULATIONCONSOLIDATED LOANS : CONSUMER INTICEMENT
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A PROPER DEFINITION NEEDS TO BE INCLUDED
IN THE NCA
DISADVANTAGES
ADVANTAGES WITH DEBT COUNSELLOR’S
ALREADY SET UP REGULATED BY ACT &
NCR ALERT TO CHALLENGESAWARE OF PROPOSAL
FRAMEWORKCAN DETERMINE RECKLESS CREDITNO CONFUSION
OPTION 1REMOVAL & ADR
FUNCTIONS BE INCORPORATED IN DEBT COUSELLOR
FUNCTIONS
ADVANTAGES
COULD PROVIDE ALTERNATIVE RELIEF
FOR CONSUMERS
OPTION 2DEFINE WITH REGARDS
TO REGISTRATION ”DEBT COUNSELLOR
BASIS”NO DUAL REGISTRATION
DISADVANTAGES
MORE REGULATIONSET UP COSTS
CONFUSION IN PUBLICINDEPENDENCEBEST INTEREST
KEY DEFINITIONS: ALTERNATIVE DISPUTE RESOLUTION – ADR’S
A PROPER DEFINITION NEEDS TO BE INCLUDED
IN THE NCA
DISADVANTAGES
MAKE PROVISION FOR THE PROPER DEFINITION
OF FIXED, VARIABLE INTEREST & MAXIMUM ALLOWABLE INTEREST
RATE IN EACH SCENARIO
ADVANTAGES
•BETTER THAN CURRENT FORMULA •FIXED AT A MAXIMUM RATE•CAN ALLOW CREDIT PROVIDERS TO DETERMINE OWN INTEREST RATE BASED ON CONSUMER ASSESSMENT•INCREASED COMPETITIVENESS BETWEEN CREDIT PROVIDERS•CERTAINTY FOR CONSUMERS•ASSIST IN REPAYMENT PLAN CALCULATIONS•STATEMENT OF CAPITAL AMOUNT ON SECTION 129 LETTER
CLARIFICATION OF APPLICABILITY OF STATUATORY IN DUPLUM RULE – SECTION 103 (5)
KEY DEFINITIONS: INTEREST RATES
A PROPER DEFINITION NEEDS TO BE INCLUDED
IN THE NCA
DISADVANTAGES
PREVENT ENTICEMENT OF
CONSUMERS OUT FROM DEBT
REVIEW
EXPERIENCE
•The credit provider proposes to consolidate all the debt of the consumer into one account •The credit provider pays the consumer an amount in terms of the loan in order for the consumer to settle outstanding debt •The credit provider charges the consumer a lower interest rate than what the consumer would be paying on the outstanding debts in terms of the debt review order
CLARIFICATION OF APPLICABILITY OF STATUATORY IN DUPLUM RULE – SECTION 103 (5)
KEY DEFINITIONS: CONSOLIDATION LOANS
DISADVANTAGES
PREVENT ENTICEMEN OF CONSUMERS
OUT FROM DEBT REVIEW
EXPERIENCE
Often the consumer does not pay the outstanding debts with the money loaned and utilises it for other purposes. This is particularly so in light of the fact that the consumers would not have had access to such an amount of money for some time and they often spend the money on unnecessary items and luxuries which they were not able to do beforeAs consequences the consumer loses the protection afforded by debt reviewThe consolidation loans need to be monitored and dealt with in a manner to ensure that the consumer’s outstanding debts are paid by the credit provider and that the consumer is not in a worse position than while under debt review
KEY DEFINITIONS: CONSOLIDATION LOANS
PROPOSED AMENDMENT TO SECTION 136
DISADVANTAGES
COMPLAINTS NOT INVESTIGATED
PROPERLYENFORCEMENT
NATIONAL CREDIT REGULATOR
FORM 29PROCEDURE INEFFECTIVENO PROPER INVESTIGATIONNO REPORTING TO INDUSTRY STAKEHOLDERNO CERTAINTY REGARDING MATTERS
AGREEMENT TO CODE BY REGISTRANTSPROVISION OF COSTS AWARDPROVISION OF PENALTIES TO REPEAT OFFENDERS SUCH AS A FINE OR DEREGISTRATION – PROPOSED AMENDMENT SECTION 140REPORT DECISIONS TO INDUSTRY PLAYERSAPPEAL PROCEDURE
PROVISION OF “ANY PERSON” ALLEGING
RECKLESS CREDIT – NOT ADVISABLE
DEBT COUNSELLORS ARE EMPOWERED TO DO
THIS
PROPOSED AMENDMENT TO SECTION 136
DISADVANTAGES
COMPLAINTS NOT INVESTIGATED
ROPERLYENFORCEMENT
NATIONAL CREDIT REGULATOR
SOLUTIONS•EFFECTIVE TRAINING •SKILLED STAFF TO BE EMPLOYED•EFFECTIVE COMPLAINTS / RESOLUTION CODE WITH DEFINED TIME LINE•PENDING OF TIME PERIODS PROVIDED FOR IN THE NCA PENDING LITIGATION•TRANSPARENCY
NATURAL OR JURISTIC PERSONS
INSERTION OF SECTION 44AREGISTRATION OF PAYMENT DISTRIBUTION AGENCIES
CURRENT PAYMENT DISTRIBUTION AGENCIES NOT REGISTERED, INEFFECTIVE AND LEAD TO BREAKDOWN IN THE DEBT REVIEW PROCESS AND INCREASED
TERMINATION, STRESS AND LITIGATION COSTS FOR ALL
OBJECTIVE 2: TO REGULATE AND IMPROVE THE PAYMENT DISTRIBUTION AGENCIES
ACCREDITED PARTIES
NATURAL OR JURISTIC PERSONS
•ADMINISTRATION ISSUES WOULD CONTINUE CAUSING SYSTEMIC RISK •PAYMENT SYSTEMS UTILISED MAY BE INEFFECTIVE•ADDITIONAL COSTS TO NCR CHECKS & REGULATION•HAVE TO MAKE NEW REGULATIONS
ACCREDITED PARTIES
•TRIED AND TESTED•REGULATION PROVIDED FOR BY (SARB)•LEGISLATION IN PLACE – NATIONAL PAYMENT SYSTEM ACT 78 OF 1998•NO ADDITIONAL COSTS TO NCR•CERTAINTY
OBJECTIVE 2: TO REGULATE AND IMPROVE THE PAYMENT DISTRIBUTION AGENCIES
AVERAGE COST TO FINANCIALLY STRESSED CONSUMERS
PDA
10 Credit Agreement2 Distributions @ R7.00 = R14.004 Distributions @ R15.00 = R60.004 Distributions @R25.00= R100.00
Total R174.00
Switch
10 Credit Agreement2 Distributions @ R8.40 = R33.604 Distributions @ R8.40 = R33.604 Distributions @ R8.40 = R16.80
Total R84.00
SAVINGS OF R90.00 PER CONSUMER MONTHLY
Savings To The Industry & Consumers
• THE SAVINGS BETWEEN THE SWITCH AND PDA AS PER THE SCENARIO WOULD BE R90.00 MONTHLY PER CONSUMER.
• IF 100,000 CONSUMERS WERE GIVEN THIS ADVANTAGE THERE WOULD HAVE BE A COLLECTIVE R9,000.000 ADDITIONAL MONTHLY THAT COULD BE PAID TOWARDS CONSUMERS DEBTS.
• OVER A 24 MONTH PERIOD THERE WOULD BE A R216,000.000 SAVINGS AND AFTER 60 MONTH PERIOD A R540,000.00 SAVINGS.
• IF VOLUMES WERE GIVEN TO THE SWITCHES, THE COST OF R8.40 PER DISTRIBUTION COULD BE FURTHER NEGOTIATED AND BROUGHT DOWN SUBSTANTIALLY.
STAKEHOLDERS
CONSUMERREQUIRE CHEAP AND
EFFECTIVE METHOD TO REARRANGE DEBTS
OBJECTIVE 3: TO IMPROVE THE DEBT REVIEW PROCESS FOR ALL STAKEHOLDERS
CREDIT PROVIDERSREQUIRE CHEAP AND
EFFECTIVE METHOD TO OBTAIN REPAYMENT
DEBT COUNSELLORSREQUIRE PROCEDURE TO PERFORM FUNCTIONS IN
TERMS OF THE NCA
NCRREQUIRE COMPLIANCEPROVIDE ASSISTANCE
RECORD KEEPING
CONSUMERS: FAIR TREATMENTCHEAPQUICKREARRANGEMENT AND RELIEF
DEBT COUNSELLORS: QUICK FAIR TREATMENTDEFINED RULESASSISTANCE
CREDIT PROVIDERS: QUICK CHEAP FAIR TREATMENTASSISTANCE
CONSUMERS ARE LOSING FAITH IN THE DEBT REVIEW PROCESS
DEBT COUNSELLORS ARE LOSING FAITH IN THE DEBT REVIEW PROCESS
CREDITOR PROVIDERS ARE LOSING FAITH IN THE DEBT REVIEW PROCESS
COMMON FEATURES
IN FINANCIAL DISTRESSEXPENSIVEFINANCIALLY UNEMPOWERED
NO SUPPORTSTRESSCHANGING ENVIRONMENT AND UNCERTAINTY
DELAYSNO SUPPORT EXPENSIVECHANGING ENVIRONMENT AND UNCERTAINTY
Lack of information
ROOT CAUSES OF WHY STAKEHOLDERS HAVE LOST FAITH IN THE DEBT REVIEW PROCESS
UNCERTAINTY DELAYS COSTS
Changing environment
Legal ProcessNo resolution process
Court processConflicting
information No rehabiliationCodes
AdverserialTerminations Termination costs
PDA’s
UNCERTAINTY
CAUSES:1.Alternative proposals outside of debt review2.Different arrangements with credit providers for similar debt3.Court process & terminations
SOLUTION:1.Enforcement of the provisions of the nca – no mixed interests2.Code setting out minimum standards applicable3.Proper resolution process to avoid court – ncr to perform function in terms of the act
PRACTICE:1.Offers to consumers to stay out of debt review or to mediate 2.Variation regarding norms – consumers with immovables targeted3.No assistance from ncr = litigation
CREDIT PROVIDERS TEAMING UP WITH DEBT COUNSELLING FIRMS
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Received: Aug 21, 2012 12:02Subject: FNB Home Loans have partnered with...
FNB Home Loans have partnered with DEBTBUSTERS to develop a home loan
solution for you. Contact DEBTBUSTERS 0861 663 328 or [email protected]
Old Mutual – “Our strategic partners' trained Debt Counsellors are registered with the National Credit Regulator and the Debt Counsellors Association of South Africa (DCASA)”
DELAYS 1CAUSES:1.Lack of information2.Adversarial3.Court process & terminations
SOLUTION:1.Enforcement - information2.Code setting out minimum standards for restructuring – parties will have a proper framework within which to negotiate - binding3.Delays in justice system, no proper mechanism to avoid court & costs
PRACTICE:1.No proper certificates of balance, no distinction between capital and interest 2.No proper communication process3.No assistance from ncr = litigation
REGULATORS RESPONSE TO PDA’S NOT DISTRIBUTING AS PER COURT ORDER
“ After many deliberations with the credit provider herein, they still refuse to reinstate the matter and responded as per the attached. The matter should then be referred to court and seek a remedy to enforce them to comply in terms of the order. Since the account was terminated due to pda not making payments in terms of the court order, I am still waiting for Snethemba of our office to provide me with their findings.Take note that unless you come your debt counselor provide the bank with a revised proposal, they will proceed to rescind the court order.Should you still feel that I am being biased in handling this file, you may proceed and contact my supervisor at [email protected].”
DELAYS 2
CAUSES:1.No resolution process – simply disputes can be resolved quickly 2.Pda’s – payment issues cause terminations3.Codes – no standard terms available, conflicting offers
SOLUTION:1.Quick and effective resolution process with feedback will cause number of referrals to decrease2.Properly monitored pda systems will prevent terminations3.Codes – standard structure allows for simplified negotiation and certainty
PRACTICE:1.Complaints to ncr ineffective, matters are resolved in court at cost2.No proper record keeping, no information available, incorrect payments3.No certainty with propsals or restructuring agreements
COSTS
CAUSES:1.Legal process – can become expensive if no prior ground rules2.Termination costs3.No rehabilitation
SOLUTION:1.QUICK AND EFFECTIVE RESOLUTION PROCESS WITH FEEDBACK WILL CAUSE NUMBER OF REFERRALS TO DECREASE2.PROPERLY MONITORED PDA SYSTEMS WILL PREVENT TERMINATIONS3.CODES – STANDARD STRUCTURE ALLOWS FOR SIMPLIFIED NEGOTIATION AND CERTAINTY
PRACTICE:1.IS COSTLY AND CAN TAKE TIME2.TERMINATIONS LEAD TO LITIGATION – EXPENSIVE FOR CONSUMERS – SECTION 86 (11)3.CONSUMERS ARE UNABLE TO RESTRUCTURE
UNITY AMONGST DEBT COUNSELLORS, CREDIT PROVIDERS
AND THE REGULATOR WILL MOVE THIS INDUSTRY FORWARD.