Good news for deeply indebted South Africans.
Banks and other credit grantors will no longer be able to hoodwink people who are under debt review to opt out in favour of voluntary debt mediation stripping them of their legal rights and placing their property at risk of repossession.
In a statement issued on Thursday the NCR withdrew the so-called Debt Counsellors’ Code of Conduct.
They also suspended recognition of a number of industry bodies such as the Credit Ombud and the National Debt Mediation Association on the grounds that they had acted contrary to the provisions of the National Credit Act.
“The so-called regulations as well as the creation of a Credit Ombud were nothing more than an effort to subvert the power of the National Credit Regulator and its task to implement the letter and the spirit of the National Credit Ac. It also made it easier for credit grantors, especially banks, to strip indebted people under debt counselling of their assets,” said Neil Roets, CEO of Debt Rescue, a national debt counselling firm.
In the statement, the NCR stated that it had determined that the Debt Counsellors’ Code of Conduct for Debt Review had deprived debt counsellors of their constitutional right to freedom of association by requiring them to affiliate to the Debt Counsellors’ Association of South Africa (DCASA).
“It also contains provisions which are contrary to the provisions of the National Credit Act by conferring excessive jurisdiction to the Credit Ombud with regards to implementation, monitoring and reporting on the Code.”
The NCR said that following a review of the Code of Conduct of Credit Providers to Combat Over-Indebtedness, the Debt Counsellors’ Code of Conduct for Debt Review and the Payment Distribution Agencies’ Code of Conduct for Debt Review it had been decided to declare them invalid because they acted contrary to the rules and regulations of the National Credit Act.
Roets said the determination by the NCR that the Credit Providers’ Code of Conduct to Combat Over- Indebtedness had failed to achieve over-indebtedness had long been a known fact in the industry.
“We know that over the last three quarters as well as the long term, debtors had been falling further behind in repaying their debts and their overall debt burden had grown.”
The NCR statement revealed that 47% of credit active consumers – a total of 9.22 million consumers – are credit impaired and have at least one account three or more months in arrears. In addition, approximately 6,400 consumers continue to apply on a monthly basis for debt counselling
“The rapid growth in unsecured lending, by especially the large banks, in a highly credit impaired environment, is something many in the debt counselling industry have long been concerned about. We know from a statement issued by African Bank this week that 25% of their micro loans are in default,” Roets said.
The NCR statement said that it had determined that the National Debt Mediation Association (NDMA) had failed to report annually to the NCR as required by the Code. It added that NCR had also determined that the Payment Distribution Agencies Code of Conduct for Debt Review contained provisions contrary to the National Credit Act.
“The National Debt Mediation Association was a monster that was entirely created for the benefit of major credit grantors to deprive indebted consumers from the protection they enjoyed under the debt counselling process. The fact that the NCR has withdrawn its recognition of the NDMA, DCASA, PDASA (Payment Distributions Association of South Africa) and the Credit Ombud is a major step forward for consumers and the debt counselling industry as whole,” Roets said.