Tuesday , January 31 2023

Banks worried over new SA law giving clients debt relief


South African banks are concerned that some of their customers will get away with not repaying their debt.

President Cyril Ramaphosa earlier this week Signed into the National Credit Amendment Bill, the law is setting the groundwork for over-indebted consumers to be suspended, in part or full, for as many as 24 months, or even scrapped if their financial situation has been worsened. The bill was opposed by the banking industry, clothing retailers who provide credit and the DA as it would drive up the cost of loans for low-income earners, restrict lending and encourage bad behavior from borrowers.

"It's disappointing that after our petition, the president made no attempt to interact with the industry and understands our concerns," Cas Coovadia, managing director of the Banking Association of South Africa, said on Friday. "This is an issue of serious concern."

The association did an economic impact assessment and engaged the Department of Trade and Industry, which is spearheading the bill, and found that banks will either have higher prices or avoid lending to lower-income customers altogether.

"This could have serious economic implications," Coovadia said. “We will await the gazetting of the bill and details its implementation. We will sit down and consider our other options. "

South Africa's National Treasury estimates that debt-relief proposals could result in a write-off of R13.2bn to R20bn under debt provision, the Johannesburg-based newspaper Business Day reported.

The bill provides for extinguishing the debt for consumers who earn a gross monthly income of no more than R7500, have unsecured debt amounting to R50 000, and who has been found to be critically indebted by the National Credit Regulator.

The six-member FTSE / JSE Africa Banks Index fell 0.7% by 12:09 in Johannesburg on Friday, led by Capitec, the nation's largest unsecured-credit provider, which was down 2.3%.

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