Up to nine million may qualify for debt write-off, parliament told

THE Treasury estimates the total debt that could fall under the debt extinguishment proposals made in the National Credit Amendment Bill could range between R13.2-billion and R20.7-billion.

Banks and retailers would be the most heavily affected by the proposed scrapping of debt‚ the Treasury said in a presentation to parliament’s trade and industry committee yesterday during public hearings on the proposals.

The committee has proposed amendments to the National Credit Act‚ which include writing off the debt of those earning below R7 500 a month and who fall within the threshold of realisable assets.

According to research by consultancy firm Eighty20‚ about 56% of the credit active market of about 18 million has an income of R7 500 a month or less.

“Based on the income estimates, approximately nine million borrowers could potentially meet the eligibility criteria for debt intervention as per the draft bill‚” it said in a presentation to the committee.

“In total, borrowers that could qualify for debt review hold over 16 million loans. 29% of these loans (4.7 million) are three months or more in arrears belonging to borrowers who could qualify for debt intervention. The total outstanding balance on these loans is around R20.7-billions.”

The Black Sash said in its presentation the debt relief proposals would provide much-needed assistance to social grant beneficiaries who are prey to loan sharks.

The Black Sash has been at the forefront of exposing the vulnerability of social grant beneficiaries to unlawful deductions and the predations of loan sharks.

The organisation welcomed the R7 500 income threshold as this would cover many social grant recipients.

Black Sash national advocacy manager Hoodah Abrahams-Fayker noted that the Easypay bank account – a joint operation between Grindrod Bank and Net1 subsidiary Moneyline – had fuelled indebtedness “as many loan sharks use this card to provide loans, often with no affordability tests‚ no recourse‚ no administrative justice and no debt counselling.

“Grant beneficiaries are trapped in a vicious cycle using debt to pay for food and basic living needs.

“Overindebtedness is a social and economic challenge with far-reaching consequences for vulnerable social grant recipients who can become easy prey for moneylenders as they are receiving a guaranteed monthly income from the state.”

The Treasury noted in its presentation that there were gaps in the protection of the overly indebted.

For example‚ there were weaknesses in the insolvency framework as sequestration did not work for those with no income and no assets.

The debt review system only worked for those earning more than R7 500 a month.