Debt relief mechanisms for no-income-no-asset debtors in the National Credit Act 34 of 2005

Abstract

The purpose of this study is to investigate the debt relief mechanisms available to over-indebted credit consumers found in the National Credit Act.

This then demands an analysis of section 86 of the National Credit Act, which introduced the “debt review” procedure in terms whereof an over-indebted consumer can voluntarily apply to be placed under a debt re-arrangement order with respect to credit agreements that fall within the Act’s scope of application. The debt review procedure has however been the subject of extensive criticism since its inception, particularly within the context of the legal position of no-income-no-asset debtors in the broader South African natural person debt relief system. This is due to the fact that the mechanism does not offer credit consumers a discharge from pre-existing indebtedness and is subject to the principle that the consumer satisfies all responsible financial obligations owed to the credit provider by the consumer. Accordingly, Magistrates’ Courts will only confirm viable plan proposals. The socio-economic implication of this is that certain over-indebted credit consumers are accordingly prevented from obtaining financial inclusivity in the credit market, once again. Incidentally, this is antithetical to the post-1994 government’s end to attain economic transformation in terms of which access to credit is essential thereto.

Recently, in tandem with the socio-economic aspirations of the Act, the Department of Trade and Industry devised the mechanism of “debt intervention” that will be introduced in the National Credit Act by the insertion of section 86A in Part D of Chapter 4 of the Act when the provisions of the 2019 National Credit Amendment Act become operative. Accordingly, the debt intervention procedure will be reviewed and critically discussed against the current debt review procedure in the National Credit Act, in order to consider whether the mechanism of debt intervention, on paper at least, offers an apt solution to respond to the legal plight of NINA debtors.