The National Credit Amendment Act : an assessment of progress or platitude for the prevention of reckless credit granting in South Africa?

Abstract

The National Credit Act 34 of 2005 introduced the concept of reckless lending into the South African credit market. It set out a regulatory framework in chapter 4 part D that provided for the credit provider s assessment of certain aspects relating to the consumer prior to the lending of credit. This assessment, inter alia, meant assessing the consumer s financial means and prospects, debt repayment history and general understanding of the risks and obligations. The obligation placed on credit providers to conduct an assessment originally stated that such credit provider must take reasonable steps when assessing the consumer s ability to afford the credit requested. However, it did not state what constituted a reasonable step. More specifically, the provision provided that guidelines would be published to assist a credit provider in creating a suitable assessment mechanism, model or procedure. However, until the first quarter of 2013, no guidelines had been issued. This led to an uncertainty in the credit market and consequently interpretational issues thereof arose. Eventually, after conducting a policy review, the National Credit Regulator published draft guidelines in May 2013 followed up by more comprehensive guidelines in September that year. The National Credit Amendment Act followed shortly thereafter altering the pre-agreement assessment provisions to state that a credit provider may determine for itself the evaluative mechanisms, models and procedures used to assess a consumer but that such mechanism, model or procedure must not be inconsistent with the regulations published by the Minister. Subsequently the Affordability Assessment Regulations were published, setting out a standard to which all credit providers have to base their assessment mechanism, model or procedure around. The main focus of this dissertation is therefore to investigate the new pre-agreement assessment dispensation, benchmarked against previous interpretational issues.