Debt Relief Bill adopted by trade and industry committee — but the DA isn’t happy
The bill, intended to help the heavily indebted, may encourage people to engage in illegal lending, according to the DA
On Wednesday, Parliament’s trade and industry committee adopted the controversial Debt Relief Bill, which is intended to help the heavily indebted.
The proposed amendments to the National Credit Amendment Bill — strongly opposed by the banking industry and the DA — will now go to the National Assembly for adoption. The bill was proposed and developed by the committee itself over the past two and a half years in response to the financial distress experienced by the heavily over-indebted.
The bill provides for the extinguishing of the debt of heavily indebted consumers who earn a gross monthly income of no more than R7,500; have unsecured debt amounting to R50,000; and who have been found to be critically indebted by the national credit regulator.
The Treasury estimates that the debt-relief proposals could result in the write-off of R13.2bn to R20bn of debt, which is the total amount of debt falling under the debt-extinguishing provisions of the bill.
The banking industry is opposed to the proposal on the grounds that it will result in a restriction of credit to the low-income section of the market and that the extinguishing of debt represents an unconstitutional deprivation of property. It would also mean that credit providers would have to price in the additional risk.
In a minority submission on the bill, DA spokesperson on trade and industry Dean Macpherson said that "one of the most egregious aspects of the bill" is that debt can be extinguished for 24 months based on an assessment of a person’s financial status. This will have a big impact on credit provision as well as costs of lending. This could have the unintended consequences of pushing more people towards illegal lending."
Macpherson said the biggest failing of the report was that no socio-economic impact assessment bill was ever provided, which would have enabled the committee to assess the impact of its proposals.