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A Free Forum For All Debt Counsellors And Persons Interested In Debt Review Matters, To Discuss Matters, Ask Advise, Share Experiences and More.

DRAFT REGULATIONS

 

 

 The National Credit Regulator will be hosting a workshop with registered Debt Counsellors in the Gauteng Province. The workshop is intended for only registered Debt Counsellors and will be attended by some of the key Stakeholders who will conduct presentations on their different roles within the Debt Counselling industry.

 

 

OBJECTIVE OF THE WORKSHOP IS TO DISCUSS THE FOLLOWING AMONGST OTHERS:

 

Debt Counselling Industry Updates

 

General Compliance

 

Debt Counselling Process

 

NCA Amendments

 

LOGISTICS

 

 

Date: Friday, 21st November 2014

 

Time: 08:30am to 16:00pm

 

Venue: To be communicated in due course

 

RSVP with Sharon Mokwena smokwena@ncr.org.za as soon as possible or before end of business 07th November 2014.

 

 

 

DEBT REVIEW AWARDS 2014

Congratulations from ALLProDC to all the winners for the Debt review awards! 


Huge thank you to Zak King from Debtfree Digi for organizing this very stylish event! The gala was a massive success.

Well done to our own NEC member Adri de Bruyn for walking away with the award for BOUTIQUE & SMALL DEBT COUNSELLING FIRMS,

For more info on the spectacular evening go to: http://debtfreedigi.co.za/debt-review-awards-2014-results/

Public Voting Results

Over the last few weeks the industry and public all had the chance to cast an individual vote in the 3 main portions of the industry namely PDAs, Credit Providers and Debt Counsellors. It was an interesting and revealing process as consumers could send sms , #Hashtag and vote online for their personal choice. Here are the results of the public voting:


FAVOURITE PAYMENT DISTRIBUTION AGENCY

This little piggy goes to:

HYPHEN Technologies

FAVOURITE RETAIL STORE CREDIT PROVIDER

This little piggy went to:

MR.PRICE GROUP



FAVOURITE VEHICLE FINANCE CREDIT PROVIDER

This little piggy went to:

WESBANK a division of FirstRand bank limited



FAVOURITE BANK

Debt Review Awards 2014 logo this little piggy onlyThis little piggy went to:

FIRST NATIONAL BANK a division of FirstRand Bank limited



FAVOURITE DEBT COUNSELLOR Small & boutique Debt Counsellors

This little piggy goes to:

ANCIL VAN HEERDEN



FAVOURITE DEBT COUNSELLOR Medium/regional Debt Counsellors

This little piggy went to:

CONSUMER DEBT HELP



FAVOURITE DEBT COUNSELLOR Large Debt Counsellors

This little piggy went to:

DEBTSAFE


Industry Panel Voting

It was then time for the Industry Panel results to be announced in the second session of the gala. The industry panels brought their many combined years of industry experience to the fore and evaluated recent performance by the nominees which were announced in June. Once again there were 3 sections Credit Providers, PDAs and DCs.

Here are the results:


CREDIT PROVIDERS

In Category 1 MICRO FINANCE


The Nominees were:

Izwe Loans
Fin Choice
Nixor
Money Star

This little piggy went to:

IZWE LOANS

In category 2 MEDIUM CREDIT PROVIDER & RETAIL

The Nominees were:

Direct Axis
Joshua Doore Group
Lewis Group
Mr.Price Group Limited

And this little piggy went to:

MR.PRICE GROUP LIMITED



In category 3 LARGE CREDIT PROVIDER, RETAIL & LOAN



The nominees were:

Bayport Financial services
Consumer Friend (representing Woolworths, Truworths, RCS, Capfin and The Foschini Group)
Old Mutual Finance

And this little piggy went to:

CONSUMER FRIEND



In category 4 VEHICLE FINANCE

The Nominees were:

Motor Finance Corporation (MFC)
Standard Bank Vehicle Finance
Wesbank



And this little piggy went to:

WESBANK



In Category 5 BANKS



The Nominees were:

First National Bank (A division of FirstRand Bank Limited)
Nedbank
Standard Bank of South Africa



And this little piggy went to:

FIRST NATIONAL BANK

(A DIVISION OF FIRSTRAND BANK LIMITED)




PAYMENT DISTRIBUTION (PDAS)

In each category the nominees were:

DC Partner
Hyphen Technology
The National Distribution Agency (NPDA)



In category 1 CLIENT AND CUSTOMER SERVICE

This little piggy went to:

NPDA



PDA Category 2

In category 2 - SYSTEMS & SOFTWARE INTEGRATION

Debt Review Awards 2014 logo this little piggy onlyThis little piggy went to:

NPDA



In Category 3 PAYMENTS

This little piggy went to:

DC PARTNER



PDA Category 4

Compliance / SLAs/legislation re: payment & financial distribution

This little piggy went to:

HYPHEN TECHNOLOGY



PDA Category 5

INDUSTRY SUPPORT AND ENGAGEMENT

This little piggy went to:

NPDA

Debt Counsellors

In category 1 BOUTIQUE & SMALL DEBT COUNSELLING FIRMS,

The nominees were:



Adri De Bryn
Frederik Reinecke
Tanja Davel



This little piggy went to:

ADRI DE BRYN



In category 2 MEDIUM DEBT COUNSELLING FIRMS WITH REGIONAL OFFICES,

The nominees were:

Casper Le Grange (DCGSA)
Clark Gardner (Summit Financial Partners)
Philippa Davis (DT Debt Counselling)
Tommy Mouton (Debt Solutions)



This little piggy went to:

PHILIPPA DAVIS



In category 3 LARGE / NATIONAL DEBT COUNSELLING FIRMS

The nominees were:

Credit Matters
Debt Busters
Debt Rescue
Octogen

And this little piggy went to:

DebtBusters

It was interesting to see how the voting by the public in some categories was similar or the same as the results announced by the Industry Panels. Well done, to all the Nominees for being the top companies in their categories, at the moment, and well done to those companies and individuals who won Golden Piggys!

Webb: www.allprodc.org

https://www.facebook.com/AllProDC

ALLProDC


http://debtconcern.webs.com/

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ALLPRODC ELECTS ITS NEW NEC

The new NEC was elected at AllProDC's AGM on 6 November 2013

The new NEC is as follows:

Chairman:  Giel van Zyl

Giel is a practicing DC in George
(giel@allprodc.org)

Vice Chairman: Joe Kotze
Joe is a practicing DC in Paarl
(joe@allprodc.org)

Secretary:  Marie Kruger
Marie is a practicing DC in Durbanville, Cape Town
(secretary@allprodc.org or marie@allprodc.org)

Legal:  Adri de Bruyn
Adri is a practicing attorney in Paarl
(legal@allprodc.org or adri@allprodc.org)

Finance:  Hennie Vermaas 
Hennie is a practicing DC in Somerset West
(finance@allprodc.org or hennie@allprodc.org)

Member:  Gerald Rodrigues 
Gerald is a practicing DC in Parkhurst, Johannesburg
(gerald@allprodc.org)

Member:  Simon Barkenhuizen
Simon is a registered DC in Parow, Cape Town
(simon@allprodc.org)

Member:  John Steyn
John is a practicing DC in Cape Town
(john@allprodc.org)

Member: Martin Snyman

Marin is a practicing DC in Kwazula Natal 

Member: Zune Coetzer

Zune is a practicing DC in the Freestate 

 

 

Credit regulator withdraws recognition of codes

 

  http://www.bdlive.co.za/economy/2013/04/30/credit-regulator-withdraws-recognition-of-debt-counselling-bodies

 

THE National Credit Regulator (NCR) has withdrawn its recognition of several organisations in the debt-counselling and payment distribution industry, along with its recognition of their codes of conduct.

The NCR said the rationale behind its decision was to be able to exercise direct regulatory oversight over the complaints resolution process and service providers’ commitment to combat overindebtedness.

Research by the University of South Africa (Unisa) and insurer Momentum released this month shows South African households’ overindebtedness amounted to R106bn. That means households are at least two months in arrears with credit payments.

Figures from the Reserve Bank show the local banking sector’s total exposure to unsecured credit was R400bn in the fourth quarter of last year.

The NCR’s decision followed a recent review of the effectiveness of the codes of conduct to prevent overindebtedness of consumers and subsequent consultation with stakeholders. The initial review was announced in December 2012.

The organisations that will be affected from May 1 are the National Debt Mediation Association, the Debt Counsellors Association of South Africa and the Credit Ombud.

Regulator CEO Nomsa Motshegare said in a statement on Friday that it had notified all registered debt counsellors, credit providers, credit bureaus, accredited payment distribution agencies and all interested parties of the final decision made by the NCR on the credit industry codes of conduct.

The NCR previously found that some provisions of the codes deprived debt counsellors of their constitutional right to freedom of association and lacked provisions to ensure accountability to the NCR with regard to implementation, monitoring and reporting on the codes.

The regulator issued a circular at the end of last year, expressing its concern about a sustained increase in the level of impairment of consumers’ credit standings and payment of their accounts. Its research shows 47% of credit-active consumers have at least one account that is three or more months in arrears.

 

Share of the week: African Bank

Mar 31, 2013 | Tshepo Mashego
African Bank borrows money from the corporate bond market to ensure it has enough
money to keep expanding its loan book
SOUTH Africa's largest unsecured lender, African Bank, is borrowing money from the corporate bond market to ensure it
has enough money to keep expanding its loan book.
African Bank said on Monday it had raised R2-billion in senior unsecured funding - money that will be lent out in the form
of unsecured credit to the bottom end of the market.
African Bank did this by increasing the size of an R800-million corporate bond it issued in February to R2-billion. The
bond, when issued, was meant to pay investors a return of inflation plus 3.2%. The five-year bond matures in April 2018.
Gavin Jones, an African Bank executive, said this showed confidence in the company because the bond issue was
oversubscribed by 1.3 times.
This support for African Bank is welcome, because it comes despite the threat of a potential fine from the National Credit
Regulator over charges of reckless lending.
Last month, the National Credit Regulator recommended to the Consumer Tribunal that African Bank be fined up to
R300-million after a probe found potential reckless lending practices. The regulator claimed that the bank's agents
colluded with customers to get loans for which they would not normally qualify.
Harry Botha, an analyst at Avior Research, said African Bank had a continual need to raise cash to fund its growth in
new loans.
Botha said he believed African Bank was still a "buy".
"Although bad debt levels are expected to increase because the bank has written more loans, I'm quite comfortable with
the level of debt."
African Bank's shares are still cheaper than those of its main competitor, Capitec.
It is trading at a price-earnings ratio of 8.86 compared with Capitec's ratio of 15.73. The key difference between the two
banks is that African Bank has a large holding in Ellerines, which makes it more like a furniture retailer than a financial
services company.
But the company's strategy of opening African Bank kiosks in its Ellerines stores appears not to have worked out as
planned. Its shares have fallen 21.8% over the past year, to about R30.41.
*This article was first published in Sunday Times: Money & Careers

Repossession of vehicles and other assets (By Financial Institutions)

Friday, July 13, 2012

The Sheriff or Deputy Sheriff’s primary role is to serve or execute all documents issued by our courts. This includes summonses, notices, emolument attachment orders, warrants and court orders. All Sheriff’s and Deputy Sheriff’s must carry a valid Identification Card issued and renewable annually by the South African Board for Sheriffs. When executing duties with a legal court order the Sheriff can enter your premises, even when you are not there. Open any door, motor vehicle or piece of furniture on your premises. Attach, remove and sell your motor vehicle, furniture and movable or immovable property to recover your debt. If the person is in possession of the court order and valid Identification Card you as a member of the public have no alternative but to allow the Sheriff or Deputy Sheriff to remove your goods.

Some attorneys are being instructed by financial institutions to institute legal action against members of the public who have defaulted in their payments and once judgment and a court order has been granted and obtained it is given to various debt collectors, tracers, representatives or agents who attend on the debtors residential or employment addresses. They produce the court order and requests the debtor to hand over the motor vehicle, goods or personal assets.  As soon as the debtor consents to handing over of his or her assets it is deemed that the debtor consents to the financial institution repossessing the assets.  The financial institution’s action by instructing these “agencies” to recover motor vehicles and other goods with a court order is unlawful. As stated, only a Sheriff or Deputy Sheriff may serve or execute court orders or judgments.

Members of the public have the right to refuse handing over their motor vehicles, goods or personal assets to the debt collectors, tracers, representatives or agents of the financial institutions.

If you have a complaint or if you are unsure of your rights feel free to contact your local Sheriffs office or the South African Board for Sheriffs.

Know your credit rights

 

 

Johannesburg - South African consumers should be aware of their rights regarding credit, the National Debt Mediation Association (NDMA) said on Wednesday.

“In South Africa, we have progressive legislation in the form of the National Credit Act (NCA), which protects credit consumers,” NDMA CEO Magauta Mphahlele said in a statement.

The association was publicising the matter to celebrate World Consumer Rights Day, under the theme “Consumer Justice Now”, on Friday.

“Justice is only possible where consumers are well-informed and there are effective institutions and mechanisms through which consumers can access redress,” she said.

Under the NCA, service providers needed to ensure that information contained in credit applications was accurate and truthful, and that the consumer could afford the loan.

The consumer needed to receive a quote and a pre-agreement statement with the terms and conditions and the costs involved. If credit was not approved, the consumer had the right to know why.

“But consumers should be aware that they are responsible for ensuring that they understand what they sign and update their contact details so that any correspondence from the credit provider reaches them on time,” Mphahlele said.

“If you do not update your details regularly, or sign something you do not understand, you risk compromising your rights.”

Consumers were entitled to compare interest rates and deals across different credit providers.

They should also not feel under pressure to sign agreements they did not understand.

A consumer also had the right to lodge complaints or negotiate their payment terms if they could not afford repayments.

“If you skip more than three months' payment, you may face legal action which leads to more unnecessary costs and fees, so the earlier you tell them, the better.”

The NDMA, Credit Ombud or a debt counsellor could be approached to negotiate on one's behalf with credit providers.

When faced with a dispute, consumers could request debt mediation services. The NDMA provided this service free of charge to both credit providers and consumers.

Mphahlele encouraged South Africans to empower themselves with knowledge and seek advice to make sure they made informed decisions. - Sapa

 

Magistrates to go on strike over salaries

Sapa | 11 March, 2013 08:29


Image by: Gallo Images/Thinkstock

Magistrate's courts across the country are facing a total shutdown as magistrates threaten to go on strike if their salaries are not adjusted, according to a report.

The Dispatch Online reported on Monday that the national executive of the Judicial Officers' Association of SA (Joasa) met in Port Elizabeth over the weekend and confirmed their intention to strike if their pay demands were not met, the report said.

Magistrates rejected the five percent salary recommendation made by the Independent Remuneration Commission and said that the commission had failed to correct flaws in its recommendation.

The strike was expected to start on March 18.

There were serious implications if the strike were to go ahead.

Awaiting trial prisoners needed J7 forms to be signed by magistrates in order to keep them detained.

If not signed, they may have to be sent home.

Justice spokesman Mthunzi Mhaga told the Dispatch Online the department was confident that talks with magistrates would yield results and avert the strike.

Johannesburg – Landdroshowe oor die land heen
kan heeltemal tot stilstand kom ná landdroste
gedreig het om te staak as hulle salarisse nie na
wense aangepas word nie, het die Dispatch
Online Maandag berig.
Die nasionale uitvoerende raad van die Vereniging van Regterlike Beamptes van Suid-Afrika (Joasa)
het die naweek ná 'n vergadering in Port Elizabeth bevestig dat hulle van plan is om te staak as daar
nie aan hulle salariseise gehoor gegee word nie, het die berig gelui.
Landdroste het die voorgestelde verhoging van 5% wat deur die onafhanklike vergoedingskommissie
gemaak is, verwerp, en gesê die kommissie het nie daarin geslaag om probleme in sy aanbeveling
uit te stryk nie.
Die staking sal na verwagting op 18 Maart begin.
Dié aksie kan ernstige gevolge vir die land se strafregstelsel inhou. Landdroste moet byvoorbeeld
verhoorafwagtende gevangenes se J7-vorms teken sodat hulle in aanhouding kan bly. As dit nie
geteken word nie, kan verhoorafwagtendes huis toe gestuur word.
Mthunzi Mhaga, woordvoerder vir die departement van justisie, het egter aan die Dispatch Online
gesê die departement verwag dat samesprekings met landdroste die gewenste oplossings sal bied.
– Volg Nuus24 op Twitter.
- SAPA
Lees meer oor: stakings | howe
Druk hierdie artikel
Howe dalk tot stilstand gedwing | Nuus24 http://afrikaans.news24.com/printArticle.aspx?iframe&aid=b2676271-03...
1Johannesburg – Landdroshowe oor die land heen
kan heeltemal tot stilstand kom ná landdroste
gedreig het om te staak as hulle salarisse nie na
wense aangepas word nie, het die Dispatch
Online Maandag berig.
Die nasionale uitvoerende raad van die Vereniging van Regterlike Beamptes van Suid-Afrika (Joasa)
het die naweek ná 'n vergadering in Port Elizabeth bevestig dat hulle van plan is om te staak as daar
nie aan hulle salariseise gehoor gegee word nie, het die berig gelui.
Landdroste het die voorgestelde verhoging van 5% wat deur die onafhanklike vergoedingskommissie
gemaak is, verwerp, en gesê die kommissie het nie daarin geslaag om probleme in sy aanbeveling
uit te stryk nie.
Die staking sal na verwagting op 18 Maart begin.
Dié aksie kan ernstige gevolge vir die land se strafregstelsel inhou. Landdroste moet byvoorbeeld
verhoorafwagtende gevangenes se J7-vorms teken sodat hulle in aanhouding kan bly. As dit nie
geteken word nie, kan verhoorafwagtendes huis toe gestuur word.
Mthunzi Mhaga, woordvoerder vir die departement van justisie, het egter aan die Dispatch Online
gesê die departement verwag dat samesprekings met landdroste die gewenste oplossings sal bied.
– Volg Nuus24 op Twitter.
- SAPA
Lees meer oor: stakings | howe
Druk hierdie artikel
Howe dalk tot stilstand gedwing | Nuus24 http://afrikaans.news24.com/printArticle.aspx?iframe&aid=b2676271-03...
1Johannesburg – Landdroshowe oor die land heen
kan heeltemal tot stilstand kom ná landdroste
gedreig het om te staak as hulle salarisse nie na
wense aangepas word nie, het die Dispatch
Online Maandag berig.
Die nasionale uitvoerende raad van die Vereniging van Regterlike Beamptes van Suid-Afrika (Joasa)
het die naweek ná 'n vergadering in Port Elizabeth bevestig dat hulle van plan is om te staak as daar
nie aan hulle salariseise gehoor gegee word nie, het die berig gelui.
Landdroste het die voorgestelde verhoging van 5% wat deur die onafhanklike vergoedingskommissie
gemaak is, verwerp, en gesê die kommissie het nie daarin geslaag om probleme in sy aanbeveling
uit te stryk nie.
Die staking sal na verwagting op 18 Maart begin.
Dié aksie kan ernstige gevolge vir die land se strafregstelsel inhou. Landdroste moet byvoorbeeld
verhoorafwagtende gevangenes se J7-vorms teken sodat hulle in aanhouding kan bly. As dit nie
geteken word nie, kan verhoorafwagtendes huis toe gestuur word.
Mthunzi Mhaga, woordvoerder vir die departement van justisie, het egter aan die Dispatch Online
gesê die departement verwag dat samesprekings met landdroste die gewenste oplossings sal bied.
– Volg Nuus24 op Twitter.
- SAPA
Lees meer oor: stakings | howe
Druk hierdie artikel
Howe dalk tot stilstand gedwing | Nuus24 http://afrikaans.news24.com/printArticle.aspx?iframe&aid=b2676271-03...
1Johannesburg – Landdroshowe oor die land heen
kan heeltemal tot stilstand kom ná landdroste
gedreig het om te staak as hulle salarisse nie na
wense aangepas word nie, het die Dispatch
Online Maandag berig.
Die nasionale uitvoerende raad van die Vereniging van Regterlike Beamptes van Suid-Afrika (Joasa)
het die naweek ná 'n vergadering in Port Elizabeth bevestig dat hulle van plan is om te staak as daar
nie aan hulle salariseise gehoor gegee word nie, het die berig gelui.
Landdroste het die voorgestelde verhoging van 5% wat deur die onafhanklike vergoedingskommissie
gemaak is, verwerp, en gesê die kommissie het nie daarin geslaag om probleme in sy aanbeveling
uit te stryk nie.
Die staking sal na verwagting op 18 Maart begin.
Dié aksie kan ernstige gevolge vir die land se strafregstelsel inhou. Landdroste moet byvoorbeeld
verhoorafwagtende gevangenes se J7-vorms teken sodat hulle in aanhouding kan bly. As dit nie
geteken word nie, kan verhoorafwagtendes huis toe gestuur word.
Mthunzi Mhaga, woordvoerder vir die departement van justisie, het egter aan die Dispatch Online
gesê die departement verwag dat samesprekings met landdroste die gewenste oplossings sal bied.
– Volg Nuus24 op Twitter.
- SAPA
Lees meer oor: stakings | howe
Druk hierdie artikel
Howe dalk tot stilstand gedwing | Nuus24 http://afrikaans.news24.com/printArticle.aspx?iframe&aid=b2676271-03...Click to add text, images, and other content

Loans via internet

criticized

WITH a R1.3-trillion consumer credit market booming in South Africa, online lending has provided a new way for consumers to dig themselves into a debt hole.

Short-term online loans have been made popular by companies such as Wonga.com, which was founded in the UK by former South African Errol Damelin and entered the South African market last year.

In 2011, the company grew faster than any other technology company in the UK to a turnover of £74m. And, in the past few months, it has been marketing itself prodigiously to South Africans through television adverts and online.

Wonga's meteoric rise has not been without controversy. In the UK, it was blamed for encouraging loans at high prices.

The Office of Fair Trading slammed Wonga for its debt-collection tactics of suggesting that its borrowers may have committed fraud, and threatened the company with fines.

David Fisher, the director of consumer credit at the Office of Fair Trading, said he wanted to ensure Wonga did not behave this way again.

"I would like to make it clear to businesses that they must not adopt aggressive or misleading practices with their customers," he said.

Presumably chastened, Wonga is now prospering in South Africa.

Wonga.com's South African CEO, Kevin Hurwitz, said: "We launched officially in May last year and are now granting thousands of loans per month. [But] we only accept around a third of applicants, as we have very stringent selection criteria."

The way it works is that first-time borrowers in South Africa can borrow up to R2000, and over time this increases to a limit of R8000.

The loan period is from a minimum of three days up to 45 days.

But it is not cheap. For example, a R1000 loan payable over 10 days incurs an interest-and-fee charge of about R250  — a quarter of the loan within two weeks.

Traditionally, lenders have justified such high interest rates by saying they were giving high-risk, unsecured loans to people who were not necessarily creditworthy.

This raises the possibility that online lenders could have a high level of bad debts.

DirectAxis, which also provides personal loans through its call centre and digital portals, said there had been a definite decrease in the credit quality of consumers.

"The beginning of 2013 started with high application volumes, but we have observed a decrease in the credit quality and scores of applicants approaching us for loans," said Mark Finlayson, a spokesman for DirectAxis.

"Over the past four years, our growth rate has lagged the market's growth rate by nearly half because we have focused on lending responsibly to customers who have conducted themselves well from a credit perspective," said Mr Finlayson.

Capitec Bank, which owes much of its success to unsecured lending, has also noticed a healthier appetite for online loans.

"Online loans are definitely growing," said Marissa Visagie, a spokeswoman for the bank.

"These days there are also many pop-up credit providers online and it's important to encourage consumers to go with trusted brands when applying for loans to protect themselves from any fraudulent activity."

Unfortunately, many websites have popped up promising quick cash with no credit checks or excessive interest rates, which may lure desperate consumers to sign up.

Signing up includes giving the lender access to your bank account, which may cause problems if the website is not registered with the National Credit Regulator.

Business Times found at least 12 websites offering easy short-term loans that could not be found on the regulator's list of registered credit providers.

Obed Tongoane, the regulator's chief operating officer, said it monitored all credit providers, including online lenders, to ensure full compliance with the National Credit Act.

Mr Tongoane said the regulator had a strategy that catered for all sectors, including companies that lend over the internet.

Riccardo Petersen, a lawyer at Norton Rose, said the National Credit Act did not contain specific provisions regarding online loans, but also had no provision that prohibited a credit provider from granting credit online.

"Provided the credit agreements are in a plain and understandable language, consumers' confidentiality is protected and credit providers comply with the provision of the National Credit Act when granting online credit, I do not foresee the National Credit Regulator doing anything different than what it is currently doing - because if online lending is compliant with the act, then there should be nothing to be worried about," said Mr Petersen.

However, he said, regulators worldwide were keeping a wary eye on the high risk to consumers who transmit personal financial information over the internet.

"Regulators are concerned about potential fraud or money-laundering," said Mr Petersen.

Given the high level of debt faced by mainstream companies such as Capitec and African Bank, online lenders seem to be walking a fine line between innovation and fuelling an unsecured lending bubble.

"Much of the vast growth in unsecured lending has been driven by traditional lenders and banks merely increasing the value and term of a personal loan and labelling it 'unsecured' in an attempt to deal with a credit market suffering from the global financial slowdown," said Mr Hurwitz.

"Obviously, it is always important to manage the level of bad debt - and we are comfortable with the level where it currently sits. As we fund the loans ourselves, we are incentivised to make accurate and reliable lending decisions and this obviously helps to keep bad debt levels down."

Mr Finlayson said DirectAxis expected bad debts to increase by 10% in the next year as "the economy experiences some stress and the global economy moves out of a period of quantitative easing".

Low broadband penetration in South Africa has restrained online loans, but this situation will change.

"As broadband becomes more affordable and tablet prices drop, one could expect these type of transactions to increase dramatically as the internet becomes more accessible to the man on the street," said Mr Visagie.

*This article was first published in Sunday Times: Money & Careers

Victory for bank customers


The National Debt Mediation Association (NDMA) claimed victory in favour of consumers in the past two months this year for successfully mediating the stopping of 18 sales in execution out of 26 requests.

In most cases, consumers approached the NDMA when the credit provider had a valid court order but even under these circumstances. credit providers were willing to offer concessions after the consumer’s financial circumstances were properly presented.

The CEO of the NDMA, Magauta Mphahlele, urged consumers to know and exercise their rights when their bank sold property to recover the money it lent to consumers.

“It is known as a sale in execution and the property is sold in a public auction held by a Sheriff of the Court.

“In many cases, this is the bank’s last resort after following steps outlined in the National Credit Act, which includes an opportunity provided in section 129 of the Act to work on a plan to bring payments up to date,” she said.

Mphahlele said many consumers do not respond to section 129 notices or do not speak to their banks immediately when they experience financial difficulties and that led them to trouble.

A sale in execution usually results in properties being sold for less than the outstanding balance, which is the amount that a consumer owes on the bond and many consumers do not understand why there are still outstanding amounts after a sale in execution.

“The consumer is liable for the payment of any shortfall and legal costs,including the costs to sell the repossessed property – this shortfall is the difference between what the property is sold for and what you owe on the bond plus costs incurred.

“This situation normally arises where the balance owed by the consumer is extremely high because they are so far in arrears, additional legal costs are involved, the value of the house is less than the bond outstanding, or a second or third bond was registered against the property,” Mphahlele said.

According to Mphahlele, a recent case that came before the NDMA was the matter involving a consumer who owed R726948 on his bond and had fallen into arrears.

“The bank sold the property in execution for R730000 but claimed the consumer still owed R11641, which was made up of additional legal fees and interest. “When the consumer came to us, unhappy about paying the shortfall even though a buyer had been found for the property with an offer of R750000 before it was sold in execution, the bank had for some reason rejected this offer,” explained Mphahlele.

After the NDMA investigated and the merits of the case became clear, the bank agreed to write off the shortfall and close the account.

South Africa’s Unsecured Lending Rules Face Changes by Late May

The Banking Association of South Africa, which represents the country’s lenders, and its members may implement changes to unsecured lending rules by May.

Cas Coovadia, managing director of Basa, said in a presentation in Johannesburg today that the association wanted to have new rules ready by the end of next month dealing with lending affordability and the garnishing of workers’ salaries when loans aren’t repaid.

South Africa’s National Treasury and the banking lobby group agreed on Nov. 1 to tighten lending rules after the number of consumers with bad credit rose to a record and the increase in loans not backed by assets led to concern that a credit bubble was developing.

The country’s National Credit Regulator reported unsecured loans granted in the fourth quarter increased at least 2 percent to 26 billion rand ($2.8 billion) from September to December last year. The regulator said expanded research showed such debt climbing 12 percent over the quarter to 29.1 billion rand. Unsecured credit now makes up 11 percent of the country’s total outstanding gross debtors’ book, it said.

“We do expect a deterioration in the unsecured lending book,” Greg Saffy, Johannesburg-based analyst for RMB Morgan Stanley, said in a note to clients on March 28. “With reduced appetite and ability to adequately service unsecured credit, we expect loan impairments to increase in the second half.”

To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

BASA and AllproDC

Alan Manshon and Adri de Bruyn will represent AllproDC in a meeting with the Banking Association on Thursday 16 May 2013.

The meeting will take place in Johannesburg and was scheduled at the request of BASA.

We will keep you posted on the discussions as soon as the 2 are back.

 

Drowning in Debt

The Greeks are underwater, the Irish and Portuguese are on life support, the water is lapping at the chins of the Italians and the French are taking urgent steps to dam the flood. So bad is the Greece situation that if it implements austerity measures until 2020 and investors take a 50% loss on their investments, its debt-to-gross-domestic-product ratio will still be 120%.

South Africa’s public-debt-to-GDP ratio is set to rise to no more than 40% in the current three-year budget cycle. We are not even waist-high in debt, but this has not stopped headlines like “Drowning in debt”, “Debt bombshell”, “In debt up to our ears”, “SA’s debt time bomb” and “Next year’s pay already spent” from appearing.

The concern locally is about household debt and not the public debt that is swallowing Europe. Planning Minister Trevor Manuel recently quoted Reserve Bank data indicating that after-tax income is 75.9% of household debt.

“If we disaggregate this ratio, we will establish that the middle classes are in way above 100%—all of next year’s earnings are already spent,” Manuel told a consumer conference.

But at the same time as these headlines are telling us the situation is somewhere between reckless and hopeless, a global report on household wealth has singled out South Africa as a star performer.

Credit-Suisse, in its second annual Global Wealth Report, said South African households had wealth (assets less debt) of $1-trillion (R8-trillion) at mid-year.

“In many respects South Africa is the model for many other African economies. Its household wealth has grown vigorously in the past decade or so, quadrupling in value from $8 400 in 2000 to $34 000 by mid-2011,” said Credit-Suisse.

“When wealth is expressed in United States dollars, the financial crisis appears to have caused a significant setback from which South Africa has now fully recovered. However, when measured in rands, the 2008 trough is quite mild. A larger fall in proportional terms occurred in 2003.”

The average South African debt, said Credit-Suisse, was $5 900 (R48 000), which was dwarfed by an average net worth of $34 300 (R275 000).

This was somewhat below the global average debt of $9 000, which rose by 80% between 2000 and 2007 and then levelled out. The average wealth per adult was $50 000, said Credit-Suisse.

Drowning in debt
The debt headlines and the wealth report are analysing the same thing: the South African household. We are, it appears, both drowning in debt and wallowing in wealth. Which is correct? The debt-to-after-tax-income figure highlighted by Manuel is not particularly helpful because it shows how far your income would go if you tried to pay your debt off in a single year. We pay off debt over considerably longer periods than that. South Africans now spend about 7% of their take-home pay servicing debt each year.

Manuel referenced National Credit Regulator figures that indicate that about 46% of consumers—8.8-million of 18.8-million in total—have impaired records. This is indeed alarming.

The Financial Mail quoted a debt expert who said: “Put simply, almost half of all credit-active consumers are maxed out in terms of their ability to repay their debt.”

Could it be true that nearly half of consumers, with a combined debt of R1.2-trillion, cannot service their loans? The regulator’s figures indicate that 90% of credit comes from our banks. I was intrigued to know how the banking system could function with such apparent levels of bad debt—perhaps as much as R500-billion—and called the regulator to ask.

I was told that South African consumers hold 65-million accounts in total and that it is not infrequent for individuals to have one or two nonperforming accounts. These include judgments for minor unpaid bills. In many cases the consumer remains creditworthy even with one or more accounts in default.

The regulator’s latest figures indicate that 16.5-million accounts are in trouble, 25% of the total number of accounts. This is R133-billion or 11% of R1.2-trillion in outstanding loans.

We have a registrar of banks, Errol Kruger, whose job it is to ensure that banks follow prudent lending policies. The registrar’s last report, for 2010, found that impaired or non-performing loans of R134-billion made up 5.8% of the total number of loans. Kruger concluded that the banking system was “safe, stable and sound”. That is not exactly reckless or hopeless.

Of concern is the rapid rise in unsecured lending—loans that are not secured by a property or motor vehicle, for example. These loans have ballooned from R45-billion three years ago to R88-billion now, the Financial Mail reported.

Unsecured loans attract high interest rates; as much as 32% is allowed by the National Credit Act.

The banks most associated with this market are African Bank, which has a loan book of R30-billion, and Capitec with R13-billion. Both are nicely profitable with bad-debt write-offs of 10.4% and 12%, respectively, relative to average gross advances. Capitec’s average size of loan is a modest R2 600.

Is credit too easy to come by? Apparently not. The regulator says that in the second quarter 44% of all applications for credit was refused.

But there is stress in the system. About 100 000 consumers are in debt counselling and about 6 000 apply each month to be admitted.

Some consumers, notwithstanding the success of the Credit Act, have reportedly managed to get themselves so indebted that they can spend 90% of their after-tax income on servicing debt.

The authorities are understandably worried about highly indebted consumers, but they are only a part of this story. Overall, the picture is one of rude health.

 

WITH a R1.3-trillion consumer credit market booming in South Africa, online lending has provided a new way for consumers to dig themselves into a debt hole.

Short-term online loans have been made popular by companies such as Wonga.com, which was founded in the UK by former South African Errol Damelin and entered the South African market last year.

In 2011, the company grew faster than any other technology company in the UK to a turnover of £74m. And, in the past few months, it has been marketing itself prodigiously to South Africans through television adverts and online.

Wonga's meteoric rise has not been without controversy. In the UK, it was blamed for encouraging loans at high prices.

The Office of Fair Trading slammed Wonga for its debt-collection tactics of suggesting that its borrowers may have committed fraud, and threatened the company with fines.

David Fisher, the director of consumer credit at the Office of Fair Trading, said he wanted to ensure Wonga did not behave this way again.

"I would like to make it clear to businesses that they must not adopt aggressive or misleading practices with their customers," he said.

Presumably chastened, Wonga is now prospering in South Africa.

Wonga.com's South African CEO, Kevin Hurwitz, said: "We launched officially in May last year and are now granting thousands of loans per month. [But] we only accept around a third of applicants, as we have very stringent selection criteria."

The way it works is that first-time borrowers in South Africa can borrow up to R2000, and over time this increases to a limit of R8000.

The loan period is from a minimum of three days up to 45 days.

But it is not cheap. For example, a R1000 loan payable over 10 days incurs an interest-and-fee charge of about R250  — a quarter of the loan within two weeks.

Traditionally, lenders have justified such high interest rates by saying they were giving high-risk, unsecured loans to people who were not necessarily creditworthy.

This raises the possibility that online lenders could have a high level of bad debts.

DirectAxis, which also provides personal loans through its call centre and digital portals, said there had been a definite decrease in the credit quality of consumers.

"The beginning of 2013 started with high application volumes, but we have observed a decrease in the credit quality and scores of applicants approaching us for loans," said Mark Finlayson, a spokesman for DirectAxis.

"Over the past four years, our growth rate has lagged the market's growth rate by nearly half because we have focused on lending responsibly to customers who have conducted themselves well from a credit perspective," said Mr Finlayson.

Capitec Bank, which owes much of its success to unsecured lending, has also noticed a healthier appetite for online loans.

"Online loans are definitely growing," said Marissa Visagie, a spokeswoman for the bank.

"These days there are also many pop-up credit providers online and it's important to encourage consumers to go with trusted brands when applying for loans to protect themselves from any fraudulent activity."

Unfortunately, many websites have popped up promising quick cash with no credit checks or excessive interest rates, which may lure desperate consumers to sign up.

Signing up includes giving the lender access to your bank account, which may cause problems if the website is not registered with the National Credit Regulator.

Business Times found at least 12 websites offering easy short-term loans that could not be found on the regulator's list of registered credit providers.

Obed Tongoane, the regulator's chief operating officer, said it monitored all credit providers, including online lenders, to ensure full compliance with the National Credit Act.

Mr Tongoane said the regulator had a strategy that catered for all sectors, including companies that lend over the internet.

Riccardo Petersen, a lawyer at Norton Rose, said the National Credit Act did not contain specific provisions regarding online loans, but also had no provision that prohibited a credit provider from granting credit online.

"Provided the credit agreements are in a plain and understandable language, consumers' confidentiality is protected and credit providers comply with the provision of the National Credit Act when granting online credit, I do not foresee the National Credit Regulator doing anything different than what it is currently doing - because if online lending is compliant with the act, then there should be nothing to be worried about," said Mr Petersen.

However, he said, regulators worldwide were keeping a wary eye on the high risk to consumers who transmit personal financial information over the internet.

"Regulators are concerned about potential fraud or money-laundering," said Mr Petersen.

Given the high level of debt faced by mainstream companies such as Capitec and African Bank, online lenders seem to be walking a fine line between innovation and fuelling an unsecured lending bubble.

"Much of the vast growth in unsecured lending has been driven by traditional lenders and banks merely increasing the value and term of a personal loan and labelling it 'unsecured' in an attempt to deal with a credit market suffering from the global financial slowdown," said Mr Hurwitz.

"Obviously, it is always important to manage the level of bad debt - and we are comfortable with the level where it currently sits. As we fund the loans ourselves, we are incentivised to make accurate and reliable lending decisions and this obviously helps to keep bad debt levels down."

Mr Finlayson said DirectAxis expected bad debts to increase by 10% in the next year as "the economy experiences some stress and the global economy moves out of a period of quantitative easing".

Low broadband penetration in South Africa has restrained online loans, but this situation will change.

"As broadband becomes more affordable and tablet prices drop, one could expect these type of transactions to increase dramatically as the internet becomes more accessible to the man on the street," said Mr Visagie.

*This article was first published in Sunday Times: Money & Careers

 

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