Davel says that the implementation of the National Credit Act (NCA) coinciding with the credit crunch raised significant challenges. The Act deals decisively with many of the problems, which caused the sub-prime crisis. It has been a challenge to implement a new Act at a time when the financial crisis and debt stress were posing huge demands on both consumers and financial institutions.
“The NCA established the function of a debt counsellor, to assist debt-stressed consumers in the engagement and negotiation with the different credit providers in order to create a debt restructuring plan.
“We found that consumers applying for counselling had on average of 10 credit agreements each, many of which would already be in arrears, with legal action being threatened. Without the specialist assistance of a debt counsellor, most consumers would find it very difficult to conclude a feasible debt restructuring plan.”
Davel further says that the most critical and complex component of the debt restructuring process is the engagement with the different credit providers and achieving a restructuring plan which is acceptable to all parties.
The NCR has an on-going programme of investigations and has had notable successes in the enforcement of the Act. Some of the most concerning practices, which were investigated over the past year related to housing finance. This often implies that debt stress homeowners are targeted with offers of finance. These schemes often involve an element of fraud and misrepresentation, resulting in the borrowers losing their homes.
The NCR completed a number of important research projects over the course of the year, including a project on the impact of the NCA on the cost of finance and access to consumer credit. The NCR also undertook research into the impact of the financial crisis and economic downturn on the South African consumer credit market.
“During the year, we expanded the scope of the NCR's awareness and educational campaigns. Our aim is to ensure that all consumers, and particularly financially vulnerable consumers, are aware of the protective measures contained in the NCA. Our media strategies over the past year have emphasised responsible financial behaviour and the importance of savings. Some of the highlights were the campaigns with the Deaf Federation of South Africa and with the South African Council for the Blind,” concludes Davel.
Download the report: www.ncr.org.za/Annual_report_2009.php.
