Employers who charge interest on staff loans will have to register as credit providers under the National Credit Amendment Bill (NCAB), which could be signed into law as early as May this year.
The NCAB is aimed at addressing shortcomings of the National Credit Act (NCA) that regulates the credit industry.
It is also the result of assessments on the effectiveness of the NCA conducted by the Department of Trade and Industry (DTI) and the National Credit Regulator (NCR).
As the legislation currently stands under the NCA, only those credit providers who have entered into at least 100 agreements or have a total outstanding book of credit of more than R500 000 need to register with the NCR. However, once the NCAB is signed into law, all credit providers will need to register with the NCR.
Nomsa Motshegare, the NCR’s CEO, says this will enable the regulator to better monitor the industry. She says last year investigators uncovered various non-compliances among micro-lenders in small towns such as Marikana in the North West, where it was found that consumers’ bank cards were being withheld by credit providers – an offence under the NCA.
Investigations such as these, undertaken in partnership with the South African Police Service (Saps) owing to a lack of resources by the NCR, also resulted in one micro-lender being fined R900 000.
Deceptive advertising offering consumers “pre-approved” credit, for instance, would also be more closely monitored. Motshegare admits that the NCR needs to do more to address this. For this reason, it is partnering with Saps.
“We are building capacity. All these amendments will mean that the NCR requires more funding and resources. We are in talks with the DTI to ensure that we have enough resources to register and monitor more credit providers.”
She says offenders will be named and shamed, but that the NCR is obtaining legal advice as to what actions could be taken against offenders.
According to Angela Itzikowitz, director of the law firm ENSafrica and professor at Wits University, the removal of criteria for credit providers to register is a step in the right direction.
“Lenders who previously were not obliged to register simply assumed that the legislation did not govern them and therefore did not adhere to it,” says Itzikowitz.
All credit providers will be regulated by the NCR and the relevant legislation, which will enable the NCR to monitor more effectively. Other parts of the NCAB include amendments to the affordability assessments by credit providers.
These will soon be prescribed in the form of regulations and will ensure that credit providers obtain proof of income and expenditure; this is currently not being done in all cases.
She says that developmental finance institutions like the Small Enterprise Finance Agency will not be controlled by these affordability assessment regulations.
“They have their own affordability assessments, that require business plans and cash flow projections and these will therefore not apply to them.” says Motshegare.