NCA Introductory Workshop for BANKSETA and with Institute of Bankers

Dr. Penelope HawkinsDr. Penelope Hawkins

F E A S i b i l i t F E A S i b i l i t YY

February – March 2006

SESSION 3

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3. Debt enforcement & settlement, Information & phasing Debt enforcement Debt counseling Dispute settlement Information sources Phasing in of NCA

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3.1 Debt enforcement Steps before court action

At least 20 days in arrears Consumer notified of default and of right to get

assistance Court to enquire whether or not reckless Specified procedure for repossession of security

Responsible credit protected! Court must grant order if not reckless, irrespective of

indebtedness level Debt restructuring if over-indebted and after Tribunal

review

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3.1.1 Debt enforcement (cont.) Courts: powers substantially increased re debt-

related orders Review prior to debt procedures, debt restructuring (+ mechanisms to prevent irregular access to court orders)

Regulator Registration Monitor conduct (& report to parliament) Compliance Redress

S13-16, S5455, S129/130, S138

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3.1.2 Debt enforcement (cont.)Regular decisions appealed to Tribunal Tribunal orders appeal to High Court

Magistrates bound by Tribunal orders Civil action: same issue not raised in Tribunal & civil

court; Magistrates can deal with NCA matters, mechanisms to avoid conflict

Prohibited conduct vs. offense Prohibited conduct = contravention of Act, ex

offenses Tribunal Offenses Magistrate & High Courts

S1, S129, S138, S148, S150, S164

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3.2 Debt counseling Debt Counselors

Assisting over-indebted consumers & facilitating debt restructuring

Potential interventions: Education & guidance Voluntary debt restructuring, with consent order Legal debt restructuring

Registered & overseen by Regulator, independent from providers

Debt restructuring must be “stamped” by Magistrates court

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3.2.1 Debt counseling (cont.) Consumer notified

Before adverse information to credit bureaux; before debt enforcement procedures

Debt Counselors, ‘Alternative dispute resolution agents’, consumer courts and ombuds all play a role Debt counseling if over-indebted; debt review debt

re-arrangement court order ADR where disputes (prior to court process) Complaints to regulator

S86 – S88, S129, S130, S134, S136

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3.3 Dispute settlement Can be “internal” – i.e. between the provider

and the consumer However, if provider offers rejected, then the

court process will be opened again. If consumer is not over-indebted, then

outside the jurisdiction of debt counselors.

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3.4 Information“… weaknesses in relation to credit

bureau activities … a key inefficiency in the consumer credit market”

Consumer information Curb unlimited ‘trade’ in private

information Protect confidentiality

S68 to S73

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3.4.1 Information (cont.) Credit register

National, non-competitive register to enable indebtedness assessment; not competing with bureaux

Credit Bureaux Exchange in information regulated; Bureaux

registered; Responsibility for verification & accuracy, Regulation of purpose for which information released

Consumer’s access to records, Correction procedure, Not report until dispute resolved

Limited, defined “data cleansing process”

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3.4.2 Information (cont.) Reasons for rejection of credit applications

Prohibition of refusing credit on discriminatory grounds

Right to reason for credit refused Establishment of a “National Credit

Register”, to curb over-indebtedness Prescribed information will have to be

submitted However, note that reckless lending provisions

are not dependent on the Register

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3.5 Phasing Concurrently:

Act signed by State President Regulations published for comment (until end

March 2006) Implementation phased in:

NCA effective: 1 April 2006 Regulator: 1 April 2006 Registration of Credit providers: June-July 2006 Compliance with interest and other regulations:

Q1 2007 Register – only when Minister announces it is up

and running: 2007(?)

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3.6 Sources

Dti website –

www.dti.gov.za/ccrdlawreview/research.htm

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Sessions 1-3Question and Answer

Session