“The Debt Intervention Bill” signed into law
21 Oct 2019
The National Credit Amendment Bill (“the Bill”), referred to in the press as the “The Debt Intervention Bill”, was signed into law in August 2019 by President Cyril Ramaphosa. The Bill is geared to advance the objectives of the National Credit Act 2005 (“NCA”), which includes the promotion of a fair, transparent, competitive, sustainable, efficient, effective and accessible credit market. To this extent, the Bill seeks to provide greater relief to over-indebted consumers by providing a mechanism for, amongst other things, debt intervention.
The NCA introduced a debt review process as an alternative mechanism to sequestration, in terms of which, debt counsellors registered with the National Credit Regulator (“NCR”) assess a consumer’s debt and help restructure a debt repayment plan. Debt counsellors would assist consumers by renegotiating interest rates with credit providers and extending repayment terms. This process is important for consumers as they are prohibited from consolidating existing debt or obtaining further credit once placed under debt review.
Due to the costs involved in the debt review process, there are categories of low-income earning consumers who are unable to access the debt review process or current insolvency measures. The Bill recognises this issue and intends to provide an alternative mechanism for access to debt relief without incurring any further costs. Accordingly, the Bill has introduced the concept of debt intervention.
To qualify for debt intervention in terms of the Bill, the applicant must meet the following requirements:
- the applicant must have accumulated debt of not more than R50 000;
- the debt must have arisen under unsecured credit agreements, unsecured short-term credit transactions and/or unsecured credit facilities; and
- the applicant must receive no income, or if the applicant does receive an income (regardless of the source, frequency or regularity), the gross income may not exceed an average of R7 500 a month for the preceding six months.
Upon receiving an application for debt intervention, the NCR is tasked with determining whether the applicant should be assisted or not.
In terms of the Bill, if the applicant meets the requirements for debt intervention but fails to have sufficient assets or income to satisfy its re-arranged obligations, the NCR must refer the matter to the National Credit Tribunal (“Tribunal”). The Tribunal is empowered to, inter alia, suspend all of the applicant’s obligations in terms of the qualifying credit agreements in part or full for a period of 12 months, which period may be extended for a further 12 months.
Consequently, the Bill has effectively provided the Tribunal with the power to expunge qualifying consumers from their debt obligations even though the Bill does not specifically cater for debt extinguishment.
In addition to the debt intervention measures created, the Bill also gives the NCR significant powers to suspend reckless credit agreements and directs debt counsellors to report suspected reckless credit agreements to the NCR.
Despite the Bill’s intention to further the objectives of the NCA, the Bill has been met with criticism. In particular, the banking sector has vocalised its concerns that the Bill may have a detrimental impact on the economy and that low-income earning consumers may be subject to higher credit costs and stricter lending controls to account for their high risk, which will result in it being more difficult for low-income consumers to access fair credit.
Credit providers are urged to seek appropriate legal advice before granting or amending any existing credit arrangements with consumers to avoid falling foul of the Bill and the NCA.
- Is an acknowledgment of debt regulated by the National Credit Act?
- Are credit providers over-charging on the credit they provide?
- Vendor financiers risk right to claim purchase price in the event of a default on payment
- New requirements for waiving debt owed by dormant group companies