Minister Mmamoloko Kubayi. Picture: Jeffrey Abrahams
The Banking Association South Africa has hit back at Minister of Human Settlements Mmamoloko Kubayi after she accused banks last week of racial profiling when considering home loan applications. She pointed out that about half of applications from previously advantaged persons were approved.
She added that she would like to see hefty penalties for banks that fail to disclose the reasons for declining home loans. The Home Loan and Mortgage Disclosure Act was promulgated in 2000 and is intended to compel financial institutions to disclose information about their leading activities and practices in the home loan market.
The department now intends to amend the legislation and this is where Kubayi wants to add the penalties for banks, saying that a fine of R100 000 will not be enough of a deterrent for a bank. She wants to finalise the Home Loan and Mortgage Disclosure Amendment Bill to address discriminatory lending practices and promote fair access to housing finance.
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The Banking Association (Basa) responded, saying that every bank has its own business and risk criteria for extending home loans and other forms of credit, but ‘race is certainly not one of them’.
“Allegations of unfair discrimination by banks remain unfounded and are frankly irresponsible. Basa and its members are opposed to unfair discrimination of any kind. To date, no Basa member bank has been found guilty in a court of law of systemic or institutionalised racism,” Basa says in a statement.
“South Africa’s banks hold in trust the savings and salaries of South African workers, professionals and businesses. This makes up approximately 75% of the funding of banks and they have a fiduciary responsibility to protect these depositors’ funds.
“Therefore, the relevant authorities strictly regulate the country’s banks to ensure that they do not lend recklessly and that those who are lent depositors’ funds are able to repay their loans, thereby protecting the savings that need to be available on demand.”
The National Credit Act, for example, Basa says, sets out the affordability criteria for responsible lending that banks must adhere to, to ensure that customers do not become over-indebted.
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“It is the business of banks to lend using financial products and services, like home loans. As such, they are incentivised to lend as much as possible. Banks do not want to turn away customers.”
According to members of Basa, they decline 48% of home loans due to a lack of affordability, 34% due to an adverse credit record and 13% due to unacceptable security. “A lack of affordability and an adverse credit record is more often than not a result of the weak economy that has created persistent unemployment and economic hardship.”
The association says it has also engaged with the National Department of Human Settlements on a Title Deeds Restoration Programme, which will give households security when applying for credit and help create a more robust affordable housing market.
“Basahas long acknowledged that the racial inequalities in wealth and ownership in South Africa have their roots in apartheid and has partnered with government to bolster inclusive economic growth and the transformation of the economy.
“However, it remains primarily the responsibility of government to create an enabling operating environment, so that companies can grow and create jobs, allowing South Africans to meet the affordability requirements set out in law.”
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In addition, Basa points out, the association and its members have been engaging with the department on initiatives to make housing finance more affordable and accessible, including the First Home Finance Subsidy Programme.
Work is also underway to develop a comprehensive consumer and borrower education programme, while Basa is still committed to working with the department to find solutions for the challenges facing the affordable housing market. “These have been outlined in various engagements with the department and in comments on the Draft White Paper on Human Settlements,” Basa says.
Basa also had several engagements with the department about the Home Loans and Mortgage Disclosure Act (HLAMDA). “While Basa supports the intention of the Act to promote fair lending practices, banks also have a legal obligation to ensure that their data and the personal information of their customers is secure.
“Banks also need to be certain there are appropriate regulations in place. Basa continues to seek clarity on the steps taken so far to amend current legislation to reflect the additional information and reporting requirements.”
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According to Basa engagements with the Office of Disclosure as well as the department are ongoing. “The department can assist with many of the barriers to affordable housing in South Africa, including making government-owned land available for housing developments, especially outside the large metros, quicker turnaround of deeds registration that will reduce the costs to consumers and speedier delivery of services.”
Development finance institutions also have an important role to play in supporting those who do not qualify for commercially sustainable loans, Basa says.
“The Financial Sector Conduct Authority (FSCA), among others, is responsible for the regulation aimed at ensuring that banks do not unfairly discriminate against their customers in any way.
“Consumers can also take their complaints to the National Financial Ombud Scheme, which has the jurisdiction to adjudicate complaints against banks and their products and services. If there are credible allegations of discrimination by banks, they should be fully investigated and the law applied accordingly.”
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