Government of South Africa Moves to Protect Consumers and Assist Over-Indebted Households

Date Published 12/12/2013
Author Marja Hoek-Smit
Country South Africa

Government of South Africa Moves to Protect Consumers and Assist Over-Indebted Households


The Cabinet of the Government of South Africa authorized the Ministers of Finance, and Trade and Industry to take measures to assist over-indebted households and prevent them from becoming over-indebted in future.

The level of household indebtedness in South Africa has risen to 76 per cent of disposable income in June 2013 compared to 50 per cent in 2003. The number of customers in arrears for more than three months or more is 4.2 million out of 20 million credit-active customers. 

Government is putting in place an immediate set of comprehensive steps necessary to deal with the problem of present and future household over-indebtedness as follows:

  • Setting clear affordability criteria that all retail lenders have to adhere to and clearly defining a “reckless” loan, thus enhancing reckless lending controls under the National Credit Act.
  • Ensuring the provision of credit is not only affordable but suitable. For example it is clearly inappropriate to promote a short-term (30 day) loan as being suitable for supporting borrowing over longer periods.
  • Reviewing the pricing caps under the National Credit Act to ensure that current levels of caps are appropriate, especially for pay-day loans where rates are excessive.
  • Strengthening regulatory monitoring, supervision and enforcement to ensure the shutting down of unregistered credit providers and full compliance of registered credit providers.
  • Reviewing the regulatory framework for credit insurance policies that are sold with, or linked to, credit.
  • Setting norms and standards for access to the payment system, including for debit orders. Persistent reckless lenders should be denied access to the payments system.
  • Setting norms and standards for emolument attachment and garnishee orders issued for credit.
  • Extending and strengthening the debt collection law to apply to legal firms. Regulating credit-linked deductions allowed on employer payroll systems.
  • Investigating simpler and lower-cost insolvency arrangements for lower- and middle-income individual persons.
Government is considering assisting households that are already in the debt trap by:

  • Engaging with lenders and their industry associations to provide appropriate relief to qualifying distressed borrowers by reducing their installment burden, without additional cost to the borrower.
  • Enabling major lenders to provide voluntary debt relief measures to distressed borrowers without charge, in addition to the current debt counseling process, subject to compliance with the National Credit Act and Financial Advisory and Intermediary Services Act.
  • Engaging with current lenders to take steps to withdraw certain categories of existing emolument attachment orders for credit, and to use such orders for future credit only as a last resort and according to a robust code of conduct.
  • Regulating debt-collection firms, including legal firms, to ensure they do not indulge in unscrupulous debt-collection practices.
  • Encouraging employers to investigate the legitimacy of all emolument attachment or garnishee orders they may be enforcing against their employees (for purposes of credit not maintenance) and to write to credit providers to reduce or even remove all onerous orders. Public sector employers will be expected to lead by example and implement the above proposals early next year, as soon as guidelines for the public sector are published.  
For full news release, see here.

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