Where is the national credit regulator?

Regulation of consumer credit providers and the debt review process both fall under the ambit of the national credit regulator (NCR) — which can refer instances to the national credit tribunal (NCT). This is based on the provisions of the National Credit Act.

One question that frequently crops up is whether "reckless lending" is sufficiently defined in the act to curtail such practices, and to enable the NCR to act against lenders that flout the rules. "The challenge with the reckless lending laws is that they are difficult for the man in the street to enforce," says Summit Financial Partners CEO Clark Gardner. "[They] leave much to interpretation, and thus require complex court intervention that will set one back significant legal fees, and much more in the event of a loss."

Given this, he says, consumers find themselves "up against lenders with deep pockets to hire the best counsel".

He adds: "The litigant takes all the risk in challenging reckless lending or any similar unscrupulous practice, as the lender finds technical aspects in the form of exceptions, locus standi, process or joinder motivations to postpone or dismiss these cases before the merits are heard."

He also feels that the NCR is dropping the ball on many cases put before it, calling the NCR "Summit’s biggest obstacle" in efficiently and effectively enforcing the act on behalf of consumers. "The NCR and NCT were established in order to escape costly and time-consuming court processes, enabling access to justice for the consumer. Unfortunately, however, all but one of our thousands of complaints submitted to the regulator have been dismissed — and in a few significant cases, only dismissed after a two-year investigation by the regulator.

"The regulator delays, opposes or dismisses our cases, making our job of protecting consumers ... that much more difficult. It is definitely not a case of insufficient budget but rather a lack of purpose, of commitment towards this cause as a result of poor leadership."

Nthupang Magolego, senior legal adviser at the NCR, says that’s a "completely unfair statement". She points to the statistics in its last annual report (2016): the NCR received 76,000 calls and 8,000 written inquiries. "In the same year, more than 5,000 complaints were received and 86% of them were resolved. Approximately R2m in refunds to consumers was secured," the report says.

It’s a huge volume to process with a relatively lean staff — about 150, she says. "Yes, we are not exaggerating the fact that we are underresourced, but complaints have to comply with some basic compliance issues."

According to Magolego, a typical example of a complaint that would be sent back to the complainant is where a third party is lodging the complaint, but doesn’t have (or doesn’t provide evidence) of their authority to do so.

"If we investigate a complaint that is not properly lodged, when we go to the tribunal the big credit providers fight us on these technicalities. Those are the little things that some people who bring complaints to us don’t do, and these become the technical points that are raised against us," she says. "We truly do take [our] mandate seriously. We recognise that it really does affect people, not just economically but socially. We receive calls every day from consumers crying, consumers who are suicidal, because of [their debt]. So we take it very seriously."

If the draft amendment bill is enacted, that administrative burden on the NCR will increase significantly. Specifically, the bill suggests that overindebted consumers would apply to the NCR for the debt intervention afforded in the bill. The NCR would then assess whether the consumer qualifies, and can submit the case and a recommendation to the NCT. The tribunal would then apply one of several options — such as limiting fees, interest and charges — to alleviate the debt burden over time. At the end of this period, if the applicant’s financial position has not improved, the NCT may apply that final debt-extinguishing provision.

Katherine Gibson, treasury’s senior adviser for financial inclusion and market conduct, says the potential volume of debt intervention applications and the NCR’s capacity to handle it is an important consideration, but that it will depend on how that process is defined. "There is going to be a significant operational impact on whoever implements this, and there is necessarily going to be a funding impact that’s related to that. I think operational implementation is critical and it cannot be underestimated.

"That is why who can apply and what process they will go through is so important. We must design that in a way that streamlines the decision making and reduces subjectivity," she says.

Until the final version is tabled, stakeholders on both the activist and credit provider sides remain concerned. "There are not enough people to deal with the volumes currently. If this bill is passed, it’s going to flood the offices of the regulator and tribunal," says Eugene Bester, a director in Cliffe Dekker Hofmeyr’s dispute resolution department.

Gardner agrees: "We are involved in trying to influence some key changes to this bill. We strongly disagree with placing the responsibility of implementing these solutions at the current regulator, and believe it will be a failure if done. One needs to amend the law [in a way that] evens out the balance of power between deep-pocketed lenders and the consumer."

Read more about the over-indebtedness of SA consumers.