Parliament’s trade and industry committee has thrown out a controversial clause in a draft bill giving the minister of trade and industry extensive powers to prescribe debt intervention measures in exceptional circumstances.

All political parties agreed on Wednesday to the removal of the clause from the draft National Credit Amendment Bill. The committee plans to formally adopt the bill — which is strongly opposed by the banking industry — on August 16.

The bill was proposed and developed by the committee and has been under review over the past three years. The main aim of the bill is to provide for the cancellation of debt in certain circumstances for consumers, where they have a gross monthly income of less than R7,500, have unsecured debt of no more than R50,000 and are deemed overindebted by the National Credit Regulator.

The committee’s decision to remove the clause came after senior counsel Wim Trengove said in a legal opinion that giving the minister such unfettered powers would be unconstitutional. Treasury also expressed concern about the wide powers granted to the minister, saying this would "not only lead to great uncertainty and constitutional objections but will likely lead to a tightening of credit".

The clause was also opposed by the Banking Association SA.

The proposed debt relief could result in the write-off of between R13.2bn and R20bn.

ANC MPs said they would agree to remove the clause if it was a stumbling block to the speedy passage of the bill.

Lifespan of the bill

The committee also agreed that within 36 months of the implementation of the bill, the minister must submit a report on its effect to Parliament, which would then decide whether to pass legislation extending the lifespan of the legislation for a further period beyond the initial 48 months. This amended the original provision, which gave the minister the power to extend the lifespan of the bill.

The committee still has to decide on a clause giving the minister the power to adjust the maximum gross monthly income and total qualifying unsecured debt of those eligible for the debt relief measures. It also has to decide on another clause giving magistrates the power to determine the maximum interest rate, fees or other charges that can be imposed under a credit agreement. This maximum could be zero.

Trengove argued: "The overall impression created by the provisions that regulate the minister’s power to introduce new debt intervention measures is that their purpose might be to provide social assistance to communities in distress. That is of course a worthy goal but the duty and cost of … social assistance should normally be borne by government and not by private credit providers."