Debt Relief – The Consequences of the National Credit Amendment Act

President Cyril Ramaphosa has signed into law the controversial National Credit Amendment Bill which is aimed at providing relief to over-indebted consumers. The Act has prompted consternation from bodies such as the Banking Association South Africa raising their concerns that some of their customers will get away with not having to repay their debt as a result of the new laws, with National Treasury estimating that it could result in the write-off of R13.2 billion to R20 billion of debt. The retailers which could also be hard hit and have not ruled out taking legal action over the Act.

The Act allows certain Applicants to have their debt suspended in part or in full for up to 24 months. And this debt may be expunged altogether if the financial circumstances of the Applicant have not improved.

The criteria for meeting this debt write-off include:

  • Where the unsecured debt is not more than R50,000;
  • Where the unsecured debt was accrued through unsecured credit agreements, unsecured short-term credit transactions or unsecured credit facilities only;
  • Where the person earned no more than R7,500 a month over the last six months;

The Act also introduces new offences related to Debt intervention such as “where a person intentionally submits false information or intentionally misrepresents information when applying for debt intervention or has deliberately altered their financial circumstances to qualify for debt intervention”.

With the current effects of the tough economic climate and rising unemployment which put the Consumers savings at a risk, and now the costs banks would incur in writing off debt, the anticipated response from the banks would be to make lending conditions much tighter which would make it more difficult for the poor to secure credit.

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