South African Retail Conference
South African Consumer Credit Outlook and Legislation presentation by: Ms Nomsa Motshegare, NCR CEO
Date: 7 October 2014
NATIONAL CREDIT REGULATOR
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OVERVIEW OF PRESENTATION
Current Credit Landscape
Consumer Credit Health
Household and Consumer Debt
Current Challenges in the Market
Debt Counselling Stats
National Credit Amendment Act, 19 of 2014
Cross Boarder issues
Conclusion
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Credit Providers
Credit Providers = +4550
Credit Bureaus
22.12 million Credit Active Consumers
Debt Counsellors
Credit Bureaus = 14
Debt Counsellors = +2130
The current credit landscape
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CONSUMER CREDIT HEALTH
• The pattern of increasing household debt in South Africa is very
similar to the global experience.
• “Consumer Credit Health Deterioration moderates in 1st Quarter
(TransUnion Consumer Credit Index)”: The TransUnion SA
Consumer Credit Index (CCI) increased to 49.4 in Q1 2014 from
a revised 48.9 in Q4 2013 (preliminary 47.2); Q1 2013: 45.1.
• Likely contributors to this are a combination of the following: loan
term restructuring, slow rates of unsecured lending (Dec. 2012 y-
o-y increase was 47%; for June 2014 y-o-y increase is at 2.56%
and more prudent debt book management by credit providers.
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Disbursement vs. Outstanding Debtors Book - Grand Total
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Percentage distribution of disbursement per credit type
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HOUSEHOLD DEBT TO DISPOSIBLE INCOME
• Household debt to disposable income in SA is still high, even though
the overall household indebtedness is actually down from its early
peaks: Q4 2008: 81.9% and this fell to 74.3% in Q4 2013 but slightly
rose to 74.5% as at the Q1 of 2014;
• Indication that large portion of household incomes still goes to
servicing debt. Thus it is important to contain this especially since it
is vulnerable to interest rate increases.
CONSUMER INDEBTEDNESS: Quarter ended June 2014
• Impaired consumers – 45%
• Impaired records – 26.8%
HOUSEHOLD AND CONSUMER DEBT
The current credit landscape…performance of
consumers
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- Consumers with impaired records increased in June 2014, the majority of which are 3 or more months in
arrears
- Consumers still showing elements of debt stress, the effects of the removal of adverse information only to be
effective if consumers continue to service their debts
The current credit landscape…performance of
consumers
The current credit landscape…the
performance of accounts
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- Accounts with impaired records increased in June 2014
Some current challenges in the market
Inadequate affordability assessment
Growing number of consumers with
impaired credit records
Excessive pricing of credit life insurance
Previous unprecedented growth in
unsecured credit (effects of growth in
unsecured credit still being felt now)
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DEBT COUNSELLING STATS (APRIL TO AUGUST 2014)
ITEM FIGURES
APPLICATIONS
No. of applications(current financial year) 58400
Monthly no. of apps on average(current financial year) 11680
Court orders granted(cumulative) 84480
Clearance certificates issued(cumulative) 6139
ITEM FIGURES
PAYMENT DISTRIBUTION Distributions(current financial year)
R1.9 billion Distributions(cumulative)
R17.8 billion
NOTE: Cumulative figures are from inception to date
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NATIONAL CREDIT AMENDMENT ACT, 19 OF 2014
• In 2010 the dti conducted an analysis of the policy of the NCA with
the objective of identifying any implementation challenges.
• The necessary amendments have been incorporated: on 19th of
May 2014, the State President assented to the National Credit
Amendment Act.
KEY AMENDMENTS
• Payment Distribution Agents, Alternative Dispute Resolution Agents
and small credit providers will be registered by the NCR;
• Debt counsellors to issue clearance certificates to consumers where
consumer paid up all other debt other than mortgage agreement;
• The affordability assessment regulations;
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NATIONAL CREDIT AMENDMENT ACT CONTINUED
KEY AMENDMENTS CONTINUED
Improving Standard of Service and Procedures for Debt
Counsellors;
Automatic removal of Adverse Consumer Credit Information +
Paid Up Judgements;
Reviewing the cost of credit life insurance to be capped
The extension of the Tribunal’s powers to pronounce on reckless
loans.
Collection and selling of prescribed debt prohibited
Review of Interest and fees
CROSS-BOARDER ISSUES
Many companies operating in other countries such as the US, UK, Australia,
Mauritius opened offices in South Africa
Their business models not in line with the National Credit Act and have
caused problems in the South African credit market
There is a need for a co-ordinated approach to cross-border regulation and
enforcement
NCR is proposing a formal international forum to discuss and formalises
processes for cross border co-operation
Meetings will be scheduled with regulators
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CONCLUSION
SA Economy is challenged by slow growth, high unemployment &
over indebted households according to the Medium Term
Expenditure Framework. • Robust culture of savings to be developed;
• Targeted consumer education campaigns + financial literacy programmes: -
improved understanding of credit savings & investment options to better take
care of their financial future;
• Visible enforcement
Proposed component for a response to consumer debt stress: • National awareness and education campaigns – we also need to educate
consumers to be responsible borrowers.
• Debt counselling support to ensure it is an effective intervention
There is still a long arduous journey ahead
Lets us work together to make SA a better place to restore the
dignity of especially the poor and marginalised.
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Thank You!
www.ncr.org.za
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