Editor’s note: “This article was first published in 2018 when Parliament approved the National Credit Amendment Bill. The provisions relating to debt intervention have since been signed into law. For up-to-date advice on credit, debt relief, or compliance with the National Credit Act, please contact KKA Attorneys.”

On 12 September 2018, the National assembly adopted the National Credit Amendment Bill 2018 (Committee Bill) after having debated in Parliament, this follows the adoption by the Portfolio Committee on Trade and Industry on 7 September 2018.  Speaking during the Second Reading Debate on the National Credit Amendment Bill on Debt Intervention, the Acting Minister of Trade and Industry (the dti), Ms Lindiwe Zulu indicated that the Bill is an amendment to the National Credit Act of 2005, which came into effect in 2007 with the aim to address and prevent over-indebtedness of consumers and ensuring an accessible, consistent, responsible and equitable credit market.

“The Bill provides relief for over-indebted consumers earning less than R7 500 with unsecured debt of not more than R50 000. It will directly address the plight of the poor and low-income workers who are over-indebted. It also intends to encourage and enforce responsible lending and borrowing,” said Zulu.

She added that the Bill introduces a new effective and accessible debt counselling and personal insolvency framework for over-indebted low-income consumers.  Additionally, she said that approximately 38% of 25 million credit active consumers have impaired credit records.

“The Bill provides a balance that addresses the needs of the consumers and promotes responsible borrowing by credit providers.  In addition, the Bill tackled some of the concerns of credit providers. It distinguishes between secured and unsecured credit in accordance with the Task Team Agreements entered into in 2010 by the National Credit Regulator and the credit providers to limit the reduction for interest on unsecured debt. Taking the repo rate into account ensures that banks will not be unfairly prejudiced by a reduction. This will form part of the regulations,” said Zulu.

Zulu added that the Bill will improve the collection of bad debt amongst over-indebted low income consumers by credit providers. In South Africa, approximately R879 million of bad debt is collected by credit providers through debt counselling on a monthly basis.