LARGE NON BANK LENDER ASSOCIATION (LNBLA) DEBT RELIEF

The LNBLA The Large Non-Bank Lender Association (“LNBLA”) is a voluntary association comprising the following larger member entities, whose products include unsecured loans, credit facilities and developmental credit: Sanlam Personal Loans (Pty) Ltd Old Mutual Finance (RF) (Pty) Ltd RCS Investment Holdings (Pty) Ltd Real People Home Finance (Pty) Ltd Bayport Financial Services 2010 (Pty) Ltd HomeChoice International Ltd The JD Group

Invitation To present on - Viable Debt Relief measures not provided in NCA Legal & other challenges Criteria that should inform – eg target group, period, type of debt, how it will be effected Impact

Our Response We appreciate the opportunity to engage and would like to engage further Short notice and limited time to engage with our members on detail and obtain mandates The Committee wants to engage around what debt relief should look like Industry asks: is debt relief the desirable and only solution? The issue is complex and requires detailed research and consideration

Why do we say this? There is an existing statutory solution in the form of debt counselling. It is not perfect but problems are receiving attention Many mechanisms are being introduced by government all of which were intended directly or indirectly on overindebtedness (amnesty, prescription, in duplum, caps, EAO reform) The NCR research is no basis for debt relief, it rather points in the opposite direction We are concerned about unintended consequences

Make debt counselling work Debt Counselling has been specifically enacted to provide a solution to overindebtedness The legislation left many gaps and problems which had to be resolved through industry task teams Currently the processes are further refined through industry, debt counsellors and the NCR working through the Credit Industry Forum to make debt counselling effective DCRS is an important element and LNBLA is supporting initiatives in this regard

More regulation? Various measures had been introduced by Government which impact or could impact on overindebtedness (amnesty, prescription, in duplum, caps, EAO reform) Some had an impact, some not Some are yet to have an impact No impact assessments

NCR research does not provide a basis Presentation by NCR - not conclusive, no justification for additional measures, not a basis to proceed on. Very few examples and generally They do not amount to mere write offs but adherence to repayment plans The state (taxpayer) pays for it They do not seek to assist those who borrowed irresponsibly There is no evidence of success They relate to situations where there is no statutory solution like debt counselling in the NCA.

Impact on credit providers? Debt Relief must not have the effect of causing additional losses for credit providers Credit providers have absorbed regulation of considerable impact Any further impact will affect credit provider sustainability, implications for economic growth and could have systemic risk consequences Credit providers developed mechanisms outside of the NCA to assist their customers to repay their loans (promises to pay, rescheduling, settlement discounts etc), based on borrower’s personal circumstances) Significant amounts of bad debt are written off by the credit industry annually as a result of non-payment

Other considerations It has been suggested that reckless lending could justify debt relief. Whilst some credit providers have always been compliant, others have not. Can a debt relief programme across the industry ever be an appropriate response to ring-fenced alleged non-compliance by certain credit providers? Finally, we are at a time when pressure on South Africa to show growth and financial discipline cannot be ignored. Can a debt relief programme be reconciled with those imperatives?

Conclusion We do not see debt relief as a desirable option Let’s make Debt Counselling work It will be difficult for credit providers to absorb further impact It is of utter important for the future of South Africa that consumers should be encouraged to meet their obligations, rather than avoiding it

Moral Hazard “It is difficult to write off loans without writing off a culture of prudent borrowing and repayment”