Consumer And Corporate Regulation Division

Presentation to Stakeholders on the Implementation of the NCAA and its Regulations 17 February 2015

Presenter

Siphamandla Kumkani Director: Credit Law and Policy

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Purpose To brief the Stakeholders on the implementation of the National Credit Amendment Act (NCAA) and its Regulations.

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Draft Regulations

The National Credit Amendment Act (NCAA) signed into law by the President on 19 May 2014.

Identified sections in the NCAA needing implementation through Regulations. • A team of legislative drafters and policy makers constituting of officials from the National Credit Regulator (NCR) and National Consumer Tribunal (NCT) was assembled.

From 30 April 2014, the dti, NCR and NCT jointly consulted with targeted stakeholders such as credit providers, payment distribution agents and financial institutions in order to test the market. NCR submitted an official communication to the Minister dated 15 July 2014 as required by the Act, as amended recommending that

these guidelines should be issued as Regulations.

• The reaction was cordial as stakeholders submitted inputs that assisted the team in finalizing its first draft. Several meetings ensued where the team conferred with each other as the draft regulations would be dealing with issues pertaining to: • Affordability assessment.

• Registration of payment distributions agents.

• Determination of a threshold dealing with registration of credit provider.

• Training requirements for payment distributions agents, credit providers and debt counsellors. These would be prescribed by the Minister in terms of the Act, as amended.

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Draft Regulations

• Under Notice R597 on 1 August 2014.

• for a period of 30 days.

• Closing date for the public to comment 2014 .

on the draft Regulations was 31 August 1. Draft Regulations published for public comments 2. Special Consultative Meetings were held from 11 August 2014 to 27 August 2014 with key stakeholders (outlined below): 3. Approximately 37 public comments were received. 4. Workshop on the impact of the NCA Regulations • Public comments are being analysed.

• Regulations will be published for implementation within Q3 of 2014/15.

• was held on 16 September 2014 • with all the stakeholders/representatives of the below organisations.

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Summary of Provisions in the Draft Regulations

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Maintenance Payments South African Social Security Agency (SASSA) Grant Verification of Financial Means Revelation of Costs of Credit

• Definition of allocatable income is amended to include maintenance payments towards children and those adults that are entitled to it.

• This change will ensure that maintenance payments will be taken into account as part of the affordability assessment regulations.

• credit providers to conduct affordability assessment tests in line with the Regulations.

• R800.00 has been set as a minimum amount.

• Credit providers to take practical steps to verify the existing financial means, obligations and prospects of consumers or joint consumers applying for credit before extending any such credit to consumers.

• Disclosure by credit providers of the cost of credit to enable consumers to know in advance how much they will be required to pay for their credit transactions.

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Determination of a Threshold on Credit Provider Registration

• proposed that the threshold is set at R1.00. This is the minimum amount which will ensure that everyone who is extending credit in whatever manner will be subject to regulation in terms of the Act, as amended.

• This will also include regulating the loan sharks, who previously evaded the application of the Act by reason of Section 42 of the Act, as amended. The court judgement led Parliament to empowering the Minister to determine the threshold on the credit providers’ registration.

Registration of Payment Distribution Agents Criteria in Conducting a “Fit and Proper Test”

• Currently, payment distribution agents are in the debt review equation through service level agreements entered into with the National Credit Regulator.

• These regulations here will be aligned to Section 12 of the Act, as amended, to provide for registration of these payment distribution agents and to further stipulate requirements that they have to comply with for registration purposes.

• These criteria, amongst other things, provide that no registration will take place if a person has been found guilty in criminal or civil proceedings or his/her licence granted by the National Credit Regulator or any other regulatory authority withdrawn.

• Further, any person who has an adverse finding against his/her name on any financial misconduct or fraud will not be eligible for registration in terms of this Act, as amended.

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Criteria for Registration, and Fees

• For the purposes of these regulations, “registrant” refers to “payment distribution agents”, “credit providers” and “debt counsellors”.

• Draft Regulations prescribe requirements such as qualifications, experience and knowledge that is needed for the registration of registrants.

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Applicable Fees

Criteria for Registration, and Fees cont…

• For the purpose of registration and renewal, PDAs are required to comply with the following registration fees: • A non-refundable application fee of R500 payable upon submission of the application form; Initial registration fee of R100 000.00; Branch fee of R250 per location or premises; Registration renewal fee of R100 000 payable annually by the date of anniversary of the registration • For the purpose of registration and renewal, ADRs are required to comply with the following registration fees: • A non-refundable application fee of R500 payable upon submission of the application form; Initial registration fee of R50 000.00; Branch fee of R250 per location or premises; Registration renewal fee of R50 000 payable annually by the date of anniversary of the registration.

Training Requirements

• Regulation 14 prescribes requirements and standards for tailor made training for PDAs; Das. Training will cover arrears such as: • Financial and Business management; • Governance and compliance; • Accounting and Customer service 10

Prescription of Consumer Credit Information held by Credit Bureaus

• These regulations provide that any information relating to a debt that has extinguished in terms of the Prescription Act, 1969 (Act 68 of 1969) may not be submitted to any credit bureaus. Credit bureaus will also not be allowed to enlist again adverse credit information that was previously removed or has prescribed under a different status code.

• Furthermore, credit bureaus should not add adverse information on their data base if the arrears owing in a particular account are paid within a period of 20 days after a notice indicating such areas have been received.

Amendment of National Consumer Tribunal Rules

•The Chairperson of the Tribunal will be authorised to make practice directives which will be regarded as binding to parties who are subject to Tribunal proceedings. •the Tribunal will be required to provide a record of review proceedings for purposes of promoting just administrative action.

•Tribunal will also be given wider discretion to allow and admit evidence given by expert witnesses in proceedings before the Tribunal.

•The Tribunal will also be empowered to summons expert witnesses. This will be done sparingly so that it does not lead to depletion of financial resources as these witnesses would have to be paid.

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Key stakeholders

Key stakeholders consulted:

• Banking Association of South Africa (BASA) – 11 August 2014 • Credit Bureau Association (CBA) and Credit Providers Association (CPA) – 13 August 2014 • Black Debt Counsellors Forum and Micro Finance South Africa– 14 August 2014 • Debt Counsellors Association of South Africa – 15 August 2014 • Capitec Bank – 18 August 2014 • Payment Distribution Agent of South Africa – 19 August 2014 • First National Bank – 25 August 2014 • Wonga.com - 27 August 2014.

• National Treasury and Department of Justice and Correctional Services 12

Action

Regulations on Affordability Assessment

Status

NCAA Implementation

Deadline

Final regulations approved by the Minister. President`s Minutes and Proclamation sent to Presidency for 27 February 2015 signature.

Review of Interest Rate Caps / Cost of Credit Task team formed, comprising of the dti, National 31 November 2014 Treasury and Department of Justice. Process will be effective six (6) months after the signing of the National Credit Amendment Act (NCAA).

Credit Insurance Capping Regulations National Credit Regulator (NCR) currently consulted 27 February 2015 with Financial Services Board (FSB).

Draft Regulations have been sent to the Minister for approval.

Monitoring on the Implementation of the Removal of Adverse Consumer Credit Information Information relation to Paid Up Judgements and Credit bureaux to submit audited reports conducted by an independent auditor within one (1) month to the 27 February 205 NCR. The NCR must submit a report to the Minister on the effectiveness and compliance within three (3) months.

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Way Forward

A final draft Regulations with recommendations will be submitted to the Minister at the end of November 2014.

*Minister has signed and approved the Final Regulations*

The Minister and the President will be signing the President’s Minute and the Proclamation that will be putting the Regulations and the Act into legal force.

*President`s Minute and Proclamation sent to the Presidency for signature*

An

Implementation Plan

of the NCAA and its Regulations is

being developed

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Education and awareness will be emphasized in the Implementation Plan.

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