The National Credit Regulator (NCR) is tackling three big issues that are currently hurting consumers of credit. Consumers of credit are any consumers that buy on or utilise credit; and there is no doubt that that we are exploited by the Credit Providers. It is the NCR who needs to intervene in these areas.
These areas can be broadly be defined as follows:
1: the abuse of garnishee orders;
2: The high cost of credit insurance; and
3: the granting of credit to people who really cannot afford it.
South Africa is one of the few countries in the world that has no limit on how much of an employee’s salary/wages can be attached by way of an emoluments attachment order/orders ( EAO); which is sometimes wrongfully referred to as a Garnishee Order; which is, in fact, something very different.
The NCR wants to limit credit providers to attaching no more than 30 per cent of a debtor’s wages or salary and also to limit the total term of an attachment order to a maximum of five years. The NCR is also attempting to stop insurance companies from overcharging us for credit insurance and has, as a result, proposed amendments to the National Credit Act that will place the onus on credit providers to confirm that the consumer can afford the repayments on any credit that they may grant us.
The NCR has also made it known that it believes that credit insurance should cost a consumer no more than R 4 in premiums per R 1000 in cover. The NCR is presently in negotiations with insurers and is expected to push for a cap on what consumers can be charged when a credit provider makes it mandatory for that consumer to have this type of insurance.
A credit provider has the right to insist that a consumer takes out credit life cover; but the choice of the product provider is that of the consumer and not the credit provider. In other words; when you are granted a home loan, your bank can insist that you have life insurance so that your loan will be repaid in the event of your death. But the bank cannot insist that you buy that life insurance from the bank itself or an insurance company that it owns or contracts with.
Credit Insurance and the questionable conduct of those who sell it has been the subject of scrutiny since 2007; when the retired Supreme Court of Appeal Judge Peet Nienaber was appointed to investigate the long and short terms insurance industry. Nienaber’s panel was duly appointed by the Life Offices Association, which was the body at the time that represented the Life Assurance Industry, and the South African Insurance Association (SAIA); which represented the short terms insurers.
The recommendations made by the Nienaber panel were never implemented, but sources say that they are being integrated into the Treat Customers Fairly (TFC) policy framework which is presently being implemented by the Financial Services Board (FSB).One of Nienaber’s recommendations was that the NCR should regulate the consumer credit insurance market, as well as the remuneration of intermediaries selling this kind of insurance to consumers. The SAIA however disagrees with this recommendation; arguing that it is accountable to the FSB, not the NCR, and that consumer credit insurance will be covered by the TFC and does not need to be independently regulated.
A task team made up of representatives of the FSB and the NCR is presently investigating credit insurance as a whole. The NCR is also engaging with the credit industry itself on providing a product for consumers that provides “minimum cover” at a capped cost when credit insurance is mandatory.
This aspect of our law is slowly adapting so as to protect consumers.
If yu have had an issue with a credit provider then consider referring it to us for resolution.
Please visit our website at www.legaladviceoffice.co.za or send us an email to firstname.lastname@example.org and we will reply within 48
We will continue this discussion in our next blog and look at the different types of credit insurance, as well.
The Legal Advice Office Team.