For a long time, South Africans have been warned about the out-of-control debt of our citizens. A lot of this responsibility has fairly been pushed back to credit providers, who in the past have allowed consumers to use up to 70% and 80% of their monthly income to repay debt. This practice is reckless and immoral, which is why the National Credit Act has been established

Last year, a draft bill giving the National Consumer Tribunal the power to extinguish debt in certain circumstances was published for public comment by Parliament's Trade and Industry committee, which formulated it. The South African Institute of Professional Accountants was one of many entities that made submissions on the draft National Credit Amendment Bill.

The initial proposed debt intervention bill sets out a process that both credit providers and credit bureaus must follow when they are lending money, but SAIPA's submission highlighted certain parts of the proposal that require further thinking and discussion.

In other words, a debt intervention applicant may apply once to the National Credit Regulator in the prescribed manner and form for a debt intervention, if that debt intervention applicant has at 24 November 2017, a total unsecured debt owing to credit providers of no more than R50,000.

The debt intervention targets relief from unsecured debt, specifically lower value loans to lower-income consumers.

According to the Act, credit providers will be tasked with reviewing all the credit agreements of the consumer from other credit providers. This would require the consumer to request these documents from all their current providers.

It is envisaged that this process alone may stagnate the industry as it will be very time consuming, for both borrowers and lenders. Once the consumer is in possession of these agreements, the prospective credit provider would then need to review each agreement and determine whether they were granted recklessly at the time when the credit was granted. With early assistance from Accord Debt Solutions consumers are ready to apply without delay. 

While some credit providers see the Act as negatively impacting the industry, it has the potential to bring the needed relief to financially stressed individuals that have no source and or reduced and or limited income to allow for provision of consumers and or consumers financial dependents necessary day to day expenses.

It is those financially stressed consumers that we WILL assist with our 18 years of Debt Mediation Re Structuring and Debt Management experience in terms of revised legislation.