1. LARGE NON BANK LENDER ASSOCIATION (LNBLA)
DEBT RELIEF

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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.

9. 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

10. 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?

11. 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

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