CREDIT LAW REFORM 2004 WORKSHOP: PARLIAMENT: PORTFOLIO COMMITTEES

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CREDIT LAW REFORM 2004WORKSHOP
PARLIAMENTPORTFOLIO COMMITTEES

• INTRODUCTION

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SETTING THE SCENE

• Consumer Credit in South Africa includes a wide
  range of products.
• Such products include housing loans, personal
  loans, credit cards, retail credit leases,
  installment sales and micro-loans.
• Many different institutions provide Consumer
  Credit.
• These include banks, micro-lenders, retailers and
  other non-bank financial intermediaries.

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THE NEED FOR A REVIEW

• A number of reports have commented on the
  weaknesses in Consumer Credit legislation.
• These include the Law Commissions 1994 Review of
  the Usury Act the Strauss Report on Rural
  Finance and the National Small Business
  Regulatory Review by Ntsika Enterprises Promotion
  Agency in 1999 amongst others.
• Whilst the need for a review has long been
  recognised and certain changes to address
  specific problems have been made, a thorough and
  holistic assessment became essential.

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SOUTH AFRICAN CONSUMER CREDIT LEGISLATION

• Consists principally of the following
• The Usury Act, 1968 the Credit Agreements Act,
  1980 and the Exemption Notices, 1992 and 1999.
• Since 1968 many factors have impacted on the
  Consumer Credit market.
• These include significant political, social and
  economic changes combined with major
  technological advances.

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CRITICISMS OF A DYSFUNCTIONAL CREDIT MARKET

• Fragmented and outdated legislation
• Ineffective consumer protection
• High cost of credit and, in some areas, access to
  credit
• Rising levels of over-indebtedness and
• Reckless behaviour by some credit providers.

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REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION

• In March 2002, Dr Alistair Ruiters mandated a
  Technical Committee to undertake the review.
• The Technical Committee members were Prof.
  Roshana Kelbrick, Mr Moses Moeletsi, Dr David
  Porteous, Mr Kgosi Pule and Mr Gabriel Davel.
• During the course of the review extensive
  research was conducted into different aspects of
  the Consumer Credit market.

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REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION

• Research covered the following areas
• Consumer perceptions about credit products,
  credit providers and consumer protection
• The views of industry representatives, consumer
  representatives and other stakeholders on the
  current regulatory framework and
• A statistical and economic analysis of the
  Consumer Credit market.

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REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION

• The purpose of the review was to identify and
  analyse weaknesses in the Consumer Credit market
  and make proposals for a new regulatory
  framework.
• The review focus included

• Impediments in current legislation to serving the
  needs of the low-income personal finance market,
  housing and small business finance
• The treatment of small, medium and micro
  enterprises in new legislation
• Methods to make consumer protection effective
  and
• Examination of solutions to problems
  over-indebtedness.

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REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION

• Key issues addressed by the Technical Committee,
  in particular through the research conducted at
  their request
• Consumer views about credit providers and
  products such as,

• Should consumers be shielded from unsolicited
  credit, especially when the belief exists that
  this contributes to levels of over-indebtedness?
• How can credit legislation address the high
  levels of consumer dissatisfaction about levels
  of disclosure on the cost and terms of credit
  products?

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REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION

• Key issues addressed by the Technical Committee
• View of industry representatives and other
  stakeholders such as,

• Is it feasible to replace the current credit
  legislation with a single statute to apply to all
  transactions and to all credit providers?
• Will stronger enforcement address many of the
  problems current being experienced by consumers?

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REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION

• Report of the Technical Committee the findings
  and recommendations were handed to the dti in
  October 2003.
• After careful analysis, examination and
  consultation both within government and with
  stakeholders a policy framework was established.
• Cabinet approved the draft Consumer Credit Bill
  and policy framework in July 2004.
• The Consumer Credit Bill, 2004 was published in
  Government Gazette (No. 26678) on 17 August 2004.
• The policy document Making Credit Markets
  Work made available to stakeholders and
  interested parties.

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THE WAY FORWARD

• Consultation is at the core of the review
  process.
• Information Sessions held jointly in all nine
  provinces with Provincial Government during
  August and September 2004.
• Written submissions from stakeholders and
  interested parties to be carefully and
  open-mindedly analysed.
• Presentation of legislative and policy proposals
  to Parliamentary Portfolio Committees.

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THANK YOU
COMMENTS AND CLARIFICATION