Tougher credit regulations to prevent reckless lending
GONE are the days when a consumer could “thumbsuck” an amount as their monthly living expenses when filling out a credit application, in the hope that it would be approved.
From Sunday, thanks to a recent amendment to the National Credit Act (NCA), credit providers will be forced to base their affordability assessments on stipulated minimum monthly living expenses amounts, linked to the applicant’s monthly income.
So if you earn R4 000 a month, for example, the credit provider will be forced to state your living expenses as at least R1 016 a month, and if you earn R15 000, the minimum is R1 955.
That’s not including your existing debt repayments.
The NCA has been a reality since 2006, and one of its main intentions was to prevent reckless lending – credit providers lending to people who clearly can’t afford to service the debt.
But it seems what it expected of credit providers didn’t go far enough because reckless lending is rife – about half of South Africa’s credit-active consumers are at least three months in arrears.
“One of the reasons for the high default rate, and the alarming consequences, was the fact that reckless credit agreements were part of normal business practices for many credit providers,” said the Credit Ombud’s office recently.
“With the new requirements around minimum living expenses and producing proof of income, consumers who always used to qualify for loans or other credit may suddenly be faced with a rejection of their application for the first time.”
Had these stricter guidelines been in place when the infamous “New car from R699 per month” Satinsky offer was enticing so many low income earners, I daresay most of the deals would have had to be rejected by the financing banks.
As it was, the applications were approved, despite ridiculously implausible living expenses being declared – allegedly reduced on the application forms by Satinsky reps – and hundreds of those cars have since been repossessed.
The NCA amendments, signed into law in March, aim to bring reckless lending to a sudden halt, by placing a lot more demands on both credit providers and consumers. The former pleaded with Trade and Industry Minister Rob Davies for more time get their red-tape ducks in a row, arguing that their systems had to be re-programmed and thousands of staff members re-trained.
The minister agreed to postpone the implementation date by six months, hence the new, far stricter criteria coming into effect this Sunday, September 13.
But industry sources have contacted me to complain that “government” – the DTI and National Credit Regulator – have done nothing to educate consumers about how much more challenging it’s going to be for them to apply for, and be granted, credit from the end of this week.
“We predict angry scenes at credit counters,” said one.
So be warned – here’s what to produce when you apply for a store account, a cellphone contract, or any other form of credit from the end of this week:
● Three months’ pay slips, or the previous three months’ bank statements, reflecting three salary deposits;
● Latest three months’ documented proof of income (payslip or other)
● Latest three months’ bank statements
That’s on top of the usual copy of your ID and proof of residence.
Many people will find themselves having to visit their banks and join a queue to request those three months’ bank statements, and then pay for them.
“A lot of the new requirements are open to interpretation,” said Michael Lawrence, executive director of the National Clothing Retail Federation of SA.
“We are often the first form of credit a consumer applies for,” he said.
“If someone comes in and says ‘I make R3 000 in tips as a waiter’, for which they can’t supply any evidence, can we phone the restaurant manager to confirm that? Or will that be considered non-compliant with the amendment?
“Most stores are still busy working on the logistics of implementation.”
Credit providers had formed a steering committee to come up with an education package for consumers on the ins and outs of the new affordability assessments, which would be rolled out in the coming weeks, Lawrence said.
It will be very interesting to monitor the impact of the new requirements on the over-indebted statistics.
● If you are unhappy with the outcome of a credit provider’s affordability assessment, you can lodge a complaint, and the company is obliged, in terms of the NCA, to attempt resolve it within 14 days.
If they fail to, you can approach the National Credit Regulator www.ncr.org.za and that body is compelled to resolve the complaint within seven days.
You can also contact the Credit Ombud for free help with all disputes relating to credit bureau listings, credit agreements with non-bank lenders and retailers; debt collection matters, garnishee orders and account statement disputes. Call 0861 66 2837; visit or email
CONTACT WENDY: E-mail: wendy@knowler.co.za Twitter: @wendyknowler As imitations go, Cape Cookies’ SnackCrax version of Bakers Salticrax is among the most blatant I’ve seen. In my local supermarket, the two products were side by side on the shelf. Interestingly, the shape of the SnackCrax box could create the impression that it contains more biscuits than the Salticrax pack, but they both contain 200g and sell for the same price, in this store at least.
Asked to comment, Snackworks (Bakers) marketing director Yann Trevian said: “We are aware of the situation but do not want to make any public comment.”