CREDIT LAW REFORM 2004 WORKSHOP: PARLIAMENT: PORTFOLIO COMMITTEES INTRODUCTION

SETTING THE SCENE Consumer Credit in South Africa includes a wide range of products. Such products include housing loans, personal loans, credit cards, retail credit leases, installment sales and micro-loans. Many different institutions provide Consumer Credit. These include banks, micro-lenders, retailers and other non-bank financial intermediaries.

THE NEED FOR A REVIEW A number of reports have commented on the weaknesses in Consumer Credit legislation. These include the Law Commission’s 1994 Review of the Usury Act; the Strauss Report on Rural Finance and the National Small Business Regulatory Review by Ntsika Enterprises Promotion Agency in 1999 amongst others. Whilst the need for a review has long been recognised and certain changes to address specific problems have been made, a thorough and holistic assessment became essential.

SOUTH AFRICAN CONSUMER CREDIT LEGISLATION Consists principally of the following: The Usury Act, 1968; the Credit Agreements Act, 1980; and the Exemption Notices, 1992 and Since 1968 many factors have impacted on the Consumer Credit market. These include significant political, social and economic changes combined with major technological advances.

CRITICISMS OF A DYSFUNCTIONAL CREDIT MARKET Fragmented and outdated legislation; Ineffective consumer protection; High cost of credit and, in some areas, access to credit; Rising levels of over-indebtedness; and Reckless behaviour by some credit providers.

REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION In March 2002, Dr Alistair Ruiters mandated a Technical Committee to undertake the review. The Technical Committee members were Prof. Roshana Kelbrick, Mr Moses Moeletsi, Dr David Porteous, Mr Kgosi Pule and Mr Gabriel Davel. During the course of the review extensive research was conducted into different aspects of the Consumer Credit market.

REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION Research covered the following areas: Consumer perceptions about credit products, credit providers and consumer protection; The views of industry representatives, consumer representatives and other stakeholders on the current regulatory framework; and A statistical and economic analysis of the Consumer Credit market.

REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION The purpose of the review was to identify and analyse weaknesses in the Consumer Credit market and make proposals for a new regulatory framework. The review focus included: Impediments in current legislation to serving the needs of the low-income personal finance market, housing and small business finance; The treatment of small, medium and micro enterprises in new legislation; Methods to make consumer protection effective; and Examination of solutions to problems over-indebtedness.

REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION Key issues addressed by the Technical Committee, in particular through the research conducted at their request: a)Consumer views about credit providers and products such as, Should consumers be shielded from unsolicited credit, especially when the belief exists that this contributes to levels of over-indebtedness? How can credit legislation address the high levels of consumer dissatisfaction about levels of disclosure on the cost and terms of credit products?

REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION Key issues addressed by the Technical Committee… b)View of industry representatives and other stakeholders such as, Is it feasible to replace the current credit legislation with a single statute to apply to all transactions and to all credit providers? Will stronger enforcement address many of the problems current being experienced by consumers?

REVIEW OF CONSUMER CREDIT POLICY AND LEGISLATION Report of the Technical Committee – the findings and recommendations were handed to the dti in October After careful analysis, examination and consultation both within government and with stakeholders a policy framework was established. Cabinet approved the draft Consumer Credit Bill and policy framework in July The Consumer Credit Bill, 2004 was published in Government Gazette (No ) on 17 August The policy document – “Making Credit Markets Work” made available to stakeholders and interested parties.

THE WAY FORWARD Consultation is at the core of the review process. Information Sessions held jointly in all nine provinces with Provincial Government during August and September Written submissions from stakeholders and interested parties to be carefully and open-mindedly analysed. Presentation of legislative and policy proposals to Parliamentary Portfolio Committees.

THANK YOU COMMENTS AND CLARIFICATION