CREDIT WHERE IT’S DUE?
What the report says The Econometrix report proposes the maximum fees on all kinds of credit agreements be given a one-off boost to compensate for the seven years of inflation since 2007 – and they then be automatically adjusted for inflation in the future.
This includes the “initiation fee” that is capped at R5 000 for mortgages, R1 000 for vehicle loans and up to R1 000 for sixmonth personal loans.
It then proposes the interest rate scheme be changed by raising the maximums and making the allowed rates less tied to the SA Reserve Bank repo rate.
The maximum rate for almost all credit products is set by multiplying the repo rate (currently 5.5%) by 2.2, then adding an extra percentage of between 5% (on mortgages) and 20% (on nonshort-term, unsecured loans). Only short-term loans work differently with an unchanging maximum of 5% a month.
Econometrix says a better formula would be to multiply the repo rate by 1.6 then add between 15% and 30% for different products.
The argument is that this would allow credit providers to make money even when the repo rate was low. It would simultaneously result in lower interest rates when the repo rate was high. What is MFSA?
MFSA claims a membership of 496 entities with 1 519 offices across the country.
This is the bottom end of the credit industry. It is concentrated, with 11 companies owning about half of those offices.
There are also 385 MFSA members that consist of only one office each.