The National Credit Act 34 of 2005 is such a complex piece of legislation that it had to be implemented in three stages, starting on 1 June 2006. The phased implementation allowed various stakeholders in the local credit industry to ready their systems and processes for the new requirements.
Although the Act was signed into law in March 2006, the final section only came into effect on 1 June 2007. The industry has thus applied the sections on credit policy, including consumer rights, confidentiality, credit marketing practices and reckless credit, as well as consumer credit agreements and the collection, repayment, surrender and enforcement of debt for little more than a month now.
A victory for consumers
The main aim of the National Credit Act is the protection of consumers against practices which led to them struggling under excessive debt burdens. Apart from placing upper limits on the amount of interest credit lenders may charge, the Act also provides for the establishment of a National Credit Regulator and clearly sets out the Regulator's role.
The Act does not absolve consumers from acting responsibly when entering or accepting credit agreements. And credit providers are still entitled to charge administration fees and credit agreement initiation fees, which are legislatively set at higher levels than previously.
What consumers should be happy about is the extensive provision in the Act for debt counselling and clear determination of the role of the debt counsellor. Debt counsellors play an extremely important part in the new Act, particularly in making recommendations on over-indebtedness and reckless credit practices.
Huge requirement for debt counsellors
The debt counsellor is far more than what we first imagine. The role played by a debt counsellor is not simply to chat to an indebted individual and help get their affairs in order. In fact, the Act envisages a more serious role for the debt counsellor.
The National Credit Regulator (NCR) will keep a register of all individuals who are able to provide debt counselling services. Counsellors have to undergo approved training at an approved training provider. Both debt counsellor and trainer have to be registered with the NCR.
Individuals who wish to provide debt counselling services must comply with a number of conditions. Most importantly, they should demonstrate the ability to manage their own finances at the time of applying for registration. In addition, they should be over the age of 18, possess a Grade 12 certificate or equivalent Level 4 qualification from SAQA, in addition to the debt counselling training.
Counsellors should also have two years experience in an appropriate field. These include consumer protection, complaints resolution, consumer advisory services, legal or paralegal services, accounting or financial services, education or training services; counselling of individuals or general business environment.
Making money from debt counselling
A major concern raised by various commentators in the early stages of the enforcement of the final section of the Act is the expense associated with debt counselling.
NCR's senior education manager, Peter Setou, says "When finalising the debt counselling fees, a major consideration is that debt counselling is sustainable and ensuring we do not perpetuate some of the abusive practices associated with debt administration."
In light of this, one might wonder whether the NCR's estimates of between R500 and R1 200 per credit case might not result in the poorest individuals suffering adversely in attempts to remedy their debt situations.