NATIONAL CREDIT ACT
AMENDMENT BILL 2013
PARLIAMENTARY HEARINGS
28 – 30 January 2014
Presenter: Magauta Mphahlele
CEO: NDMA
Start Here
2
THE TEAM
The NDMA is a non profit organisation that aims to contribute to combating over indebtedness through
proactive and reactive measures, impactful partnerships and advocacy. The NDMA is run by a team of
dedicated individuals who are experts in debt advise and management. They have integrity and are
motivated by the drive to serve and make a difference to consumers who approach us for assistance.
WE AIM TO SERVE
It always seems impossible
until it is done.
Nelson
Mandela
3
THE NDMA LEADERSHIP
The NDMA is led by and independent Board comprising of Board Chairperson, Sikkie Kajee and
5 other Board Members, including the CEO, Ms Magauta Mphahlele.
Other members recently appointed to the
Board are:
• Ms Lebo Ramafoko – CEO of Soul City
Institute
• Ms Esther Letlape – Deputy Chairperson
of Community Rail Services & Human
Resources Consultant
• Mr Brian Mdluli – CEO of TOPAZ and
Chairperson of the Communication
Subcommittee of the Services Seta
• Mr Christo Otto – Retired Banker
4
NDMA FOCUS 2013/2014
Maintain a sustainable and impactful organisation:
1
2
3
4
To provide and advocate for the highest standards of affordable consumer services,
innovative, and sustainable solutions for the market backed up by sound business
and ethical principles within a non-profit model;
Design and implement effective interventions to prevent and
alleviate debt Stress:
To create healthy credit consumers in South Africa through effective and cost
efficient consumer education and financial hardship management solutions;
Build and maintain strong and impactful partnerships and
Networks:
With other NGOs, government departments, regulatory agencies and
other related consumers services agencies work collaboratively to make
sustainable impact.
Advocate for change
To influence and inform policy and practice through targeted research and
casework analysis.
ADDRESSING FINANCIAL HARDSHIP
6
DEBT STATUS IN SOUTH AFRICA
South Africa has more than 20 million credit active consumers. Almost half of these suffer from some
form of financial distress, leading to the inability to service their debt while affording minimum living
expenses. These South Africans and their families/household members are suffering from the
consequences of such financial difficulties with the accompanying embarrassment, worry and
humiliation from being pursued by creditors and debt collectors. This situation is made worse by the
inadequate debt relief remedies and lack of access to redress as most of the remedies are court
based.
In many cases judgments and emolument attachment orders have been obtained even where
residual net incomes are insufficient to meet even the most basic living costs. The spotlight is
constantly on the abuse of mechanisms and highlights how abusive market practices can worsen the
plight of the consumer. Specific consequences of debt stress in most families and individuals are:






Reduced standards of living;
Social stigma and exclusion;
Deterioration in health;
Relationship breakdown;
Financial exclusion;
House repossession or eviction;





Utility disconnection;
Reduced productivity;
Personality disorders;
Suicide; and
Criminal and corrupt activities
7
CAUSES OF OVER INDEBTEDNESS
From January 2011 to December 2013 the NDMA has handled 46026 calls to its helpline,
6914 enquiries and 7213 cases. These show that the reasons for the plight of consumers vary
and include:
 Over-indebtedness due to having taken on/been granted debt in excess of affordability
capacity or as a result of the consumer not disclosing their true financial position;
 Ineffective remedies, abusive and illegal practices in the debt collection industry and lack
of product knowledge;
 Lack of money and financial management knowledge and skills made worse by lack of
planning and savings;
 Changed family or personal circumstances that have resulted in unforeseen temporary or
more permanent income and or expenditure shocks/changes such as:
Illness/medical expenses in the family and extended family;
Death of a spouse or other family member contributing to household income;
Loss of employment of one or more people in the family/ household;
Involuntary change in the borrower’s employment status/ income;
Rising cost of living due to increases in fuel and amenities; and
Unforeseen emergency expenses;
Educational costs; etc.
8
CREDIT STANDING OF CONSUMERS
The number of consumers with impaired records increased by 71,000 to 9.76 million,
from 9.69 million in the 2ND quarter of 2013!
1
7.7 million are up to date
2
2.78 million are 1 – 2 months
in arrears
3
4.6 million are more than
three months in arrears
4
2.8 million have adverse listings
5
2.6 million have judgements and
admin orders
01
Case Studies
10
CASE STUDIES
The NDMA maintains a large database of Case studies to inform its work, educate and
advocate for change. The Case studies below illustrate the shortcomings in current remedies
01. The Yoke of administration
02. Debt Counselling Not an Option
• The consumer, a female and sole
breadwinner in her 60s, was placed under
administration in 2009. Since then, the
administrators have deducted R500 per
month from her salary, amounting to
R18 102. The consumer currently takes
home R1 547 and her living costs are R1 700.
Like many other South Africans, she
supplements her income with microloans
from a local Mashonisa in order to survive.
•
52 year old Domestic worker married in COP with
two children, living in an RDP house. Husband lost
his job as a taxi driver in 2013 which used to bring
in R1000 per week.
•
The two young adults are studying with the
assistance of bursaries and study aid but the
mother still has to provide basics essentials like
food, clothing and transport.
•
She earns R1700, living expenses are R1 488 and
her total outstanding debt is R36 932 with
monthly instalments totalling R2 677. She can only
afford to distribute R211 per month. She has two
personal loans and one furniture agreement. The
joint income was considered when these were
given.
•
The NDMA attempted to negotiate with creditors
to accept 7% of the instalment and they were not
willing. We referred the consumer to ProBono to
assist her with the Administration process.
• The main challenge for this consumer was
that she had been paying the administrator
through a salary deduction for four years,
but she recently found out that the
administrator had not been paying the
money over to some of her creditors and as
a result some creditors handed her account
over for legal collection, thus increasing the
amount now owing. A chunk of the R18 000
went to the administrator for fees.
11
CASE STUDIES
The NDMA maintains a large database of Case studies to inform its work, educate and
advocate for change. The Case studies below illustrate the shortcomings in current remedies
03. Self Employed: Debt Mediation to the Rescue
• Consumer’s car was in the process of being repossessed
due to arrears. Consumer is a web developer specializing in
online store development. His most recent commission was
R7695.00. He is in the process of negotiating an online
store with two large retail companies, which will be on a
much larger scale to this one and expect a go ahead soon,
with a 50% down payment.
• His other project is wedding planning and management. He
secured a management contract at R25,000.00 and the
income from a referral to the service providers at 10%-15%
will bring in a further R30,000. He had already received
R12,500.00 and will be acquiring more weddings through
his event management website at iorganize.co.za and the
various contacts..
• NDMA was able to negotiate for consumer to pay R6000
towards his arrears over three months and as business
picks up increase his payments to catch up with the total
arrears.
• He was able to retain his car which he desperately needed
to conduct his business.
04. Credit with Benefits: Mediation to the Rescue
• Consumer took a consolidation loan to pay his debts. The Consumer was
unhappy that the balance of the loan had not decreased despite him
paying the monthly instalments for the loan.
• The Consumer attempted to query the balance with the credit provider
but he was not happy with the explanation provided.
• The Consumer requested the NDMA’s assistance in querying the balance
outstanding.
• The NDMA discussed the above contract with the credit provider.
• On closer inspection of the statement the NDMA realised that on top of
the capital amount loaned, the consumer could access other “benefits”
which included cash advances to cover annual essential needs and
monthly cash support which were added to the balance as the consumer
accessed them.
• The NDMA worked out a monthly budget for the consumer and explained
the terms of the contract and the breakdown of all fees, costs and interest
of the contract to the consumer.
• Credit life insurance and the costs were explained to the consumer.
• The Credit provider afforded the consumer the opportunity to find his own
credit life policy but the Consumer declined the offer and opted to keep
the credit life policy that was in existence with the company.
• The reward benefit was not compulsory. The consumer decided to cancel
the reward benefit which resulted in his instalment being reduced from
R2 371.79 to R1 417.71 per month giving him a monthly cash flow relief of
R954.08.
• The settlement amount was fixed at R22 723.20 giving him a relief of
R62 661.24 had he paid off the account at the time of mediation.
12
Over indebtedness: Key Considerations
The following policy considerations are important to consider when the
committee makes its deliberations;
 Reckless borrowing and lending are not the only drivers of over indebtedness.
Economic and life shocks, lack of employment and lack of a savings culture play a major
role hence the need to have proper remedies to deal with long and short term debt
problems;
 Debt Counselling is not suitable in all cases and the cost of administering the process
for debt counsellors makes servicing low income consumers, consumers with no
income and consumers who for personal reasons do not want it unviable.
 Our insolvency laws are expensive and inaccessible. Administration is highly abused and
needs a complete review. The courts not a suitable place for consumers to resolve
disputes and transgressions of the law.
 While consumers can approach credit providers to restructure consumers face huge
obstacles which include low bargaining power due to lack of knowledge, competing
multiple credit provider demands, processes, policies and procedures.
13
Over indebtedness: Key Considerations
The following policy considerations are important to consider when the
committee makes its deliberations:
 Access to redress is very limited for low income consumers due to the cost, especially
as most remedies are court based .
 There is no sufficient capacity to prevent and punish abusive market practices in the
debt collection and administration industries. The competing mandates and
jurisdictions of various regulatory institutions coupled with lack of cooperation
makes the problem worse.
 Ombud Offices play an important role but are not adequately capacitated. Belonging
to an Ombud Scheme should be compulsory.
 NGOs need to be capacitated to play a central role and act as a safety net for millions
of consumers who cannot afford to fight for their rights. NGOs would also be better
placed to provide impactful and sustainable education and redress programs while
regulators concentrate their resources and efforts on proactive and reactive
enforcement and compliance programs.
 Awareness workshops are not sufficient consumers need to be able to approach well
resourced and local NGOs or something like the NDMA helpline for detailed and
objective information on credit issues.
14
COMMENTS ON AMENDMENTS
Bill Proposal NDMA Comments
Amendment of
section 86 of the
Act
 We agree with the proposed amendments however we
are of the view that the section does not go far enough
to address the unintended discrimination against
consumers who do not qualify for debt review.
 S86(7) (b) of the NCA makes provision for the consumer
to make voluntary arrangements with their credit
provider but there is no process in place for a consumer
to access this option. Even (a) where a consumer is not
found to be over indebted there has to be some
“channel” or place for them to go as in their minds there
is a problem with their finances that’s why they asked for
the assessment.
 There is lack of a structured procedure to deal with the
voluntary arrangements outlined in section 86(7)(b) as
such it is not being used and this excludes millions of
consumers from accessing a viable remedy.
 Where there is consent the
Tribunal should be
empowered to provide the remedies outlined in 86 (7)
(c) and 87. This will reduce the cost of debt counselling
immensely.
 The Tribunal should be capacitated to handle these
applications and its procedures should be simple, cost
effective and quick.
Recommendation


86(7)(c) should also fall within the jurisdiction of
the Tribunal where there is consent.
The Minister should be empowered to issue
regulations regarding how the 86(7)(b) voluntary
process should be handled. These regulations
should address:
a) Affordability and Eligibility criteria
b) Application Procedure
c) Creditor Consent Rules and Procedure
d) Protection from legal action
e) Credit Bureau listing if any
f) Confirmation of agreement
g) Fees and charges
 Voluntary arrangements should only be subject to
the jurisdiction of the Tribunal.
 NGOs should be funded by a credit provider levy
to accommodate low income consumers or
consumers whose financial circumstances are such
that they would not afford to pay for debt
counselling or other remedies.
 The Minister can through regulation set the rules
to manage conflict of interest and the governance
structures and reporting procedures for qualifying
NGO’s under the ADR registration requirements.
15
COMMENTS ON AMENDMENTS
Bill Proposal
NDMA Comments
Recommendation
Amendment
of section
129 of the
Act
 We agree with the proposed amendments however we are of the
view that the section does not go far enough to address the
problems experienced by consumers who have more than one
credit agreement in arrears and has to deal with the competing
demands of multiple credit providers, the costs of the ADR and the
status of the agreements reached in this process. Just addressing
the default status does not provide a solution in some instances.
 Whilst S129 provides a consumer with various options to make use
of remedies to address their situation this is not effective due to:
a) Consumers not understanding how to exercise their rights due to
low levels of awareness, inability to access a remedy as the
processes are either not clear or laborious and finding objective
assistance from a trusted party to guide them through the
process.
b) The credit provider is in many instances not trusted to provide a
solution to the problem the consumer has with them consumers
tend to think “they only do what’s best for them and not me”.
c) Credit providers who send S129 are only interested in making
arrangements for their specific credit agreements. There is no
portfolio approach resulting in the consumer being “bullied” into
making arrangement they cannot keep. Their intention is mostly
to pay the credit provider but without a holistic understanding of
their situation they just cannot make informed decisions.
d) Without a portfolio approach to rehabilitation it will not work!
 The Minister should be empowered to
publish regulations relating to the Sec 129
process relating to arrears negotiation and
settlement process. This should include:
a) Obligation on credit providers to tell
consumers where to go
b) The treatment of retrenched or consumers
experiencing change in circumstances
(divorce, illness, etc.;) Consider token
payments until situation improves.
c) Protection from legal action, handing over
to third parties once agreement concluded
and consumer pays according to
agreement
d) Should include consumers who anticipate
default.
e) Circumstances under which the credit
provider can refuse to restructure the
arrears and proceed with legal action.
f) Protection from harassment of consumers
who declare their financial status;
g) Adjustment of the Credit Bureau Record
and mechanism to support downscaling;
h) Circumstances under which the agreement
comes to an end.
02
THE NATIONAL RESPONSIBLE
CREDIT HELPLINE
Educating and Providing Relief
17
THE RC Helpline
Through the RC Helpline the NDMA aims to reduce the negative impact created by over indebtedness on individuals,
families and society in general, through both preventative measures (proactive-) and aftercare (reactive-)
interventions. The NRC Helpline ensures that consumers have access to credible and objective information and
assistance that addresses the consumer’s unique circumstances, concerns or situation at the time that they call.
The Helpline agents are supported by a team of expert mediators and registered debt counsellors, should a consumer
require specific relief. The RC Helpline aims to educate consumers from the time that they are considering taking out
credit to the point where they actually take out credit and everything that follows after that, including providing relief
where they experience financial hardship or their rights are transgressed.
The Helpline offers :
Application &
Affordability
Repairing &
restoring
credit
worthyness


Credit
Health
Take up &
contracting



Managing
payment
difficulties
Responsible
use and
repayment
improved understanding of credit products,
concepts and risks;
through information, instruction and/or objective
advice, develop skills and confidence to become
more aware of credit risks and opportunities;
facilitate making informed choices regarding
options available to address financial hardship;
Advice of how and where to access redress;
enables effective actions to improve their credit
status, financial well-being and become
responsible users of credit.
18
REACH, CAPACITY AND IMPACT
Reasons given for not being satisfied were:



Consumer had no affordability; Unemployed; Referral;
Consumer did not get what they wanted (no payment, consolidation
loan or very low instalment) and
Consumers were waiting for the NDMA to respond.
The response to how well the NDMA answered questions, 71.2% of
consumers answered either very or extremely well.
19
SERVICE STANDARDS
Analysis of the responses indicated that consumers felt that:
 The information was not clear or complicated to
understand;
 Being advised that you are over indebted does not assist
with finding a solution (these instances expenses
exceeded income or there was no income); and
 They were not happy with the information received as
they did not receive an expected outcome or advice e.g.
consolidation loan to repay debts).
It was evident that the responses were determined by the
emotion of the experience in most instances.
Consumers who are very and extremely likely to refer our service made
up 68.3% of all consumers interviewed for the survey. The remainder of
the suggestions that would prevent them from recommending our
services were:
 Credit Providers do not accept the arrangements negotiated by the
NDMA and will not wipe debt out;
 Improve the NDMA follow-up service to see if consumers are coping
or need help;
 Listen and not blame consumers for their situation;
 Communicate in Afrikaans, Pedi and Tsonga speaking officers
available to assist consumers who cannot speak English well ; and
 Advertise the NDMA service as people do not know of the service and
benefits.
20
Origination Sources
At present the NRC Helpline attracts a small number of over-indebted consumers (compared to
the number experiencing financial hardship) in South Africa as we depend on:
1
Free editorial based on monthly
press releases issued;
2
Free radio slots and interviews
arising from press releases issued;
3
4
Face to face interactions with
consumers based on joint
initiatives with Provincial
Consumer Affairs Offices;
Being invited to employer
financial wellness sessions and
word of mouth.
21
ORIGINATION SOURCES
Analysis of the responses indicated that
consumers felt that:
The information was not clear or
complicated to understand;
Being advised that you are over indebted
does not assist with finding a solution
(these instances expenses exceeded
income or there was no income); and
They were not happy with the information
received as they did not receive an
expected outcome or advice e.g.
consolidation loan to repay debts.
It was evident that the responses were determined by the
emotion of the experience in most instances.
22
Our Services Layout & Capacity
01. Case Management System





Audit trail with date, user and time stamp;
All activities are tracked and can be traced;
Differentiation can be made between referral
sources;
Workflow that generates automatic follow-up
actions and reminders
The ability to diarise actions per case.
02. Helpline Capacity





03. Referral Process







Pre-referral Process
Consumer educated on rights and
responsibilities prior to referral.
Referral Process
Referral capability exists;
Database to store information in place;
Monitoring of referrals through reporting
and feedback from organisations referred to:
Various Ombud Offices, NCR, Law Society
and Consumer Affairs Offices
Three Helpline Agents, supported by one backup
agent(capacity to be increased as volumes increase);
Currently handling an average of 387 calls per week;
Time spent on a call on average ten minutes per call
(ranges from 4-16 minutes dependent on the type of
enquiry);
Agents are currently trained to provide information and
guidance on credit related matters;
Additional requirements to be identified and
04. Hardship Solutions




Senior Mediation Officers with legal, credit, mediation
and debt restructuring expertise;
In-house registered Debt Counsellors who assist
consumer suited for this solution;
Compliance monitoring team for quality assurance and
training purposes.
Solution monitoring team who support and monitor
solution progress
Contact Options & Process
Call from Consumer
Helpline
086 111 6362
Types of requests:
Credit Enquiries
Requests for Assistance
Helpline
Screens calls and gives
information according to
specific requests
Service Requests
(Receipt acknowledged within 2 days)
Contact Us:
Via email: info@ndma.org.za
(Receipt acknowledged within 1 day)
Via website: www.ndma.org.za
Helpline: 0861116362
Via fax: 011 781 0589
Via post:
P.O. Box 7068, Cresta, 2118
20
Contact consumer with
outcome or status update of
mediation (within 20 days from date
of receipt unless circumstances
require extension
Via SMS: SMS “ASSIST” to
44238 (R1.50/sms)
Mediate possible solutions
identified
Information received and assessed (within 11 days).
Sufficient information?
Valid service request.
Possible solution identified
If you are not satisfied
with the outcome of the
solution proposed, please contact
the NDMA Quality Assurance
Department: 011 326 3459
E-mail: compliance@ndma.org.za
11
Should the matter be invalid & fall
outside the jurisdiction of the
NDMA, the matter will be
referred to the applicable party
After receiving information and the
matter is logged as a valid service
request, a reference number will be
given. Keep this reference number
safe for future use
24
CONTACT US
Physical Address:
Fernridge Office Park, Silver Fern Building
5 Hunter Ave cnr Bram Fischer
Ferndale, Randburg 2125
Phone: 011 326 3459
Helpline: 086 111 6362
Fax: 011 781 0589
Email: info@ndma.org.za
Website: www.ndma.org.za
SMS Call Back 44238 (R1.50/sms)
Like’ us on
(National Debt Mediation Association (NDMA))
http://www.facebook.com/pages/National-Debt-Mediation-Association-NDMA/
‘Subscribe’ to us on
‘Follow’ us on
(NDMAZA) – https://www.youtube.com/user/NDMAZA
(@NDMAZA) – https://twitter.com/NDMAZA