Legislation: Credit Bill encourages ‘arbitrary deprivation of property’

During the second day of parliamentary hearings on the draft National Credit Amendment Bill, the Large Non-Bank Lender Association and the Banking Association of SA (Basa) both questioned the constitutionality of clauses providing for what is perceived as the ‘arbitrary deprivation of property’, reports Pam Saxby for Legalbrief Policy Watch. According to the Basa presentation, clause 14 (among other things seeking to empower the Minister to prescribe debt intervention in specific circumstances) is ‘vague’ and confers ‘wide discretion without guidance’. Interestingly, the issue was explored at length on Tuesday in a submission from the Association of Debt Recovery Agents (Adra) – but was not raised by members of the National Assembly’s Trade and Industry Committee during ensuing discussions.

In the view of Adra’s CEO Marius Jonker, ‘the credit provider has a contractual right to repayment of a debt owing to it, the extinguishing of which constitutes a deprivation of property’. Arguing that ‘the principle of extinguishing a debt as provided for in the (draft) Bill is arbitrary’ and ‘irrational’ on numerous grounds, Jonker concluded that – should the provisions concerned eventually be adopted – credit providers ‘will be inclined to refuse to conclude credit agreements’ with the very people the draft Bill seeks to assist: persons with a monthly income of R7 500 or less. Calling for clear definitions of the terms ‘indigent’, ‘adverse conditions’ and ‘household debt’, Jonker expressed concern that the clause: makes no provision for repayment of the debt should the debtor’s financial circumstances improve; and ‘imposes no impediment to this category of persons incurring further debt’.

The concluding remarks in Basa’s presentation were telling, among other things warning that debt interventions proposed in the Bill ‘could result in a reversal of positive developments’ alluded to elsewhere in the document. The ‘positive effects’ of legislation already in place are apparently ‘starting to show’ and – in Basa’s view – should be ‘allowed to stabilise’. The measures mooted could also ‘accelerate the growth of unscrupulous lending practices outside … the regulatory space’ when formal lenders inevitably ‘de-risk’. As Legalbrief Today has already reported, Basa is concerned that debt-relief provisions in the draft Bill will ‘increase the cost of credit for all consumers’ (Business Day). The hearings are scheduled to end on Friday.