Newsletter of the Credit Bureau Association - Edition No. 1

 

 

Meet the new agile Credit Bureau Association Let me start this note by saying, “Welcome, and thanks”. You are receiving this newsletter – our first! – as a valued stakeholder of the Credit Bureau Association (CBA). It has been a busy year, and we wanted to take the time to let you in on what we’ve been up to. Shortly after I joined the CBA as the new executive manager in June 2014, we moved offices to our new low-key, cost-effective space in The Oval Office Park, Bryanston. The smaller space is more than adequate for our needs, and also allowed us to reduce some of our running costs and overheads. This is just one of the steps we have taken towards ensuring we remain a cost-effective and efficient industry body. With efficiency in mind, we also reorganised the way in which our member workstreams were structured to try make the best use of members’ time. This has led to the consolidation of some streams, as well as to more efficient use of video and teleconferencing facilities. At the start of the year, we also bid farewell to our long-serving chairman Ramesh Pillay, and welcomed Geoff Miller as the new CBA chairman. Below you will find some of the highlights of the work we have been involved in. We know you’re busy, so we’ve kept it concise. If you would like more information on any of these initiatives, please get in touch. 2015: a year of robust, constructive  industry participation It may go without saying, but between the credit information amnesty and the publication of the amendments to the Credit Act, it has been an eventful 18 months in the credit space! We at the CBA have had plenty of excellent opportunities to participate in constructive discussion with our partners in credit and related fields, and we’ve jumped at the chance to take up as many of them as possible. On behalf of our members, the CBA engaged with the DTI and NCR on the Amendment act matters. We made our submissions and sought legal opinion on issues that have the potential to change the way in which the entire industry operates. To ensure we comply with these changes, we are busy reviewing our policy directives. We engaged with Department of Justice around the proposed changes to the Maintenance Act and the possible use of credit bureaus to trace maintenance defaulters. We made submissions to the NCR on the listing of medical info, and met with the NCR on debt review matters. We were also delighted to be asked to participate as a category judge in Debt Free Digi’s 2015 Debt Review Awards, an initiative endorsed by the NCR and all major players in that sector of the industry. We were invited to present at the first DTI credit conference on the impact of amnesty in September last year and again at the second conference at Birchwood on the new amendments in March this year. On an on-going basis, the CBA participates in a number of industry forums to ensure that we are able to represent members at all levels. We sit on the NCR CIF forum, and serve on the Credit Ombud council, where we were involved in the appointment of the new ombud. We are continuously engaging with the South African Credit and Risk Reporting Association (SACRRA, previously the Credit Providers Association) regarding how the industry deals with data. Finally, we continue to develop for Project Evolution compliance, and we expect to have all major data suppliers on board by June 2016.   Heads up   CBA members and other industry players can look forward to the appointment of the PoPI regulator in 2016. The CBA has drafted a proposed PoPIA code in anticipation of the appointment. As you are no doubt aware, we also welcomed a new Credit Ombud in 2015, Nicky Lala-Mohan.  Welcome, Nicky!     Featured in Face-to-face with credit consumers Consumer education, outreach and empowerment were some of our “mini missions” in 2014-2015; We wanted to address credit myths, help people empower themselves through knowledge, and understand what concerns real credit consumers had. We saw public events as an excellent way to do this. As a collective of the consumer information-holding bureaus, we took a stand at the 2014 Soweto Festival, issuing free credit reports to consumers. In 2015, we joined forces with SACCRA and the Credit Ombud on an event at Unisa campus in Pretoria in August. And we jumped at an invite from the National Credit Regulator to attend their Spring Day to provide NCR staff with access to their personal credit reports. In October, we also partnered with the NCR and the Ombud on a mall activation at Greenstone, where over 730 consumers were able to view their free reports and a lot of positive engagement, education and conversation happened.  Through our public relations and consumer outreach work, the CBA has been featured in print, online and broadcast media, helping us reach an even wider national audience, with touchpoints and takeaways aimed at different audiences and segments of South African society. For a taste of some of the media outlets we’ve appeared in, see “Featured in” (above right). Looking forward Even though the year is winding down, we aren't. We're working with the Department of Justice on adding maintenance judgements onto the bureau data in compliance with the new Maintenance Act Amendment Act, and with the Gauteng Rental Housing Tribunal to see how we can enrich bureau data with this information. With the new year in sight, the CBA is hard at work preparing our 2016 strategies, budgets, and reviewing the organisation's constitution and code of conduct. The latter we look forward to sharing with our members – along with any new codes and policy directives – at the CBA AGM early next year. Keep an eye on your inbox for more details, or contact us directly via the new, redesigned CBA website.

Credit Bureau Association · St Georges Building, The Oval Office Park, · 1 Meadowbrook Lane (Corner of Sloane Street), Bryanston, · Johannesburg, Gauteng 2192 · South Africa

Consumer Law Seminar: Financial Literacy and Balancing Responsibilities

24 August 2015, 11:00: Unisa Radio presentation on the role of credit insurance

 

The Constitutional Court revisits the in duplum rule

The Constitutional Court has recently revisited the in duplum rule in Paulsen and Another v Slip Knot Investments 777 (Pty) Ltd 2015 (3) SA 479 (CC). For an interesting perspective on the case, see http://www.derebus.org.za/interested-interest-debt-duplum-rule-revisited/

Seminar on being a responsible credit consumer - 28 July 2015

The Responsible Use of Credit-Community Engagement Project from the Banking Law Group in the Department of Mercantile Law recently hosted a seminar to create awareness amongst consumers on certain aspects of the management of their personal credit profiles (Twitter: @ConsumerHints).

Mr Lesiba Mashapa from the National Credit Regulator gave an overview of the National Credit Act and spoke about new developments such as the National Credit Amendment Act and recent cases regarding emolument attachment orders. Mr Des Power from the South African Credit and Risk Reporting Association spoke about building your own credit profile. He addressed several queries from the attendees regarding their current credit profiles. Mr Lee Soobrathi from the Credit Ombud gave an overview of consumer relief measures and addressed several queries related to non-banking credit and credit records. Ms Bridgette Caprin from the Credit Bureau Association spoke about credit information and credit bureaus.

During the breaks and after the seminar attendees had the opportunity to access and query their credit records.

Extracts from the seminar will be broadcasted on Unisa Radio on 3 August 2015 between 11:00 and 12:00 (Twitter handle: #CLAWMondays or follow Unisa Radio on Twitter - @UnisaRadio).

Emolument attachment orders under the court's scrutiny

The Western Cape High Court last ruled last week that emolument attachment orders in Anglo American’s Platinum legal battle against fees for salary deductions und unpaid debt were invalid. Judge Desai  delivered judgment against debt collectors and the way emolument attachment orders were managed. The court also ordered that a firm of attorneys be investigated by the Law Society for breaching its ethical duties for seeking out favourable courts to secure salary attachment orders.

 

In Amplats’ legal battle, the mining company argued that debt collectors and administrators cannot charge what they wish or circumvent the 12.5% cap in terms of the Magistrates’ Court Act by subcontracting their duties.

 

For more information see: http://businessday.newspaperdirect.com/epaper/showarticle.aspx?article=08f7aafa-bd54-46f7-ac0a-8ed91505778c&key=JfPun3%2fC2wte%2bDJ0rYuM4Q%3d%3d&issue=11062015071000000000001001.

 

Responsible Credit Management

 

 

Invitation for the public to comment on the draft regulations on review of limitations of fees and interest rates - National Credit Act

Invitation for the public to comment on the draft regulations on review of limitations of fees and interest rates: https://www.compuscan.co.za/wp-content/PDF/Draft-regulations-limitations-of-fees-and-interest-rates_20150625.pdf

Seminar: Applying for Credit in a Responsible Manner - 28 July 2015

We will be holding a seminar on 28 July 2015 and some of the confirmed speakers include the NCR, Credit Ombud and the Consumer Tribunal. Full details will follow in due course. The general theme for the seminar will be "Applying for Credit in a Responsible Manner". It will  be held on the UNISA Main Campus. 

What role does the National Consumer Tribunal fulfil in today's society?

Role of the National Consumer Tribunal: Online discussion

Listen online to Unisa Radio on 25 May 2015 between 11h00 and 11h30 for a discussion with Adv John Simpson (Member of the National Consumer Tribunal) on the role the National Consumer Tribunal is currently playing and how consumers can make use of the Tribunal.

Consumer Credit: Affordability Assessment

The Credit Affordability Assessment Regulations forms part of recent major amendments to the South African National Credit Act and its regulations. Before the amendments the National Credit Act did not prescribe how credit affordability  assessments should look. The Affordability Assessment Regulations intend to bring some clarity on how to calculate whether a consumer can afford credit. In the past many consumers were under-declaring their expenses in order to qualify for a loan causing many consumers to be over-indebted. The Affordability Regulations now set a minimum expenses norm per income category. Apart from that income needs to verified. The aim of the Affordability Assessment Regulations is therefore to prevent over-indebtedness of consumers and to prevent reckless credit granting.

 

The Affordability Assessment Regulations are unfortunately quite technical. The Regulations are summarised below and an example is used in an attempt to explain how an affordability assessment should be conducted (the National Credit Regulator needs to publish an explanation or guidelines).

 

Selected aspects of the Affordability Assessment Regulations under the National Credit Act

The National Credit Regulations including Affordability Assessment Regulations have been published in Government Notice R202 in Government Gazette 38557 of 13-3-2015. Chapter 3 of the Regulations has been amended by the insertion of Regulation 23A which deals with criteria to conduct affordability assessments in terms of the National Credit Act 34 of 2005.

 

Applications of the Credit Affordability Assessment Regulations (reg 23A(1) and (2))
The Regulations apply to current, prospective and joint consumers, credit providers and all credit agreements to which the Act applies.

The Regulations do not apply to a credit agreement in respect of which the consumer is a juristic person. They also do not apply to -

• a developmental credit agreement
• a school loan or a student loan
• a public interest credit agreement
• a pawn transaction
• an incidental credit agreement
• an emergency loan
• a temporary increase in the credit limit under a credit facility
• a unilateral credit limit increase under a credit facility
• pre-existing credit agreements
• any change to a credit agreement and/or any deferral or waiver of any amount under and existing credit agreement in accordance with section 95 of the Act
• mortgage agreements that qualify for the Finance Linked Subsidy Programs developed by the Department of Human Settlements and credit advance for housing that falls within the threshold set from time to time.

Framework
The following aspects must be assessed when a consumer applies for credit:

• Existing financial means and prospects
• Existing financial obligations
• Debt repayment history as a consumer under credit agreements 

Existing financial means and prospects (reg 23A(3)-(5) and (7))

• Practicable steps must be taken to assess the consumer or joint consumer's discretionary income to determine whether he or she has the financial means and prospects to pay the proposed instalments. The consumer has a duty to provide authentic documentation to the credit provider to enable the provider to conduct the affordability assessment.
• Practicable steps must be taken to validate gross income. If a consumer receives a salary, the latest three payslips or latest three bank statements showing the salary deposits must be considered. If a consumer does not receive a salary the latest three documented proofs of income or the latest three bank statements must be considered. When a consumer that is self-employed, informally employed or employed in a way that the do not receive a payslip of proof of income, the latest three bank statements or latest financial statements must be considered.
• If a consumer's monthly gross income varies from month to month, the average monthly income of not less than 3 pay periods must be utilised. 

Existing financial obligations (reg 23A (6) and (8)-(12))

• A credit provider must make a calculation of the consumer's existing financial means, prospects und obligations.
• The consumer has a duty to disclose accurately to the credit provider all financial obligations to enable the provider to conduct the affordability assessment.
• A credit provider must utilise the minimum necessary expense norms table (below), broken down by monthly gross income when calculating the existing financial obligations of the consumer.
• The credit provider must ascertain the gross income, the statutory deductions and living expenses to arrive at a net income, which can be allocated for payment of debt instalments.
• When existing debt obligations are taken into account, the credit provider must calculate discretionary income to enable the consumer to satisfy any new debt.
• When affordability is assessed, the credit provider must calculate the consumer's discretionary income and take monthly debt repayments obligations (as reflected on the consumer's credit profile held by a registered credit bureau), necessary expenses and maintenance obligations into account.
• The credit provider may on an exceptional basis, where justified, accept the consumer's declared minimum expenses which are lower than those calculated in terms of the minimum expense norms table, provided the questionnaire set out in Annexure A to the regulations, is completed by the consumer. 

Example - how to calculate affordability:

If X earns R10 000.00 per month and declares that his expenses are R1300.00 and the he has an existing debt repayment obligation of R2500.00.  The credit provider then has to apply the minimum expenses norms table to determine the consumer's existing financial obligations. When existing debt obligations are taken into account, the credit provider must calculate discretionary income to enable the consumer to satisfy any new debt

Necessary expense norms (the consumer's minimum living expenses as determined in accordance with reg 23A(9):

1. R10 000 (monthly income) – R6250.01 (less minimum income in the relevant band) = R3749.99

 

Monthly gross income	Minimum monthly fixed factor	Monthly fixed factor + percentage of income above band minimum
R0.00 to R800.00	R0.00	100%
R800.01 to R6250.00	R800	6.75%
R6250.01 to R25000.00	R1167.88	9%
R25000.01 to R50000.00	R2855.38	8.2%
R50000.01 to unlimited	R4905.38	6.75%

 

2.   9% on R3749.99 = R337.50

3.   R337.50 + R1167.88 (minimum monthly fixed factor) = R1505.38 (X's minimum expenses in terms of the necessary expenses norm table)

 

4.   Select the highest between the declared expenses (R1300.00) or expenses in terms of the necessary expenses norm (R1505.38) and deduct that from the income less statutory deductions and necessary expenses.

 

5.   R10 000.00 (gross monthly income) – R1500.00 (statutory deductions and other necessary expenses: PAYE, UIF, maintenance, medical aid, pension fund contributions) = R8500.00
 
6.   R8500.00 (monthly income less statutory expenses) – R1505.38 (expenses) = R6994.62 (allocatable income)

Calculating discretionary income

 

7.   Credit bureaux listed debts or debts declared should be deducted from the allocatable income to determine whether the consumer has money available to fund the proposed credit instalment: R6994.62 – R2500.00 (existing debt repayment obligation) = R4494.62 (discretionary income: amount available to fund proposed credit instalment).

Debt re-payment history as a consumer under credit agreements (reg 23A(13))
A credit provider must take a consumer's debt re-payment history as a consumer under credit agreements into consideration. The regulations provide for a relatively long period to conduct a credit check. In terms of the regulations the credit provider most consider a consumer's debt repayment history within 7 business days immediately prior to initial approval of credit or the increasing of an existing credit limit and within 14 business days with regards to mortgages.

Avoiding double counting in calculating discretionary income (reg 23A(14))
Where a consumer applies for on a substitutionary basis to settle on or more of his existing obligations, a credit provider must record that the credit being applied for is to replace an existing obligation(s) and the credit provider must take practicable steps to ensure that such credit is properly used to replace an existing obligation(s).

Outcome of affordability assessment (reg 23A(16)-(20)
If a consumer is aggrieved by the outcome of an affordability assessment, he or she may at any time lodge a complaint in terms of sections 134 or 136 with the credit provider for dispute resolution. The credit provider then has to attempt to resolve the complaint within 14 business days after receiving notice of the complaint from an ombud in terms of section 134. If the credit provider do not address the complaint within the prescribed period of time, the consumer may approach the National Credit Regulator, who must resolve the complaint within 7 business days. If the National Credit Regulator issues a notice of non-referral in response to the complaint, the consumer may refer the matter directly to the National Consumer Tribunal.

Consumer Goods and Industry Ombud

The Minister of Trade and Industry has prescribed the attached code (click on the link below) as the Industry Code for the Consumer Goods and Services Industry and has accredited the Consumer Goods and Services Ombud as an accredited industry ombud in terms of section 82(6)(b) of the Consumer Protection Act.

 

The Code can be accessed at: http://www.gov.za/sites/www.gov.za/files/38637_rg10407_gon271.pdf

  

To contact the ombud visit www.cgso.org.za or email info@cgso.co.za.

Selected aspects of the National Credit Amendment Act 19 of 2014

 

The National Credit Amendment Act 19 of 2014 has been published in Government Notice 389 in Government Gazette 37665 of 19-5-2014 and came into force on 13-03-2015.

 

What are the purposes of the amendment Act?

The purposes of the amendment Act are –

• to amend the National Credit Act 34 of 2005,
• to amend certain definitions in the National Credit Act 34 of 2005;
• to provide for the alteration of the governance structure of the National Credit Regulator;
• to empower the Chief Executive Officer to delegate certain functions to other officials of the National Credit Regulator;
• to provide for the registration of payment distribution agents;
• to tighten measures relating to debt counsellors and the conduct of their practices as debt counsellors;
• to allow registrants to voluntarily cancel their registration;
•  to empower the Minister to issue a notice for the removal of adverse consumer credit information; to provide for automatic removal of adverse consumer credit information;
• to empower the National Consumer Tribunal to declare a credit agreement reckless;
• to provide for the registration and accreditation of alternative dispute resolution agents; and to provide for matters connected therewith.

Changes to definitions (a selection)

The definition of 'mortgage' has been replaced.  The new definition provides that a mortgage is a mortgage bond registered by the registrar of deeds over immovable property that serves as continuing covering security for a mortgage agreement.

 

A 'mortgage agreement' is defined as a credit agreement that is secured by the registration of a mortgage by the registrar of deeds over immovable property.

 

The National Credit Amendment Act has introduced 'payment distribution agents'. A 'payment distribution agent' is a person who on behalf of a consumer that has applied for debt review, distributes payments to credit providers in terms of a debt re-arrangement, court order, order of the Consumer Tribunal or an agreement.

 

The definition of 'prohibited conduct' has been amended. 'Prohibited conduct' is defined as an act or omission in contravention of the Act.

 

The second part of the definition of 'secured loan' has been amended.  A secured loan is defined as an agreement, irrespective of its form but not including an instalment agreement, in terms of which a person (a) advances money or grants credit to another, and (b) retains, or receives a pledge to any movable property or other thing of value as security for all amounts due under that agreement. 

 

Registration of credit providers: threshold requirements

In terms of the amended section 42 the Minister, by notice in the Gazette, must determine a threshold for the purposes of determining whether a credit provider is required to be registered as a credit provider in terms of section 40.

 

Payment distribution agents

Section 44A has been inserted in the Act.  It provides for the registration of payment distribution agents. Section 44A provides that a person may apply with the National Credit Regulator to be registered as a payment distribution agent and that a person must not offer or engage in the services of a payment distribution agent, or hold themselves out as being authorised to offer such services, unless the person is registered as payment distribution agent. A consumer is not obliged to use the services of payment distribution agent.

 

These agents must comply with education, experience or competency requirements (and the requirements of section 46).  They must also maintain fidelity insurance and trust accounts and submit financial accounts as may be required by the National Credit Regulator for purposes of a financial audit.

 

Credit providers are not permitted to have any direct or indirect interests in the management or control or the business operations of a payment distribution agent (or debt counselling business).

 

Disqualification of natural persons (section 46)

The disqualification of certain natural persons applies to credit providers, debt counsellors and payment distributions agents. If a natural person is, for example, an unrehabilitated insolvent, her or she may not register as credit provider, debt counsellor or payment distribution agent.

 

Application for registration as credit provider (section 48)

The amended section 48, among others, provides that if a person qualifies to be registered as a credit provider, the National Credit Regulator must further apply the criteria prescribed in section 48, which include the commitments, if any, made by the applicant in connection with combating over-indebtedness and compliance with a prescribed code of conduct as well as affordability assessment regulations made by the Minister on the recommendation of the National Credit Regulator.  Section 48 empowers the Minister to prescribe criteria and measures to determine the outcome of affordability assessments provided for in section 48.

 

Automatic removal of adverse credit information (section 71A)

Section 71A was inserted into the Act.  It makes provision for the automatic removal of adverse credit information.  It, amongs others, provides that the credit provider must submit to all registered credit bureaux, within seven days after settlement by a consumer of any obligations under any credit agreement, information regarding the settlement where an obligations under such credit agreement was the subject of an adverse classifications, an adverse listing or a judgment debt. The credit bureaux must then remove any adverse listing within seven days after receipt of information regarding the listing from the credit provider.

 

Suspension of reckless credit (section 83)

The heading of section 83 ("Court may suspend reckless credit") has been substituted by the heading, "Declaration of reckless credit". In terms of the amended section 83 any court or Tribunal may in proceedings in which a credit agreement is being considered, declare that a credit agreement is reckless. In terms of the amended section 136 a complaint concerning an allegation of reckless credit may be submitted to the National Credit Regulator.

 

Termination of an application for debt review (section 86)

Section 86(10) and (11) of the Act have been substituted. The amended section 86(10)(b) provides that no credit provider may terminate an application for debt review lodged in terms of the Act, if such application for review has already been filed in a court or in the Tribunal.

 

Prohibited charges (section 100)

Section 100 has been amended by the addition of subsection 3 that provides that a person who contravenes section 100 by charging prohibited charges is guilty of an offence.

 

Sale of prescribed debt (section 126B)

Section 126B has been inserted in the Act.  It provides that no person may sell a debt under a credit agreement to which the Act applies and that has been extinguished by prescription under the Prescription Act 68 of 1969.  No person may continue the collection of, or re-activation of debt which has been extinguished by prescription and where the consumer raises the defence of prescription, or would reasonably have raised the defence of prescription had the consumer been aware of such a defence, in response to a demand, whether as part of legal proceedings or otherwise.

 

Required procedures before debt enforcement (section 129)

Section 129 has been amended. The substituted subsection 3 provides that subject to subsection (4), a consumer may at any time before the credit provider has cancelled the agreement, remedy a default in such credit agreement by paying to the credit provider all amounts that are overdue, together with the credit provider's prescribed default administration charges and reasonable costs of enforcing the agreement up to the time the default was remedied.

 

Subsection 5 has been inserted in the Act.  It provides that the notice contemplated in subsection (1)(a) of the Act must be delivered to the consumer by registered mail or to an adult person at the location designated by the consumer.

 

The consumer must in writing indicate the preferred manner of delivery contemplated in subsection 5. Proof of delivery contemplated in subsection 5 is satisfied by—

• written confirmation by the postal service or its authorised agent, of delivery to the relevant post office or postal agency; or
• the signature or identifying mark of the adult person at the location designated by the consumer. 

Registration and accreditation of alternative dispute resolution agents (section 134A)

Section 134A was inserted in the Act.  It provides that the National Credit Regulator must register and accredit alternative dispute resolution agents.

-- PN Stoop --

How to budget

Are you uncertain what a budget is or how to set one up. Download Debtsafe's budget template at: http://www.debtsafe.co.za/free-debtsafe-budget-template/ 

Remember that your budget is a valuable tool on the road to financial freedom and independence. 

Tax amendments addressing the low levels of household savings in South Africa

SINCE government wishes to address the low level of household savings in South Africa and SINCE government is desirous of allowing providers of financial products to market financial products in a manner that creates a partnership between government and those providers of financial products to encourage household savings, the following legislation has accepted:

Section 12T of the Income Tax, 1962, and regulations are enacted to enable providers of financial products to provide financial products that are simple to understand; that are offered in a transparent manner; carry fees and charges that are reasonable; and that are suitable for those persons who are not necessarily expert investors.

 

For the regulations on tax free investments see: http://www.gov.za/sites/www.gov.za/files/38509_rg10372_gon172_0.pdf

Reckless lending continues in South Africa

Then percentage of consumers with adverse credit bureau listings increased with 48% in the last quarter of 2014.

For a recent report on reckless credit lending in SA and for recent statistics see the following article published by Angelique Arde: http://iolmobile.co.za/#!/article/reckless-lending-continues-unabated-1.1818082

Draft affordability assessment criteria

As part of its plan to curb reckless credit lending the South African Department of Trade and Industry is working on a set of affordability assessment criteria to be published as regulations under the NCA. That is because credit providers must, before granting credit, conduct an affordability assessment.

See the following links for more information on the draft affordability assessment regulations: 

• http://www.sanews.gov.za/south-africa/dti-publishes-draft-affordability-assessment-regulations; 
• https://www.kpmg.com/ZA/en/IssuesAndInsights/ArticlesPublications/Financial-Services/Documents/Draft%20National%20Credit%20Regulations%20for%20Affordability%20Assessment.pdf/. 

Your rights on attached debt

Do you want to know how an emolument attachment order works? Read this explanation published on Moneyweb's website: http://www.moneyweb.co.za/moneyweb-financial/your-rights-on-attached-debt.

Solidariteit Finansiële Dienste se finansiële wenke vir 2015

http://maroelamedia.co.za/blog/goeiegoed/wenke-vir-persoonlike-finansiele-bestuur-in-2015/

Tips for distressed home owners

Remax (South Africa) recently published the following tips for distressed home owners: http://blog.remax.co.za/news/distressed-homeowners-there-are-options/