SUBMISSION: NATIONAL CREDIT AMENDMENT BILL PRESENTED BY KEN BREDENKAMP ATTORNEYS

CURRENT HOUSEHOLD OVER INDEBTEDNESS EMPLOYED = 13.6 MILLION UNEMPLOYMENT = 4.6 MILLION CREDIT ACTIVE = MILLION CREDIT IMPAIRED = 9.53 MILLION 7.2 MILLION DEFICIT HOW DID THIS OCCUR ? LACK OF ENFORCEMENT BY THE NCR SOUTH AFRICANS ARE FINANCIALLY ILLITERATE

AMENDMENT TO THE NCA, EFFICIENT FUNCTIONING OF THE NCR & THE TRIBUNAL REGISTRATION & REGULATION OF PDA’S & THE NATIONAL PAYMENTS SYSTEM DEBT REVIEW PROCESS ADR’S, MEDIATION CODES OF CONDUCT ADDRESS & CORRECT INEFFECTIVE & INEFFICIENT ASPECTS OF THE NCA TO REGULATE & IMPROVE THE PAYMENT DISTRIBUTION AGENCIES TO IMPROVE THE DEBT REVIEW PROCESS FOR ALL STAKEHOLDERS AMENDMENTS TO THE NATIONAL CREDIT ACT

CORRECTION OF PATENT ERRORS IN THE LEGISLATION REMOVE CONTRADICTORY & NON-SENSICAL RESULTS ENSURE THAT AMENDMENTS RESULT IN INCREASED EFFICIENCY ENSURE AN EFFECTIVE FUNCTIONING NCR & TRIBUNAL UPHOLDING THE AIMS & OBJECTIVES OF THE NCA THE AMENDMENT TO THE DEFINITIONS WILL ASSIST IN ENSURING THAT THE NCA IS ACCURATELY INTERPRETED AND THAT THE AIMS AND OBJECTIVES OF THE ACT ARE MET OBJECTIVE 1: TO ADDRESS & CORRECT THE INEFFECTIVE & INEFFICIENT ASPECTS of the NCA This is an example text. Go ahead and replace it with your own text. It is meant to give you a feeling of how the designs looks including text.

DEFINITIONS: MORTGAGE:DEFINITION OUT OF LINE WITH COMMON LAW ADR’S:REMOVE OR ALLOW FOR REGISTRATION INTEREST:DEFINE FIXED, VARIABLE AND MAXIMUM ALLOWABLE INTEREST RATES IN DUPLUM: DEFINE FIXED, VARIABLE AND MAXIMUM ALLOWABLE INTEREST RATES SURETYSHIP:DEFINED AS A CREDIT AGREEMENT DEVELOPMENTAL CREDIT: REGULATION CONSOLIDATED LOANS :CONSUMER INTICEMENT This is an example text. Go ahead and replace it with your own text. It is meant to give you a feeling of how the designs looks including text.

A PROPER DEFINITION NEEDS TO BE INCLUDED IN THE NCA DISADVANTAGES ADVANTAGES WITH DEBT COUNSELLOR’S ALREADY SET UP REGULATED BY ACT & NCR ALERT TO CHALLENGES AWARE OF PROPOSAL FRAMEWORK CAN DETERMINE RECKLESS CREDIT NO CONFUSION OPTION 1 REMOVAL & ADR FUNCTIONS BE INCORPORATED IN DEBT COUSELLOR FUNCTIONS ADVANTAGES COULD PROVIDE ALTERNATIVE RELIEF FOR CONSUMERS OPTION 2 DEFINE WITH REGARDS TO REGISTRATION ”DEBT COUNSELLOR BASIS” NO DUAL REGISTRATION DISADVANTAGES MORE REGULATION SET UP COSTS CONFUSION IN PUBLIC INDEPENDENCE BEST INTEREST KEY DEFINITIONS: ALTERNATIVE DISPUTE RESOLUTION – ADR’S

A PROPER DEFINITION NEEDS TO BE INCLUDED IN THE NCA DISADVANTAGES MAKE PROVISION FOR THE PROPER DEFINITION OF FIXED, VARIABLE INTEREST & MAXIMUM ALLOWABLE INTEREST RATE IN EACH SCENARIO ADVANTAGES BETTER THAN CURRENT FORMULA FIXED AT A MAXIMUM RATE CAN ALLOW CREDIT PROVIDERS TO DETERMINE OWN INTEREST RATE BASED ON CONSUMER ASSESSMENT INCREASED COMPETITIVENESS BETWEEN CREDIT PROVIDERS CERTAINTY FOR CONSUMERS ASSIST IN REPAYMENT PLAN CALCULATIONS STATEMENT OF CAPITAL AMOUNT ON SECTION 129 LETTER CLARIFICATION OF APPLICABILITY OF STATUATORY IN DUPLUM RULE – SECTION 103 (5) KEY DEFINITIONS: INTEREST RATES

A PROPER DEFINITION NEEDS TO BE INCLUDED IN THE NCA DISADVANTAGES PREVENT ENTICEMENT OF CONSUMERS OUT FROM DEBT REVIEW EXPERIENCE The credit provider proposes to consolidate all the debt of the consumer into one account The credit provider pays the consumer an amount in terms of the loan in order for the consumer to settle outstanding debt The credit provider charges the consumer a lower interest rate than what the consumer would be paying on the outstanding debts in terms of the debt review order CLARIFICATION OF APPLICABILITY OF STATUATORY IN DUPLUM RULE – SECTION 103 (5) KEY DEFINITIONS: CONSOLIDATION LOANS

DISADVANTAGES PREVENT ENTICEMEN OF CONSUMERS OUT FROM DEBT REVIEW EXPERIENCE Often the consumer does not pay the outstanding debts with the money loaned and utilises it for other purposes. This is particularly so in light of the fact that the consumers would not have had access to such an amount of money for some time and they often spend the money on unnecessary items and luxuries which they were not able to do before As consequences the consumer loses the protection afforded by debt review The consolidation loans need to be monitored and dealt with in a manner to ensure that the consumer’s outstanding debts are paid by the credit provider and that the consumer is not in a worse position than while under debt review KEY DEFINITIONS: CONSOLIDATION LOANS

PROPOSED AMENDMENT TO SECTION 136 DISADVANTAGES COMPLAINTS NOT INVESTIGATED PROPERLY ENFORCEMENT NATIONAL CREDIT REGULATOR FORM 29 PROCEDURE INEFFECTIVE NO PROPER INVESTIGATION NO REPORTING TO INDUSTRY STAKEHOLDER NO CERTAINTY REGARDING MATTERS AGREEMENT TO CODE BY REGISTRANTS PROVISION OF COSTS AWARD PROVISION OF PENALTIES TO REPEAT OFFENDERS SUCH AS A FINE OR DEREGISTRATION – PROPOSED AMENDMENT SECTION 140 REPORT DECISIONS TO INDUSTRY PLAYERS APPEAL PROCEDURE PROVISION OF “ANY PERSON” ALLEGING RECKLESS CREDIT – NOT ADVISABLE DEBT COUNSELLORS ARE EMPOWERED TO DO THIS

PROPOSED AMENDMENT TO SECTION 136 DISADVANTAGES COMPLAINTS NOT INVESTIGATED ROPERLY ENFORCEMENT NATIONAL CREDIT REGULATOR SOLUTIONS EFFECTIVE TRAINING SKILLED STAFF TO BE EMPLOYED EFFECTIVE COMPLAINTS / RESOLUTION CODE WITH DEFINED TIME LINE PENDING OF TIME PERIODS PROVIDED FOR IN THE NCA PENDING LITIGATION TRANSPARENCY

NATURAL OR JURISTIC PERSONS INSERTION OF SECTION 44A REGISTRATION OF PAYMENT DISTRIBUTION AGENCIES CURRENT PAYMENT DISTRIBUTION AGENCIES NOT REGISTERED, INEFFECTIVE AND LEAD TO BREAKDOWN IN THE DEBT REVIEW PROCESS AND INCREASED TERMINATION, STRESS AND LITIGATION COSTS FOR ALL OBJECTIVE 2: TO REGULATE AND IMPROVE THE PAYMENT DISTRIBUTION AGENCIES ACCREDITED PARTIES

NATURAL OR JURISTIC PERSONS ADMINISTRATION ISSUES WOULD CONTINUE CAUSING SYSTEMIC RISK PAYMENT SYSTEMS UTILISED MAY BE INEFFECTIVE ADDITIONAL COSTS TO NCR CHECKS & REGULATION HAVE TO MAKE NEW REGULATIONS ACCREDITED PARTIES TRIED AND TESTED REGULATION PROVIDED FOR BY (SARB) LEGISLATION IN PLACE – NATIONAL PAYMENT SYSTEM ACT 78 OF 1998 NO ADDITIONAL COSTS TO NCR CERTAINTY OBJECTIVE 2: TO REGULATE AND IMPROVE THE PAYMENT DISTRIBUTION AGENCIES

AVERAGE COST TO FINANCIALLY STRESSED CONSUMERS PDA 10 Credit Agreement 2 R7.00 = R R15.00 = R R Total R Switch 10 Credit Agreement 2 R8.40 = R R8.40 = R R8.40 = R16.80 Total R84.00 SAVINGS OF R90.00 PER CONSUMER MONTHLY

Savings To The Industry & Consumers THE SAVINGS BETWEEN THE SWITCH AND PDA AS PER THE SCENARIO WOULD BE R90.00 MONTHLY PER CONSUMER. IF 100,000 CONSUMERS WERE GIVEN THIS ADVANTAGE THERE WOULD HAVE BE A COLLECTIVE R9, ADDITIONAL MONTHLY THAT COULD BE PAID TOWARDS CONSUMERS DEBTS. OVER A 24 MONTH PERIOD THERE WOULD BE A R216, SAVINGS AND AFTER 60 MONTH PERIOD A R540, SAVINGS. IF VOLUMES WERE GIVEN TO THE SWITCHES, THE COST OF R8.40 PER DISTRIBUTION COULD BE FURTHER NEGOTIATED AND BROUGHT DOWN SUBSTANTIALLY.

STAKEHOLDERS CONSUMER REQUIRE CHEAP AND EFFECTIVE METHOD TO REARRANGE DEBTS OBJECTIVE 3: TO IMPROVE THE DEBT REVIEW PROCESS FOR ALL STAKEHOLDERS CREDIT PROVIDERS REQUIRE CHEAP AND EFFECTIVE METHOD TO OBTAIN REPAYMENT DEBT COUNSELLORS REQUIRE PROCEDURE TO PERFORM FUNCTIONS IN TERMS OF THE NCA NCR REQUIRE COMPLIANCE PROVIDE ASSISTANCE RECORD KEEPING

CONSUMERS: FAIR TREATMENT CHEAP QUICK REARRANGEMENT AND RELIEF DEBT COUNSELLORS: QUICK FAIR TREATMENT DEFINED RULES ASSISTANCE CREDIT PROVIDERS: QUICK CHEAP FAIR TREATMENT ASSISTANCE CONSUMERS ARE LOSING FAITH IN THE DEBT REVIEW PROCESS DEBT COUNSELLORS ARE LOSING FAITH IN THE DEBT REVIEW PROCESS CREDITOR PROVIDERS ARE LOSING FAITH IN THE DEBT REVIEW PROCESS COMMON FEATURES IN FINANCIAL DISTRESS EXPENSIVE FINANCIALLY UNEMPOWERED NO SUPPORT STRESS CHANGING ENVIRONMENT AND UNCERTAINTY DELAYS NO SUPPORT EXPENSIVE CHANGING ENVIRONMENT AND UNCERTAINTY

Lack of information ROOT CAUSES OF WHY STAKEHOLDERS HAVE LOST FAITH IN THE DEBT REVIEW PROCESS UNCERTAINTYDELAYS COSTS Changing environment Legal ProcessNo resolution process Court process Conflicting information No rehabiliation Codes AdverserialTerminationsTermination costs PDA’s

UNCERTAINTY CAUSES: 1.Alternative proposals outside of debt review 2.Different arrangements with credit providers for similar debt 3.Court process & terminations SOLUTION: 1.Enforcement of the provisions of the nca – no mixed interests 2.Code setting out minimum standards applicable 3.Proper resolution process to avoid court – ncr to perform function in terms of the act PRACTICE: 1.Offers to consumers to stay out of debt review or to mediate 2.Variation regarding norms – consumers with immovables targeted 3.No assistance from ncr = litigation

CREDIT PROVIDERS TEAMING UP WITH DEBT COUNSELLING FIRMS SMS From: Received: Aug 21, :02 Subject: FNB Home Loans have partnered with... FNB Home Loans have partnered with DEBTBUSTERS to develop a home loan solution for you. Contact DEBTBUSTERS or Old Mutual – “Our strategic partners' trained Debt Counsellors are registered with the National Credit Regulator and the Debt Counsellors Association of South Africa (DCASA)”

DELAYS 1 CAUSES: 1.Lack of information 2.Adversarial 3.Court process & terminations SOLUTION: 1.Enforcement - information 2.Code setting out minimum standards for restructuring – parties will have a proper framework within which to negotiate - binding 3.Delays in justice system, no proper mechanism to avoid court & costs PRACTICE: 1.No proper certificates of balance, no distinction between capital and interest 2.No proper communication process 3.No assistance from ncr = litigation

REGULATORS RESPONSE TO PDA’S NOT DISTRIBUTING AS PER COURT ORDER “ After many deliberations with the credit provider herein, they still refuse to reinstate the matter and responded as per the attached. The matter should then be referred to court and seek a remedy to enforce them to comply in terms of the order. Since the account was terminated due to pda not making payments in terms of the court order, I am still waiting for Snethemba of our office to provide me with their findings. Take note that unless you come your debt counselor provide the bank with a revised proposal, they will proceed to rescind the court order. Should you still feel that I am being biased in handling this file, you may proceed and contact my supervisor at

DELAYS 2 CAUSES: 1.No resolution process – simply disputes can be resolved quickly 2.Pda’s – payment issues cause terminations 3.Codes – no standard terms available, conflicting offers SOLUTION: 1.Quick and effective resolution process with feedback will cause number of referrals to decrease 2.Properly monitored pda systems will prevent terminations 3.Codes – standard structure allows for simplified negotiation and certainty PRACTICE: 1.Complaints to ncr ineffective, matters are resolved in court at cost 2.No proper record keeping, no information available, incorrect payments 3.No certainty with propsals or restructuring agreements

COSTS CAUSES: 1.Legal process – can become expensive if no prior ground rules 2.Termination costs 3.No rehabilitation SOLUTION: 1.QUICK AND EFFECTIVE RESOLUTION PROCESS WITH FEEDBACK WILL CAUSE NUMBER OF REFERRALS TO DECREASE 2.PROPERLY MONITORED PDA SYSTEMS WILL PREVENT TERMINATIONS 3.CODES – STANDARD STRUCTURE ALLOWS FOR SIMPLIFIED NEGOTIATION AND CERTAINTY PRACTICE: 1.IS COSTLY AND CAN TAKE TIME 2.TERMINATIONS LEAD TO LITIGATION – EXPENSIVE FOR CONSUMERS – SECTION 86 (11) 3.CONSUMERS ARE UNABLE TO RESTRUCTURE

UNITY AMONGST DEBT COUNSELLORS, CREDIT PROVIDERS AND THE REGULATOR WILL MOVE THIS INDUSTRY FORWARD.