The recent amendments to the National Credit Act, 2005 seeks to ensure a higher level of protection for South African consumers in the credit market.
Credit ombudsman Nicky Lala-Mohan informed that the amendments are far reaching, but the focus will be in the new rules for affordability assessments, prior to credit being extended.
Gone are the days when it was normal to see an amount of anything between R20–R200 on an affordability assessment form said Lala-Mohan.
He also informed that the new affordability assessment guidelines were recently introduced, and they are already in force.
“From now on, the new legislation places stricter requirements on the credit providers at the time of entering into a new credit agreement,” he said.
Requirements for new credit agreements
• Ensure that they obtain three months’ pay slips, or the latest three months’ bank statements, reflecting three salary deposits; or
• Latest three documented proof of income or latest financial statements
• They must work on average over not less than three months, in cases where there is a material variance in the income
• The next step is for the credit provider to perform a very specific calculation to ascertain the gross income
• They must deduct all the statutory deductions
• They have to calculate the minimum living expenses – according to the minimum expense norms in order to establish the nett income.
• Finally they have to take into account all the consumers’ existing debt obligations, and the net result is the consumer’s discretionary income.
Consumers Beware
According to Lala-Mohan, “Consumers who are regular customers of credit may find that the new application of a minimum living expense, affects their access to credit the most. Some consumers may well be used to fill in any amount for living expenses, in order to qualify for the new credit. With the new dispensation, the credit provider will automatically have to take a minimum amount as set out in the regulations.”
He said, the consumer, who always used to qualify for the loan or other credit, may suddenly be faced with a rejection of their application for the first time.
“Similarly, we foresee problems with the new requirements forcing credit providers to obtain proof of income.
“Some consumers may have been able to obtain credit regularly without such proof, but purely based on their past track records with that credit provider. If they apply the new law, the same consumer who has been a repeat customer, could be turned away due to these stricter requirements,” he said.
Details: www.creditombud.org.za or email us at ombud@creditombud.org.za
