Logan said a common refrain among credit providers was affordability was not their concern. “What matters is the probability of default and how we perform at an overall book level and from a shareholder perspective.”
In an attempt to prevent irresponsible lending that leads to over-indebtedness, far stricter criteria for sound affordability assessments have been explicitly stipulated in amendments to the National Credit Act, which came into effect on March 13.
“CEOs of major and minor credit providers have to say we are going to look after consumers… Can they afford the credit or not, irrespective of whether or not it is going to be profitable for us,” said Logan, who formed part of a National Credit Regulator (NCR) committee to determine the new affordability assessment guidelines in the National Credit Amendment Act (NCAA).
He was addressing a conference hosted by the Department of Trade and Industry, in conjunction with the NCR, to engage credit industry stakeholders. Logan said there was an attitude of “complying with the minimum” among credit providers and called on them to “fertilise the financial market, rather than do what is minimally required in terms of the regulations”.
Professor in banking law at the University of South Africa (Unisa) Michelle Kelly-Louw supported this view. “It’s a misnomer to think if you follow the regulations you’ll be safe – that’s the minimum you need to do.”
NCR company secretary Lesiba Mashapa said: “Almost half of all credit active consumers are in some form of financial distress, but I can bet you they still have access to credit”.