Consumer And Corporate Regulation Division Presentation to Stakeholders on the Implementation of the NCAA and its Regulations 17 February 2015

Presenter Siphamandla Kumkani Director: Credit Law and Policy 2

Purpose To brief the Stakeholders on the implementation of the National Credit Amendment Act (NCAA) and its Regulations. 3

Draft Regulations 4 The National Credit Amendment Act (NCAA) signed into law by the President on 19 May Identified sections in the NCAA needing implementation through Regulations. From 30 April 2014, the dti, NCR and NCT jointly consulted with targeted stakeholders such as credit providers, payment distribution agents and financial institutions in order to test the market. NCR submitted an official communication to the Minister dated 15 July 2014 as required by the Act, as amended recommending that these guidelines should be issued as Regulations. A team of legislative drafters and policy makers constituting of officials from the National Credit Regulator (NCR) and National Consumer Tribunal (NCT) was assembled. The reaction was cordial as stakeholders submitted inputs that assisted the team in finalizing its first draft. Several meetings ensued where the team conferred with each other as the draft regulations would be dealing with issues pertaining to: Affordability assessment. Registration of payment distributions agents. Determination of a threshold dealing with registration of credit provider. Training requirements for payment distributions agents, credit providers and debt counsellors. These would be prescribed by the Minister in terms of the Act, as amended.

Draft Regulations Public comments are being analysed. Regulations will be published for implementation within Q3 of 2014/15. was held on 16 September 2014 with all the stakeholders/representative s of the below organisations. Under Notice R597 on 1 August for a period of 30 days. Closing date for the public to comment on the draft Regulations was 31 August Draft Regulations published for public comments 2. Special Consultative Meetings were held from 11 August 2014 to 27 August 2014 with key stakeholders (outlined below): 4. Workshop on the impact of the NCA Regulations 3. Approximately 37 public comments were received. 5

Summary of Provisions in the Draft Regulations 6

Definition of allocatable income is amended to include maintenance payments towards children and those adults that are entitled to it. This change will ensure that maintenance payments will be taken into account as part of the affordability assessment regulations. Maintenance Payments credit providers to conduct affordability assessment tests in line with the Regulations. R has been set as a minimum amount. South African Social Security Agency (SASSA) Grant Credit providers to take practical steps to verify the existing financial means, obligations and prospects of consumers or joint consumers applying for credit before extending any such credit to consumers. Verification of Financial Means Disclosure by credit providers of the cost of credit to enable consumers to know in advance how much they will be required to pay for their credit transactions. Revelation of Costs of Credit 7

proposed that the threshold is set at R1.00. This is the minimum amount which will ensure that everyone who is extending credit in whatever manner will be subject to regulation in terms of the Act, as amended. This will also include regulating the loan sharks, who previously evaded the application of the Act by reason of Section 42 of the Act, as amended. The court judgement led Parliament to empowering the Minister to determine the threshold on the credit providers’ registration. Determination of a Threshold on Credit Provider Registration Currently, payment distribution agents are in the debt review equation through service level agreements entered into with the National Credit Regulator. These regulations here will be aligned to Section 12 of the Act, as amended, to provide for registration of these payment distribution agents and to further stipulate requirements that they have to comply with for registration purposes. Registration of Payment Distribution Agents These criteria, amongst other things, provide that no registration will take place if a person has been found guilty in criminal or civil proceedings or his/her licence granted by the National Credit Regulator or any other regulatory authority withdrawn. Further, any person who has an adverse finding against his/her name on any financial misconduct or fraud will not be eligible for registration in terms of this Act, as amended. Criteria in Conducting a “Fit and Proper Test” 8

Criteria for Registration, and Fees For the purposes of these regulations, “registrant” refers to “payment distribution agents”, “credit providers” and “debt counsellors”. Draft Regulations prescribe requirements such as qualifications, experience and knowledge that is needed for the registration of registrants. 9

Criteria for Registration, and Fees cont… For the purpose of registration and renewal, PDAs are required to comply with the following registration fees: A non-refundable application fee of R500 payable upon submission of the application form; Initial registration fee of R ; Branch fee of R250 per location or premises; Registration renewal fee of R payable annually by the date of anniversary of the registration For the purpose of registration and renewal, ADRs are required to comply with the following registration fees: A non-refundable application fee of R500 payable upon submission of the application form; Initial registration fee of R ; Branch fee of R250 per location or premises; Registration renewal fee of R payable annually by the date of anniversary of the registration. Applicable Fees Regulation 14 prescribes requirements and standards for tailor made training for PDAs; Das. Training will cover arrears such as: Financial and Business management; Governance and compliance; Accounting and Customer service Training Requirements 10

These regulations provide that any information relating to a debt that has extinguished in terms of the Prescription Act, 1969 (Act 68 of 1969) may not be submitted to any credit bureaus. Credit bureaus will also not be allowed to enlist again adverse credit information that was previously removed or has prescribed under a different status code. Furthermore, credit bureaus should not add adverse information on their data base if the arrears owing in a particular account are paid within a period of 20 days after a notice indicating such areas have been received. Prescription of Consumer Credit Information held by Credit Bureaus The Chairperson of the Tribunal will be authorised to make practice directives which will be regarded as binding to parties who are subject to Tribunal proceedings. the Tribunal will be required to provide a record of review proceedings for purposes of promoting just administrative action. Tribunal will also be given wider discretion to allow and admit evidence given by expert witnesses in proceedings before the Tribunal. The Tribunal will also be empowered to summons expert witnesses. This will be done sparingly so that it does not lead to depletion of financial resources as these witnesses would have to be paid. Amendment of National Consumer Tribunal Rules 11

Key stakeholders Key stakeholders consulted: Banking Association of South Africa (BASA) – 11 August 2014 Credit Bureau Association (CBA) and Credit Providers Association (CPA) – 13 August 2014 Black Debt Counsellors Forum and Micro Finance South Africa– 14 August 2014 Debt Counsellors Association of South Africa – 15 August 2014 Capitec Bank – 18 August 2014 Payment Distribution Agent of South Africa – 19 August 2014 First National Bank – 25 August 2014 Wonga.com - 27 August National Treasury and Department of Justice and Correctional Services 12

NCAA Implementation 13 Action StatusDeadline Regulations on Affordability Assessment Final regulations approved by the Minister. President`s Minutes and Proclamation sent to Presidency for signature. 27 February 2015 Review of Interest Rate Caps / Cost of Credit Task team formed, comprising of the dti, National Treasury and Department of Justice. Process will be effective six (6) months after the signing of the National Credit Amendment Act (NCAA). 31 November 2014 Credit Insurance Capping Regulations National Credit Regulator (NCR) currently consulted with Financial Services Board (FSB). Draft Regulations have been sent to the Minister for approval. 27 February 2015 Monitoring on the Implementation of the Removal of Adverse Consumer Credit Information and Information relation to Paid Up Judgements Credit bureaux to submit audited reports conducted by an independent auditor within one (1) month to the NCR. The NCR must submit a report to the Minister on the effectiveness and compliance within three (3) months. 27 February 205

Way Forward A final draft Regulations with recommendations will be submitted to the Minister at the end of November *Minister has signed and approved the Final Regulations* The Minister and the President will be signing the President’s Minute and the Proclamation that will be putting the Regulations and the Act into legal force. *President`s Minute and Proclamation sent to the Presidency for signature* An Implementation Plan of the NCAA and its Regulations is being developed. Education and awareness will be emphasized in the Implementation Plan. 14

15