Debt-relief plan ‘no help for poor’

Draft bill not supported by banks or retail sector

Coins. File picture
Coins. File picture

Parliament’s trade and industry committee is in the final stages of processing a draft bill providing debt relief for heavily indebted consumers which remains substantially unchanged‚ despite strong opposition from the banking sector.

The committee is expected to conclude its deliberations on the draft National Credit Amendment Bill once parliament resumes work after the winter recess at the end of next month.

The bill proposes giving the National Consumer Tribunal the power to extinguish debt under certain circumstances.

The targeted group for the envisaged debt relief would be individuals earning a gross monthly income of not more than R7 500‚ who have no readily realisable assets, are not subject to debt review and have debt of less than R50 000.

The minister can review the income and asset thresholds from time to time through a government gazette notice.

The banking sector is not in favour of the proposed bill‚ which it says will harm lowerincome groups because credit providers would limit the extension of credit to them in a bid to limit their risk.

Banks say they have their own debt-relief measures.

Retailers are also opposed to the bill.

Its opponents warn that providing debt relief as proposed would foster a culture of nonpayment and drive up the cost of credit.

DA spokesman on trade and industry Dean Macpherson said the party was opposed to the proposal to empower the minister to review income and asset thresholds.

“We are absolutely firm that this should go through parliament‚” he said.

The DA is also opposed to the proposal in the bill which would make the National Credit Regulator a de facto debt counsellor as well as being a regulator‚ which the party regards as a conflict of interest.

Macpherson said the answer to over-indebtedness lay in making debt counselling and debt services available to lower-income groups rather than in providing debt relief.

He was concerned that the bill could open up the possibility of nine million people applying for debt relief, which the credit regulator would not be able to handle.

“I don’t think the bill has been thought through,” Macpherson said.

Extinguishing debt would increase the cost of credit to everyone and restrict access to credit.

“This is going to be very problematic for poor people,” Macpherson said. 

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