Is it possible that in 2018 your debts may be written off?

Various interested parties have been working closely with the Portfolio Committee for over a year regarding this draft Bill. Written comments on the Bill were due by 15 January 2018 and public hearings are scheduled to take place on 30 and 31 January 2018 and 1 February 2018. The annual Christmas holidays and the fact that most people took some time off in December did not seem to deter the Portfolio Committee calling for comments on the draft bill by 15 January 2018. However, after some deliberation the Portfolio Committee graciously granted one week’s extension for written comments.

The preamble to the National Credit Act states unequivocally that the purpose of the National Credit Act was to promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and an accessible credit market industry. What this draft amendment Bill seeks to achieve is to provide a mechanism for, among other things, debt intervention. At first blush, the purpose of the draft Bill seems innocuous. After all, debt intervention could perhaps be interpreted as a mechanism aimed at assisting consumers, but not necessarily intervention to such extent that obligations owed by consumers to credit providers are extinguished. The preamble to the Bill does not provide for debt extinguishment, but this is exactly what this draft Bill seeks to achieve.

In simple terms, the draft Bill permits a person who as at 24 November 2017 earns less than R7,500.00 per month and who owes less than R50,000 in unsecured debt relating to Credit Agreements to make an application to the National Credit Regulator for debt intervention. The National Credit Regulator is tasked with determining whether the debt intervention applicant should be assisted or not. If the National Credit Regulator is of the view that the applicant requires assistance, a single member of the National Credit Tribunal can suspend all qualifying Credit Agreements in part or in full for a period of 12 months. If the financial circumstances of the applicant do not improve, the Tribunal can declare the debt under the qualifying Credit Agreements extinguished. All or part of the debt under the qualifying Credit Agreements can be extinguished.

This Bill in its current form will have far reaching consequences for credit providers in terms of the National Credit Act.

It cannot be disputed that a significant number of consumers are over-indebted. This is borne out by the fact that in excess of R40 billion was the subject matter of debt review in terms of the National Credit Act as at December 2016. Financial Institutions, during the 2016 calendar year, granted interest rate concessions in excess of R3 billion. Arising from the amendments to the National Credit Act in March 2015, debt in excess of R9 billion had been expunged and/or discharged.

This Bill has a second debt intervention aspect which is totally separate to the debt intervention referred to above. The Minister of Trade and Industry may prescribe debt intervention measures to alleviate household debt where an occurrence has constituted a significant exogenous shock that caused widespread unemployment, or there has been a regional natural disaster or something similar that is of enormous public interest. This debt intervention by the Minister is only applicable to indigent persons, consumers who earn less than R7,500, or persons who suffered unforeseen loss of income or who are subject to adverse conditions in a sector that has been identified by the Minister.

While this Bill seeks to assist a certain segment of the population that is over-indebted, one wonders what the reaction would be of a person who earns R7,510 and has debt marginally in excess of R50,000 who will not be assisted by the measures contemplated through this Bill. Similarly, the cut off line of 24 November 2017 will not be welcomed by a person, who on the 25^th November 2017, earned less than R7,500 and had unsecured debts less than R50,000.