Victory for the heavily indebted as Ramaphosa signs the National Credit Amendment bill into law

It has happened, President Ramaphosa has signed the National Credit Amendment Bill into law. The bill will bring relief to heavily indebted consumers who earn a gross monthly income of no more than R7 500. According to the estimates by the Treasury, this could result in the write-off of R13.2bn to R20bn of debt.

The next step in the process is for the National Credit Regulator and the National Consumer Tribunal to obtain R100mil to process debt relief applications.

Some of the debt relief intervention are going to be;

· Increasing the repayment term of the loan to be above 5 years or, if not possible

· Suspending credit payments for 1 to 2 years with regular reviews

· Cancelling the debt if after 2 years the consumer is still not able to pay the debt

· Empowering magistrates to reduce interest rates to as low as 0% where necessary

The lenders had this coming their way. By forcing consumers to take debt that they do NOT need through the credit scoring process that forces consumers to have unnecessary, high interest unsecured consumer debt in order to qualify for home loans and car loans, they must take responsibility for causing high indebtedness amongst consumers. Further to this, the cost of borrowing is far too high for the low income South Africans who over and above having to pay high interest rates they also are forced to paying for credit life / credit assurance / credit protection polices which they don’t need and cannot afford. It is time the Department  of Trade and Industry does a full investigation into these policies and abolish them because they artificially increase the cost of borrowing to the poor. The industry collected over R16 billion in premiums for these policies in 2012 alone and the claims rate is below 20%

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