The National Credit Amendment Bill (the Bill) is set to become law after President Ramaphosa signed the Bill into our legislation in August 2019. The Bill reiterates the purpose of the National Credit Act namely, to promote and advance the social and economic welfare of South Africans; to promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market industry; and to protect low-income South Africans.
The Bill came about due to categories of consumers who do not benefit from the current protection offered to insolvent natural persons, or who cannot access the current insolvency measures due to the “advantage of creditors” requirement or due to the excessive costs attributable to insolvency procedures. It is not only a challenge for such consumers to manage or improve their financial position, but it also amounts to unfair discrimination on socio-economic grounds. In order to address these discrepancies, the Bill aims to introduce new concepts such as “debt intervention”, “debt intervention applicant” and “total unsecured debt” into our Law of Insolvency.
For purposes of this article, those referred to as the “debt intervention applicant” includes any natural person or natural persons who own a joint estate and which on the date of submission of the application meets the following requirements regarding their debt in terms of section 86A –
- is a consumer under an unsecured credit agreement, unsecured short-term credit transactions or unsecured credit facilities only;
- receives no income, or receives income, regardless of the source, frequency or regularity, that on average the last 6 months, does not exceed R7 500 per month;
- is over-indebted, whether due to a change in personal circumstance or other circumstances; and
- is not sequestrated or subject to an administration order.
Several modifications and additions have been brought by in terms of this Bill. Section 15A(1) states that the functions of the National Credit Regulator include, the process of assisting the appellant with the processes to be followed, to rearrange its obligations, or the obligations of the joint estate, to consider its application in terms of section 87A or to consider its application for rehabilitation as contained in section 88B by the Tribunal. In terms of section 86A(1), a person is eligible for a debt loan if the total unsecured debt owed to the credit provider is not exceeding R50 000, or an amount as prescribed by section 171(2A)(b).
Section 86A(12) provides for a revision of section 87A after 4 years from the enactment of the National Credit Amendment Act to determine whether it will be of assistance to the debtors, followed with a report to be issued which determines whether it will be beneficial or not, after which it will be reviewed.
In terms of section 87A(2) the Tribunal may make an order that denies the application or suspends the credit agreement partly or fully for a period of 12 months with regard to all relevant factors or requires the debt applicant to attend a financial literacy program.
Section 88A and 88B determine the effects of debt implementation and rehabilitation. With reference to the former, an applicant may not enter into further credit agreements except a consolidation agreement with a service provider. In terms of the latter, an applicant may apply in the prescribed manner to the National Credit Register to be granted a rehabilitation order by the Tribunal.
Lastly, section 85 of the Bill now states that the Court, when considering a credit agreement, may refer the matter directly to a debt counsellor, who must evaluate the circumstances and make clear whether the consumer has an excessive amount of debt and thereby relieves such debt in terms of section 87, or whether the consumer is seeking to participate in debt intervention.
by Darren Swartz
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).