Parliament - It has been tough implementing the National Credit Act under the current economic climate, says the National Credit Regulator (NCR).
"It has been a challenge to implement a new Act at a time when the financial crisis and debt stress are posing huge demands on both consumers and financial institutions," said the Chief Executive Officer of the regulator, Gabriel Davel on Tuesday.
He was speaking during the tabling of the NCR's Annual Report in Parliament.
The Act, which came into effect on 1 June this year, was aimed at protecting consumers by prohibiting reckless credit extension and providing for debt reorganisation in cases of over-indebtedness.
It further determines the way consumers apply for, and get access to credit. The Act outlaws the practice of job applicants being denied a job because of a poor credit history.
In its Annual report, the NCR found that consumers who were applying for counseling already had an average of 10 credit agreements in arrears.
In the six months following year-end, the number of debt review applications continued increasing and now exceed 100 000.
Under the Act, consumers can apply for assistance from a debt councilor who will create a debt reconstruction plan.
"Without the specialist assistance of a debt counsellor, most consumers would find it very difficult to conclude a feasible debt restructuring plan," said Davel, adding that the most complex part of debt reconstructuring was reaching an agreement between the consumer and credit provider.
He said there were a range of factors undermining these debt councelling provisions of the Act, such as the inability to conclude court hearings. This was causing substantial delays.
"At our financial year end, magistrate's court hearings had taken place for less than 3 000 of more than 50 000 applications for debt counseling."
The Department of Trade and Industry has published draft regulations which could address certain problems which are delaying the magistrate's court hearings.
Davel said, however, there have been some improvement in the number of debt counselors as well as a consistent enhancement in the quality of debt counsel. He said this was pleasing.
"During the year, we expanded the scope of the NCR's awareness and educational campaigns. Our aim is to ensure that all consumers, and particularly financially vulnerable consumers, are aware of the protective measures contained in the NCA," said Davel.
